Multiple new analyses have exposed the limited impact that fossil fuel divestment is having on the industry fueling the climate crisis.
The key issues that campaign groups have highlighted for public sector institutions included their retaining millions in fossil fuel investment, and continuing to bank with the biggest fossil fuel financiers.
Meanwhile, a separate report revealed that, overall, divestment efforts are failing. In particular, the research showed a trend wherein the largest shareholders have simply increased their investment. As a result, this has been cancelling out any divestment wins by smaller, more climate-conscious investors.
Fossil fuel divestment campaigns
Climate campaign group 350.org launched the first calls for public institutions in the US to divest from the fossil fuel industry in 2012. Since then, campaigners have scored a number of historic divestment victories.
To date, according to Stand.Earth, around 1,600 institutions have made public divestment commitments. Altogether, it estimates that these have put a $40.51tn dent in fossil fuel financing. Faith organisations make up the bulk of these divestment commitments, accounting for over a third. Additionally, educational institutions like universities, philanthropic organisations, public pension funds, and governments make up the significant proportion of the rest.
In spite of these public commitments however, campaigners have identified that divestment is still falling short. Crucially, it is not forcing a phase-out of fossil fuels.
Public sector pensions still investing in fossil fuels
Platform and Friends of the Earth have identified that UK Local Government Pension Schemes (LGPS) still hold £16bn in fossil fuels. Specifically, the groups analysed data for the 2021/22 financial year.
Notably, LGPS funds are funnelling over half of this investment into companies developing new oil and gas projects. The £16bn total investment value is over double the market size of UK renewable energy production for 2022.
The research found that just 10% of the 86 LGPS funds hold over half of these investments. In particular, the Greater Manchester Pension Fund and West Yorkshire Pension Fund each invested over £1bn into fossil fuels during the assessed financial year.
On the whole, pension funds in England were investing nearly 4% on average of their total fund into fossil fuels. By contrast, funds in Wales were investing less than half of England’s average in fossil fuels.
Divestment campaigner and researcher at Platform Rob Noyes said that the findings showed that pension funds were turning:
public sector savings into fossil fuel playthings, pumping billions of pounds through the pensions pipeline into climate-wrecking fossil fuels.
What’s more, he pointed out that:
This money is syphoned from workers’ wages and squandered, when it should be fuelling the green and just transition that we so desperately need. Polluters are profiting at pensioners’ expense.
Echoing this, climate coordinator at Friends of the Earth Jamie Peters said that:
From insulating heat-leaking homes to facilitating mass public transport, councils are key to effective climate action, but this is undermined if local authority pension funds continue to fund fossil fuels.
As a result, Peters argued that the research bolstered the call for councils to “ditch financially risky holdings in gas, coal and oil”.
Propping up polluters through bank accounts
Meanwhile, a separate piece of research has demonstrated that some public institutions’ divestment pledges retain glaring pitfalls. As climate disinformation monitoring site Desmog reported, a majority of divesting universities still hold bank accounts with leading fossil fuel financiers.
Campaign group Make My Money Matter conducted the research through a series of Freedom of Information (FOI) requests which covered the period between April 2021 and April 2023. They showed that, of the nearly 100 universities with public commitments to move their investments out of fossil fuels, 95 still held bank accounts with five leading fossil fuel funders. In particular, these included Barclays, HSBC, Santander, Natwest, and Lloyds.
Collectively, between 2016 and 2022, these banks have ploughed nearly US $420bn into fossil fuel companies. Barclays was the primary fossil fuel-financier used. Nearly three quarters of UK universities banked with the financial institution.
Ultimately, this shows that even where public institutions have pledged to divest, a green transition isn’t ensured. Crucially, they can still prop up the fossil fuel industry through ill-considered banking decisions.
Powerful investors cancel out divestment wins
Moreover, these divestment shortfalls are only part of the picture. New research from anti-capitalist research group Corporate Watch and the Centre for Climate Crime and Justice suggested that, overall, fossil fuel divestment campaigns are failing.
The research assessed trends in the share ownership of major fossil fuel firms BP and Shell. It examined this for the period since nations signed the Paris Agreement in December 2015, up to December 2022.
The groups found that big investors were offsetting any divestment wins by smaller investors. In particular, the top 20 shareholders had increased their holdings overall. This cancelled out divestments by the next 230 largest shareholders.
The worst offenders included investment firms BlackRock, Vanguard, and Norwegian sovereign wealth fund Norges Bank Investment Management.
The analysis found that, together, these shareholders owned more than 17% of BP and close to 16% of Shell. For the study period, they had increased their holdings in BP from 11.5% in 2015 to 17.7% by December 2022. Similarly, these top three shareholders ramped up their shareholdings of Shell from 13.1% in 2015 to 15.9% in 2022.
As a result, the report stated that:
The data analysed here indicates very strongly that shareholder movements in BP and Shell are not applying the pressure necessary to cease oil and gas development. Indeed, if there is any discernible effect, it is that shares are being pushed into the hands of a few very powerful asset management companies.
In other words, divestment campaigns have so far pushed fossil fuel assets into the hands of those powerful investors heavily engaged in fueling climate chaos. Therefore, the report said that:
even if there were an army of companies ready to completely divest, there is an even bigger army of BlackRocks, Vanguards and Norges Banks ready to replace any divested funds. On this basis, divestment is not divestment at all: it is reinvestment.
Keep it stranded in the ground
Instead, the report argued that campaigners should therefore shift their focus to work keeping fossil fuels in the ground altogether. It provided one notable example of this: Ecuador’s recent referendum. In August, Ecuadorians voted to end oil and gas extraction in ‘block 43’. This is a key drilling area that overlaps with the biodiverse Yasuni National Park in the Ecuadorian Amazon. The report noted that:
Block 43 has just become a stranded asset for the Ecuadorian state oil company.
As such, the report concluded that:
If the planet is to have a fighting chance of survival, oil and gas assets must be decommissioned, and removed from the reach of predatory investors now.
In short, the pace of new investment in fossil fuels is outstripping campaigners efforts to compel divestment. Moreover, while shifting destructive fossil fuel finances out of public institutions is vital for a green and just transition, larger private funds are swooping in for the spoils. Ultimately, the only way to ensure an end to the era of fossil fuels is to force countries and companies to keep them firmly in the ground.
Feature image via Mark Dixon/Wikimedia, cropped and resized to 1910 by 1000, licensed under CC BY 2.0
