The Divestment Campaign: A just response to climate inaction 350Africa.org

The Divestment Campaign: A just response to climate inaction

Written by Rayne McKechnie & Tamzin Ractliffe October 2015

Page 1 The Divestment Campaign: A just response to climate inaction 350Africa.org

CONTENTS

Glossary 4

Executive Summary 5

Background 6 What is divestment? 6 Is divestment an effective tool for mobilizing social change? 7 How does divestment work? 7 Why do we need a divestment movement? 8

The cost of continued dependence on fossil fuels 9 Social costs to health and wellbeing 9 Distributional costs exacerbate social (and economic) inequality 10 Moral costs are evident in the continued exploitation of developing countries 10 Economic costs – real and potential 12 Short-termism and short-sightedness: Justifying a narrow definition of fiduciary duty 14 Vested interests are currently winning the fight to maintain a high carbon status quo 14 Political Inertia sits at the top of the toxic triangle 16

Divestment as a strategy in coal dependent or developing economies: Is it valid in the case of South Africa? 17 South Africa’s carbon intensive energy challenge: 17 A low-carbon economy for South Africa is there for the taking 18

Tipping the Triangle: The need for a divestment movement 19

Conclusion 20

Recommendations 21

Endnotes 22

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Dear reader, activists and those pushing for a clean energy future are killing the people’s developmental The central purpose of this report is to present dream. Sound familiar? Well, such arguments the case for divestment from fossil fuels and to are virtually identical to what the apartheid highlight that this is not just an environmental regime and those who supported it used issue but a political, economic and moral to counter the anti-apartheid divestment one as well. The divestment movement is movement in the 1980s. growing globally, with over 450 institutions, pension funds, universities and faith-based The question that we must ask of these organisations having committed to divest, naysayers is; development for whom? The including the World Council of Churches. reality is that communities who, for example, live near coal mines and power plants have Divestment is not new to South Africa. It was had to confront the horrific health impacts of a central component of the anti-apartheid polluted water and air for generations. This is sanctions campaign and proved to be a hugely clearly not the kind of development that those important tactic against the apartheid regime on the frontline of climate change want or need. and those that supported it. Divestment is both a more immediate, material Divestment that was directed against apartheid catalyst for positive developmental change was significant for two reasons. First, to and part of a longer-term struggle for climate highlight the individual and collective moral justice. imperative to oppose apartheid itself and The fossil fuel divestment movement stands second, to expose the apartheid system as for a just transition away from dirty and harmful inherently unsustainable and destructive to the fossil fuel energy. In particular, 350Africa.org majority of the people and the country. As such, is calling on banks in South Africa to disclose the divestment movement empowered ordinary exactly how much they invest in coal, oil and citizens and individuals around the world to voice gas and commit to stop any future funding of their opposition to an oppressive and unjust fossil fuel projects. These banks claim that system, to place economic and social pressure they practice corporate sustainability and are on those who invested in it, and to become proud to speak of how green they are with zero involved in a bigger movement for change. emissions operations yet at the same time they The same thing can now be said of the fossil invest billions of Rand in fossil-fuel refineries, fuel divestment movement. Its motivations mines and power-stations across Africa. are strikingly parallel: – a moral imperative to Fossil fuels are fast becoming developmental act against those who profit from exploitation dinosaurs Our future is in clean, renewable and societal destruction; and to mobilise sources of energy but we must act now! climate justice fighters across the world to take individual and collective action. Archbishop Desmond Tutu was one of the highest profile supporters of the anti-apartheid The climate change crisis is one of the biggest divestment movement and today he has once challenges of our time. We are increasingly again come to the fore in support of the global experiencing devastating floods, drought and fossil fuel divestment movement. He has stated rising temperatures, which are felt through that the destruction of the earth’s environment (amongst other things) water shortages, food is the human rights challenge of our time and price hikes and increasing numbers of climate that “people of conscience need to break their migrants. Crucially for those who live in Africa ties with corporations financing the injustice of and the Arab world, the science and material climate change,” reality consistently shows that the effects of climate change are hitting this part of our world Now is the time for action! The divestment the hardest. movement of the 21st century gives each one of us an opportunity to make a difference and Not surprisingly though, fossil fuel companies become climate fighters for developmental are painting themselves as the developmental justice. Join us! saviours of Africa and the Arab world. They claim that fossil fuels are the answer to these Forward to a zero carbon future, regions poverty and various other economic Ferrial Adam problems and that fossil fuel divestment 350 Africa and Arab World Team Leader

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Glossary The following definitions have been drawn from the work of the CarbonTracker initiative and seek to explain current understanding of the economic case for divestment from coal and fossil fuel. Term Definition

Fossil fuel energy sources which cannot be Unburnable Carbon burnt if the world is to adhere to a given carbon budget.

Energy resources which, at some time prior to the end of their economic life, are no longer able to earn an economic return as a result Stranded Assets of changes in the market and regulatory environment associated with the transition to a low-carbon economy.

High-carbon fossil fuel projects are usually also the most expensive, and require high break- Wasted Capital even prices to be profitable. Capital investment in such projects could end up wasted capital in a demand and carbon-constrained world.

Additional factor which needs to be integrated into analysis of high-cost, high-risk fossil fuel Fossil Fuel Risk Premium assets to ensure climate risk is priced properly, and capital is allocated to align with the transition to a low-carbon future.

All photographs in this report: © 350.org/Creative Commons

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Executive Summary behaviour is not reflecting the honest fulfillment of fiduciary duty, despite claims that it is History attests to the success that divestment fiduciary duty that drives continued investment for ethical considerations has achieved in in fossil fuel companies. On the contrary, the multiple contexts and in addressing a number view that continued investment in fossil fuel of different moral concerns. Whether focused is reflective of securities fraud is one that is on apartheid in South Africa, tobacco, HIV increasingly worthy of consideration.2 This pharmaceuticals, munitions or human rights, calls into question not only the behaviour of the evidence reflects that activism efforts based companies raising new capital for fossil fuel- on divestment have the capacity to significantly related activities; it raises serious concerns mobilize public opinion and ultimately ‘force about the role market regulators are playing, (or the hand’ of policymakers and corporations not playing) in ensuring that appropriate climate seeking to maintain an unjust, unsustainable and risk management strategies are in place. By indefensible status quo. allowing new public listings to take place without a transparent exposition of the related climate “The aims of the fossil fuel risks or the risk of devaluation in the face of divestment movement, like the imminent global policies that may strand carbon anti-apartheid, tobacco and other assets and render investments worthless, divestment movements before it, market regulators are clearly not fulfilling their are to raise awareness, stigmatize a role in ensuring the stability of the market, given powerful political opponent and win appreciation of imminent policy and associated value adjustments. changes in government policy.”i Superficial critics of the latest divestment “Companies are clearly betting movement like to argue that its application to that governments will do nothing. fossil fuel is different in nature and purpose This is the largest crisis in the to the past issues it has sought to affect, that history of humanity. In addition it is an over-emotive response that aims to to the fundamental financial simply bankrupt fossil fuel companies, harm the issue, there’s a fundamental developing world’s poor; send capital markets moral issue. You’re getting money back into turmoil and push the world into a new financial crisis. Careful consideration of from companies whose business ii the substance in these arguments (or the lack model is to destroy the planet.” thereof) should cause us to ask how much Divestment seeks to raise the volume of longer we can allow “figures of influence to 1 essential voices to counter this inaction, peddle this piffle with impunity”. to challenge big oil, big coal and the vested Although there is only a declining minority of interests of a system that supports them, and to climate change denialists who won’t accept confront the power dynamics that allow money that fossil fuel combustion is the single largest to follow financial gains above all else. It seeks to contributor to global warming, there is little promote behavioural acceptance of the fact that evidence to suggest that an appropriate “the world is truly at the cusp of the end of the 3 response is being mounted by business, fossil fuel era” and to ensure that investment governments or civil society. Accepting as institutions, and the individuals or organisations fact the link between fossil fuel combustion on whose behalf they act, vote with their and global warming must surely compel us to financial investments accordingly. acknowledge that the continued investment If the world is to avoid exceeding the 2°C in their exploration, extraction and use is temperature increase widely considered safe the equivalent to financing the accelerating for life, up to 80% of known fossil fuels reserves destructive impacts of global warming. should not be extracted for use. This means Divestment as a movement is fuelled by concern immediate and meaningful measures must that both institutional investors and corporate be put in place to curb fossil fuel use. Without behaviour are not supporting scientific these, many believe that it is more likely that knowledge. Equally important is that this the world is heading for a significantly higher 4 same institutional and corporate investment (4 - 6°C) rise in temperature. Unknown and

Page 5 The Divestment Campaign: A just response to climate inaction 350Africa.org unexpected feedback loops at this level will have investments in high carbon emitting assets. enormous impact on social, environmental and economic wellbeing and ultimately on political Integrated into this analysis, the disabling stability. The interactions that these multiple environment for divestment is explained stressors will have will also act to enhance the and identified through the explanation of a 6 vulnerability of those already facing high levels “Toxic Triangle” (comprising financial short- of risk and exposure, typically the already termism, vested interests and political inertia). poorest of the poor, lessening resilience and Understanding the common barriers of the adaptive capacity in under-resourced areas.5 “toxic triangle” as a global dynamic that also Already, the costs associated with climate- impacts South Africa and whether an exception related disasters have stretched economies and is warranted given the country’s developing aid budgets the world over. Future costs and world context is discussed. In conclusion, it is risks associated with continued global warming argued that divestment fulfills an invaluable for the strongest economies are hard to justify. role, one that has significant merit both in its More importantly, for the most vulnerable and own right and in the part it plays to catalyze poor in developing world context these are the process of education, awareness raising simply untenable. and engagement of related efforts focused on transitioning the world to a low-carbon future. “It is in everyone[’s] … interest Background to have everyone do something. [Climate change] is a massive What is Divestment? social action problem.”iii “Divestment simply means This paper seeks to understand the business getting rid of stocks, bonds, or case in support of the divestment movement investment funds that are unethical on the basis of an analysis of the cost- iv benefit of action versus inaction in social and or morally ambiguous.” economic spheres. It seeks to clearly outline t its most simple, divestment can be and present an unemotional perspective of Aunderstood as the opposite of investment. what the divestment argument is really asking “Uninvesting”, divestiture or reduction of for and reflect on how it supports, and is capital assets invested in a company is supported by, similar action calling for greater achieved through the sale of shares held in that investor transparency and accountability; company. Notwithstanding this explanation, the increased shareholder activism and corporate term divestment is most particularly used to engagement; and a growing movement towards emphasise the intentional withdrawal of support litigation against laggards intent on maintaining for (investment in) a business. In the context of

Page 6 The Divestment Campaign: A just response to climate inaction 350Africa.org the divestment movement, it indicates action industry. Yet the simple but powerful message taken for social, political, ethical and/or of the divestment movement shaped the moral reasons and is sometimes also called collective moral standing against the tobacco disinvestment. industry, ultimately shaping business and policy regulation for good. Is divestment an effective tool for mobilizing social change? Similar efforts have been seen against Big Pharma in the fight against HIV and Aids, against erhaps the most well known example of munitions programmes, human rights abuses Pdivestment in this context was reflected and genocide in Darfur and Israel. Fossil fuel in the call for divestment and sanctions divestment mirrors these efforts. As with all against apartheid-era South Africa. The moral divestment efforts in the past, the potential of imperative presented by the injustices of the divestment campaign may be dismissed as apartheid, amplified by scores of individuals inconsequential in terms of its potential to make and civil society groups across the globe, a real financial impact on the fossil fuel industry drove investment institutions, mutual funds overall. However, financial impact is not the and retirement funds to sell off the stocks of sole objective of divestment movements. Nor businesses that had investments or ties to is it the only measure of success. Heightened South Africa, encouraging major multinationals awareness of, and massive social action against to close down and/or sell out of South African morally reprehensible behaviour; concerted business operations. action that has historically been shown to be highly effective in shaping public and policy “Divestment campaigns have been discourse and ultimately in effecting a sea hugely successful in putting the change in the policy environment is an important issue of unburnable carbon on the indicator of the effectiveness of the divestment agenda of investment institutions.”v movement. Other divestment campaigns have similarly “Divestment can work in other fought stagnant unresponsiveness and won ways than by leveraging economic changes in moral behaviour. For example, pressure. It affects the broader for years the tobacco industry disregarded societal debate, which is an important or discredited the health-related impacts of nicotine addiction. Tobacco companies factor since there has been a political denied that lung cancer was a direct result failure to address the issue as well of smoking even whilst annually more than as a market failure in pricing climate 400,000 Americans were dying from the change risks into corporate stock disease.7 The tobacco divestment movement prices. It is also a moral issue for was born out of frustration as education leaders institutions and individuals.”vi and pro-health activists saw the industry profiteering from a socially destructive industry, How does divestment work? one heralded as representing respectable, accountable businesses. Vested interests in the he principle behind how divestment works tobacco industry included chemists, biotech Tis that it will ultimately increase the cost researchers, movie stars, advertisers and of capital for target companies who are being legislators with bountiful tobacco campaign divested from. This is based on the impact that contributions exempting nicotine from drug a mass sale of shares will have on the share legislation even though it was found to be one of price of target companies and the resultant the most addictive substances.8 In addition, the effect that this has on future returns. A declining United States trade representatives threatened share price will make capital more expensive, sanctions against countries that prevented thus making it more difficult for companies to U.S. cigarettes being imported and President deliver an acceptable return on capital invested. Carter fired the head of the Department of Ultimately it means long-term capital-heavy Health for not easing back on regulation of projects will be harder to finance. See this tobacco.9 Hegemonic powers in economic and rationale reflected in the diagram below: political spheres put their significant weight behind the continued flourishing of the tobacco

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Figure 1 How divestment works. HSBC believes that the divestment movement “could end up hitting fossil fuel companies, putting their projects into a financial stranglehold. .... Less demand for shares and bonds ultimately increases the cost of capital to companies and limits the ability to finance expensive projects, which is particularly damaging in a sector where projects are inherently long term.”10

fossil fuel-based power infrastructure. To make Why do we need a divestment movement? matters worse, government subsidisation of ew still argue against the conclusions of the oil and gas industry continues unabated, science which confirm the planet has a whilst incentives to drive investment in low- F carbon renewables at scale continue to lag carbon budget of approximately 900Gt CO2 within which we must remain in order to have significantly.11 This “lunacy”12 not only continues a significant (80%) chance of containing global to threaten viability of the planet and the lives of billions, it reflects a serious misreading of warming within a 2°C “safety” zone. Taking account of emissions already produced, this demand, a waste of capex, a lack of financial discipline and a breach of fiduciary duty on leaves a budget of 565 Gt CO2 for the remaining 40 years to 2050. However, current “proven” the part of energy companies (and arguably fossil fuel reserves held by publicly listed the governments who incentivise them). companies, if burned, would release around Continued investment in fossil fuel based energy infrastructure will lock in a commitment to fossil 762Gt CO2, far more than this budget would allow. Total estimated global reserves would fuel combustion, increasing global warming and related climate risks. And importantly, the release in excess of 2,795Gt CO2 (see Figure 2 below). Logically it is not hard to accept risk to financial markets’ instability as a result therefore that a large proportion of fossil fuels of significant stranding of high-carbon assets have to remain unused. and wasted capital put to their exploitation could result in a disorderly transition to the low- carbon future that must come about. The worst affected by the coming to bear of both climate and financial instability risks that result are the poor and least developed nations. Morally, ethically and financially it is more than evident that a move to drive divestment from such activities is essential. DID YOU KNOW that removing fossil fuel energy subsidies could reduce Figure 2: Appreciating the extent of “unburnable” world GHG emissions by more than carbon – the maths of the carbon bubble 6% in 2050 compared to business as Despite this scientific knowledge, significant usual, and contribute to improved ongoing capital expenditure is being committed economic efficiency in the countries to exploration, extraction and construction of undertaking the reforms?vii

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Globally, the fossil fuel divestment movement that global warming and climate change are is the largest social movement that proactively causing. seeks to curb the impacts of climate change by directly arresting the financial investment in its It is indisputable that fossil fuel driven global continuation. Based on now-accepted science warming is causing climate change and that that indicates continuing to burn fossil fuel is not this has both direct and indirect impacts on a viable option if we want to secure planetary people’s health and wellbeing (including the viability, the divestment movement highlights knock on effect on their productivity and that fossil fuel companies, governments and therefore ultimately on economic growth). financial institutions have the moral imperative The increase in deaths as a result of airborne to overcome political inertia, financial short- pollution, heatstroke and high temperatures, termism and vested fossil fuel interests – the the increased incidence of natural disasters, “Toxic Triangle”13 – of business as usual. droughts and floods and the related spread The combination of these entrenched, co- of diseases, famines, loss of land, homes and dependent and negatively reinforcing issues livelihoods that have been witnessed in the have held back serious and committed moves last two decades, are clear evidence of, and towards mitigating the impacts of climate costs associated with fossil fuel-driven global 14 change. Premised on the belief that coordinated warming. In 2015, India reported 2500 deaths individual conviction can result in a mass and Egypt reported 93 as a result of extreme movement, which drives forward the will and heat, while countries in eastern and southern urgency to address the issue of global warming Africa are experiencing the worst drought since due to fossil fuel combustion, the divestment 1992. movement seeks to accelerateprogress in this Greater understanding of the specific pathways regard. is not necessary in order to appreciate the iincredible loss to health and wellbeing and to The cost of continued dependence on society at large that continued warming will fossil fuels make manifest in every sphere of life. This The costs of global warming are multifaceted includes the increase in social and political and impact every sphere of human life – social, instability, conflict and war which will establish political, environmental and economic. Even a a vicious cycle, increasing numbers of climate cursory analysis of known costs associated refugees, forcing climate-related migration, with the impacts of fossil fuel combustion can feeding the spread of xenophobia-related significantly demonstrate the logic of and need conflict and ultimately eroding the fabric of for divestment. The following discussion seeks societies and wellbeing of communities the to present an outline of the clear social and world over. economic costs of continued dependence on fossil fuels, which support the call for divestment from carbon-based energy. “Divestment rests on the premise that it is wrong to profit from an industry “When climate change is framed as whose core business threatens human a health issue, rather than purely and planetary health, bringing to as an environmental, economic, or mind one of the [Wellcome Trust] technological challenge, it becomes Foundation’s medical ethics – first, do clear that we are facing a predicament no harm. We believe that, in aligning that strikes at the heart of humanity.”viii an organization’s investments with Social costs to health and wellbeing their aims and values, it goes beyond a “grand gesture”. The question is hilst quantifying the relationship not only one of direct, short-term Wbetween greenhouse gas emissions, impacts, but of leadership.”ix the consequent magnitude and rate of global warming and the specific impact that warming Understanding the social, health and wellbeing has on forcing climate change is difficult to costs of climate change and the need to drive an determine with any accuracy, this difficulty does alternative future, more than 50 of the world’s not negate either the existence of a relationship leading doctors and academics presented the or the fact that there are significant social costs argument for divestment with particular clarity

Page 9 The Divestment Campaign: A just response to climate inaction 350Africa.org in an open letter addressed to the Wellcome are time lags in the impact of emissions and Trust Executive Board published in the Guardian capacity differences in the ability to cope with newspaper15. Beyond the direct health costs these impacts. The continued and expanding related to climate impacts, there are also reliance on fossil fuels for transport and energy significant opportunity costs that are being will perpetuate and increase health impacts lost as a result of not mitigating climate risks. the world over, but the absolute cost will be Indeed, according to a report by the Lancet higher in poor countries because of their Commission (2015), the issue of tackling climate relative lack of capacity to cope. Furthermore, change “could be the greatest global health developed countries already able and moving opportunity of the 21st century”.16 Clean energy towards cleaner technologies, means that cook stoves and reduced air pollution alone regional emissions – and therefore health- would save millions in health care costs, not to related impacts – will begin to drop.21 Developing mention increased productivity of the workforce. countries that are not supported financially to switch quickly to low-carbon solutions will Social costs associated with the burning of be locked into a negative dependency.22 This fossil fuels can be identified at a household, highlights the important issue of vulnerability community and regional scale by the physical in climate change impacts and should provide 17 impacts in all of these arenas. At the household added motivation for developing countries – scale specific reference is made to the poorest and the developed countries who have much households that commonly use solid fuels for to lose as a result of disasters and failures in cooking and heating, thereby creating pollution developing country growth and stability – to act pockets in the immediate area where members with immediacy. of the household spend the most time. Globally some 4% to 5% of diseases are attributed to this Unfortunately, an understanding of the small-scale, but concentrated form of pollution.18 costs of non-mitigation for many developing Traditional cook stoves are estimated to account countries is too easily dismissed by a narrow for 13% of global energy consumption and their focus on the assumed “benefits” of economic toxic emissions responsible for the death of growth and development: a benefits analysis between 1.6 million people each year according that (consciously or not) does not take into to the World Health Organization.19 account the increasingly strong evidence that climate impacts based on continued fossil At a community scale, the collective release of fuel dependence will erode any development fossil fuels into the surrounding atmosphere gains. Indeed, the OECD has estimated that not from both individuals and industry impacts mitigating emissions quickly enough could result on the long-term health of populations living in a global GDP loss estimated to range between within the immediate surrounds of these areas. 0.7% to 2.5% by 2060.23 In addition these levels are not always keeping within the urban health-related pollution Moral costs are evident in the continued guidelines. To compound this issue, it is diesel- exploitation of developing countries fueled vehicles that are the highest emitters and which are also more commonly found orally, the exploitative conduct associated in developing countries, thereby enhancing Mwith building reliance on an energy the inter-linkages between fossil fuel energy source, which will ultimately result in costs too sources, global warming and vulnerability.20 expensive for developing countries to bear, is increasingly recognised to be both questionable Distributional costs exacerbate social and abhorrent. Despite this, Big Oil and Big Coal (and economic) inequality continue to argue that a reliance on fossil fuel as energy for development in many of the world’s erhaps of most concern to ethical and moral poorest countries is a human rights issue. Preasoning is the fact that the distributional Learning from the efforts of tobacco giants in impacts of climate change are not equitable. the past, these big fossil fuel-based energy It is clear that the problem originates with the companies are driving sales to developing carbon emissions of the rich but the effects are nations where the need for energy is high and felt most severely in the poorest countries of carbon regulation weak or nonexistent. These the tropics and the developing world. Indeed, companies argue that the overwhelming at a regional and global scale the issue of fossil benefit of energy security and reliability for fuel emissions becomes more complex as there

Page 10 The Divestment Campaign: A just response to climate inaction 350Africa.org development shadows any costs associated 1,000% in just three years.26 In trying to justify with climate impacts. By way of example, Exxon behaviour, the World Coal Association (WCA) Mobil,24 argues that there is a fundamental proposes that divestment “does not recognise need for fossil fuels to help the world’s poor the reality of growing energy demand, the attain development targets. During the 2014 continuing role of coal and the importance of Ebola outbreak, Peabody Energy went so far as technology in enabling coal use to be compatible to allude to an unfounded linkage between an with global efforts to reduce emissions.27 The investment in coal and the ability to distribute WCA goes on to emphasise the invaluable Ebola vaccines.25 The claim highlights the role that coal is playing in development as the skewed opportunistic thinking with regards to fastest growing energy source with a significant maintaining developmental trajectories, which contribution being made to building modern rely on carbon investment and extraction. infrastructure.28 Such infrastructure, it is argued, significantly contributes to economic “I think there are much more pressing growth and development and ultimately provides priorities that we... need to deal with. social benefits that more than outweigh climate There are still hundreds of millions, change-related costs. billions of people living in abject What is neglected by this argument is not only poverty around the world. They the fact that this infrastructure is likely to be need electricity... They need fuel to stranded in the near future resulting in massive cook their food on that’s not animal economic losses that will more than offset the dung... They’d love to burn fossil fuels gains, it also fails to consider the social, health because their quality of life would and wellbeing costs and implications of fossil fuel dependence discussed earlier. Perhaps rise immeasurably, and their quality most importantly, the lack of consideration given of health and the health of their to the opportunity costs and related benefits of children and their future would rise foregoing the very real potential for developing immeasurably. You’d save millions economies to leapfrog the lessons of the upon millions of lives by making fossil developed world and centre their development fuels more available to a lot of the part programmes around low-carbon, clean of the world that doesn’t have it.”x energies is a travesty of justice. This includes a shift from centralized energy production - Exxon CEO Rex Tillerson - towards diverse, clean energy models that hold particular promise for the creation of a With the decline in demand for coal in the US, more cost-effective and decentralized energy big coal companies are similarly pursuing production. This would have the ability to reach developing world markets. According to the more people: a critical consideration that should Energy Information Administration (EIA) of the be given to developing world environments Department of Energy, US coal exports to China where accessibility to centralized infrastructure increased from nothing in 2007 to ten million is unlikely to materialize for many or at any tons in 2012, whilst exports to India increased reasonable cost.29 Shortcomings in service from 1.5 million to seven million tons, and to delivery and issues of aging infrastructure can South Korea from virtually nothing to nine be alleviated by diversified energy markets; million: cumulatively a jump of more than

Page 11 The Divestment Campaign: A just response to climate inaction 350Africa.org whilst local opportunities that both empower political benefits are included.34 Analysing the and enable local communities, thereby lifting the economic costs of not divesting from fossil fuels, administrative burden of service provision and especially in light of the mounting awareness of enabling capacity towards better governance, the impacts and costs of climate change, makes can be fostered with significantly greater ease.30 this particularly clear. Furthermore, if businesses, governments and society would recognise the potential Economic costs – real and potential overlap between the need for jobs and the provision of clean energy, these objectives “Climate change poses significant could be addressed in a holistic way and not risks to the global and regional as two separate challenges.31 Polin (2012) has economies and to the portfolios of demonstrated that spending money on green institutional investors that depend investments rather than on existing and aging on economic stability and growth. infrastructure creates three times the amount Mitigating climate change is in the 32 ofjobs. economic interests of investors, “We must … recognize that there both to reduce systemic risks to is a humanitarian imperative to their portfolios and to capture meeting [the developing world’s new investment opportunities in growing global energy needs.”xi the necessary transition to a low- carbon, clean energy economy.”xii - Exxon CEO Rex Tillerson - he potential economic costs related to Undoubtedly, it is true that people and countries Tcontinued investment in and by fossil fuel need energy to grow. To propose, however, companies should be framed in the context of that this energy should be based on fossil fuels an increasingly imminent policy and regulatory proven to be resulting in the demise of the environment that will ultimately render carbon viability of the planet, and to attempt to hide assets unburnable and therefore valueless. This profit motives in a humanitarian wrapper, is argument is well documented in Carbontracker’s morally repugnant. It is evident that energy report, “Unburnable Carbon”35 and has most does not have to be fossil fuel-based: on recently been taken up by the Bank of England the contrary, it is increasingly evident that it as posing a very real danger to the stability of shouldn’t be. Equally to portray fossil fuel- financial markets across the globe.36 The notion based energy as cheaper for developing world of the “carbon bubble” suggests that, whilst countries needing to stretch their budgets is historically, an investment in carbon assets has entirely self-serving and disingenuous. The provided a failsafe haven for capital as a result failure to internalize the cost of carbon-related of widespread global reliance on fossil fuels for destruction in the price of carbon is arguably energy, the weight of evidence of the impact the biggest failure of the market, one which of carbon combustion today presents a rapidly developing world countries are already paying a evolving sea change in their ability to maintain significant price for. Thus whilst Exxon argues this value. Accordingly, continued investment in that markets rather than regulators should fossil fuels is largely unjustifiable. determine which technology should meet consumer needs,33 this position can only be true This presents a very real picture of a future if the value of carbon is appropriately linked to wherein carbon assets are largely stranded the full costs associated with its use. assets.37 With the realization that fossil fuels no longer have intrinsic value, investors will dump The lack of proper pricing of carbon emissions is them in quick succession, with the potential perhaps the biggest social and market failure in to create a fossil fuel equivalent of the 2008 the world economy. It skews a full appreciation subprime crisis. Such a disorderly transition of the cost/benefit analysis and drives the to a low-carbon future will result in a massive continued use of fossil fuels. Such incomplete financial instability with concomitant knock on pricing inhibits acceptance of the very real impacts for social and economic wellbeing and evidence that fossil fuels are significantly more political stability. As with the 2008 financial expensive and socially detrimental at full pricing, crisis, the impact of, for example, a market most especially when subsidies and related crash will wipe out pension fund assets and

Page 12 The Divestment Campaign: A just response to climate inaction 350Africa.org the retirement savings of millions of people, carbon budget to restrict warming to 2° means putting additional strain on governments and that the world has come to the end of the fossil social welfare systems and spurring conflict fuel age. Similarly, an insufficient number of and social disintegration. Surprisingly, the institutional investors are accepting of this divestment movement is specifically criticized fact and voting with their share allocations for its supposed potential to create such a accordingly. That is a major problem. And disorderly financial crisis. Yet it is evident that it is a problem worsened by the fact that the argument to divest from carbon assets policymakers, market regulators and legislators represents a specific attempt to resolve an are still allowing coal companies to raise capital untenable situation and avoid the scenario that from public markets and list on stock exchanges would result if divestment does not take place. without any mention of climate risks in their capital raising documents. The combined lack “Fossil fuel companies have reserves of acceptance and transparency in investment more than four times the amount that structures, as well as the maximization of can be burned if global warming is short-term benefits has to be recognised as to be limited to 2°C and catastrophic irresponsible fiduciary care, behaviour that will effects avoided…. [and] companies are result in future economic dislocation for both individual investors and industries alike. spending significant amounts annually to search for more. From an economic The short-termism intrinsic to the primary standpoint, an argument can be made focus on profit and financial return above all that stocks are incorrectly priced else is one of the founding base points of the previously mentioned “Toxic Triangle”. This, it because of that, and that exploration is argued, can only be achieved by accepting dollars ought to be invested elsewhere an exceptionally narrow definition of fiduciary xiii or returned to shareholders.” duty but it is the notion of fiduciary duty to maximize financial returns for investors that is Despite all the evidence, however, it remains the rationale for arguing against the notion of fundamentally apparent that the majority of divestment. fossil fuel companies will not accept that a

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Short-termism and short-sightedness: already known reserves are far more than those Justifying a narrow definition of that can possibly be used, supports the call to stop (divest) from ongoing exploration of carbon fiduciary duty as fuel. eeting fiduciary duty is a reoccurring This will assist in ensuring that an orderly Margument used by investment divestment programme can occur and professionals against divestment. Those fossil fuel companies can partly protect the currently responsible for investing significant financial implications on both themselves capital on behalf of individuals (for example and their investors by paying out dividends asset owners of pension funds) argue that they to shareholders and winding up unviable and have the specific (one would believe sole) duty of expensive operations. In this way, the historical ensuring that maximum (not necesarrily optimal) benefits derived by fossil fuel companies financial returns accrue to their beneficiaries. can realign to current and future realities As such, they believe they have a more vigilant and development imperatives.41 The obvious responsibility towards the economic uncertainty problem with this is that by paying a bigger of a divested portfolio over institutions such as dividend, fossil fuel companies are committing 38 universities. to a trajectory of company reduction - away This view is used by asset owners, asset from growth, away from profits and away from managers, institutional investors and financial short-term financial interests. This is contrary intermediaries to reject or ignore consideration to the capitalist ethos and illustrates why efforts of the social and environmental consequences to address climate change demand powerful of continued investment in fossil fuels. The leadership, political and moral courage and a refusal to be swayed by vested interests. lack of proper pricing of CO2 emissions adds to this behaviour, perpetuating the distortion Vested interests are currently winning and making it difficult for renewable energy investments to compete on the basis of financial the fight to maintain a high carbon returns, even though these investments status quo would, in all likelihood, offer better financial returns if carbon risk premiums were fully “The potential for innovations to incorporated in investment decisions, and accelerate the transition to a low- would simultaneously address specific societal carbon economy is enormous, but challenges. Unfortunately, investment pricing there are real barriers, including is not currently strong enough to direct the market scale, sunk costs and investments to something that makes sense at entrenched incentives for incumbent a societal level, a problem that is amplified by xiv corporate governance issues and the fact that high-carbon technologies.” the interests of fossil fuel company directors he transition to low-carbon, renewable and managers are not necessarily aligned to the forms of energy represents a major 39 T interest of investors. challenge to the existing energy system and rises in the face of some of the most powerful However, recognising that full carbon pricing is actors – and their vested interests; actors who imminent, Carbontracker and many others are are intent on preserving the status quo at all calling for project-based divestment from high costs. Perhaps unsurprising, but nonetheless cost, low value initiatives that will ultimately be disconcerting, is the fact that governments mothballed or stranded, as well as for increased continue to subsidise these same fossil dividend payout of cash assets that the big fuel companies, evidencing their own direct oil, gas or coal companies would otherwise vested interests in maintaining a status quo or have allocated to exploration, research and championing a short-term gain in contradiction development, and other no longer viable carbon to a long-term future. The fossil fuel industry, intensive projects.40 This argument recognizes as with the tobacco giants in the past, has that some carbon assets may have an important formidable lobbying power backed by substantial role to play in the economy in other ways, such financial reserves, which unfailingly wins as a raw material in the pharmaceutical industry, the backing of weak political leadership. This but that continued exploration and investment in industry gains further support from government carbon assets as fuel has to stop. The fact that

Page 14 The Divestment Campaign: A just response to climate inaction 350Africa.org policies that subsidise continued vested renewable energy, their removal from fossil fuel- interests and the status quo. In this regard, based energy sources would result in immediate a study by the International Monetary Fund cost parity with renewable energy technologies calculated that pre-tax subsidies for fossil fuels – with only increasing upside for low-carbon in 2011 equaled $480 billion.42 solutions thereafter. “…subsidies provide incentives Innovation is central to sustainable growth and for inefficiently high levels of fuel much potential lies in the “green economies”. consumption and that the associated Yet innovation is not driven by potential alone, 43 fiscal costs can be detrimental it is also driven by demand and public policies. Businesses will innovate when profits are in to growth and poverty reduction. question. However with large and continued Eliminating subsidies will encourage subsidization of investment targeting fossil more efficient energy consumption fuel companies, incentives to innovate are and thus reduce the impact of misaligned and path dependency is perpetuated. future international price increases Unless the cost of carbon is accurately priced on the economy. In addition, into business models for fossil fuel companies, profits will not align to the innovation needed subsidy reform will contribute to to move away from carbon-intensive energy fiscal sustainability and economic sources and vested interests will continue to growth, which are crucial for reap the benefits resulting from a lack of political sustained poverty reduction.”xv action. The logic of continuing to subsidise fossil fuel Indeed, many argue that the lack of movement companies in the face of scientific evidence of to a decarbonised economy is primarily a the ultimate demise of social, environmental political issue, that it requires a strong policy and economic value is inexplicable. Every signal from governments across the globe to sustainable development principle advocates for drive an active transition over the next five a transition to renewable, clean energy options. years with consistent support and direction Every economic scenario points to the ultimate provided by an enabling policy framework from massive loss associated with a protracted delay governments.44 Unfortunately at the apex of the to this transition. If subsidies were focused on toxic triangle we find political inertia and a lack renewable, clean energy sectors, an avenue of of leadership undoubtedly supported by similar entrepreneurship and innovation could flourish. short-termism of focus on election cycles and Even if subsidies weren’t made available to vested interests of retaining power.

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Political Inertia sits at the top of the energy requirements entail as well as the toxic triangle outcome of who is to benefit the most. “To manage change and realize “Government has a role both in shifting growth opportunities, clear and the expectations (for example, by credible policies are needed to align credibly committing to climate policy) expectations, guide investors, or changing the initial conditions stimulate innovation, and avoid (for example, by investing in green locking in to carbon-intensive infrastructure or funding clean energy infrastructure and behaviour.”xvi research) in order to reduce the risk of clean technology investment and hile markets could and should play a thereby help shift the economy to Wsignificant role in guiding and encouraging the low-emission pathway.”xvii economic development, they are not assigned to play the role of protecting the common good Vested interests and business relationships with of all people, especially those that are most fossil fuel companies makes the argument for vulnerable.45 It is, in contrast, the explicit role continued fossil fuel exploration and extraction of policy makers to ensure that appropriate on the premise of researching “cleaner” carbon protections are in place. Thus credible policies a difficult issue to navigate. Not addressing path are needed to foster the transition to a low- dependencies in policy formulation and funding carbon economy and to protect the future efforts thus results in a delay of innovation in sustainability of people and planet.46 As argued clean technology, entrenching further carbon- earlier, business and innovation is inspired by dependent behaviour.48 profit: if policies provide perverse incentives for profit generation through harmful behaviours A clear signal from government is required if the path dependency of fossil fuels is to be such as continued fossil fuel dependence, they 49 will not create the framework consistent with broken. Pre-emptive policy that takes into increased momentum towards a low-carbon account the science of climate change and future. Unfortunately, maintaining policies the rationale behind divestment, could guide that support the current path dependence behaviour towards responsible investment and system inertia will delay innovation and and strengthen the requirement for greater transition towards a “clean economy”, adding social and environmental accountability. Putting significant costs to the future. Furthermore, clear and unambiguous policies in place to set funding innovation in more effective carbon the parameters for emissions behaviour and production rather than funding “clean” guide market pricing appropriately will assist in technology directly creates additional resistance ensuring that an orderly transition can occur. to a shift towards low-carbon economies Sadly, the need for political leadership is 47 both politically and economically. The global significantly greater in developing economies preoccupation with gas as an interim fuel, where vulnerability, poverty and socio-political and the subsequent massive investment in unrest typically poses a significantly greater fracking and related infrastructure, seems threat to stability and where a lack of resources, particularly likely to increase the resistance or, transparency and governance combined with at a minimum, delay the committed transition market failures, vested interests, short-termism to low-carbon solutions. Massive capital and corruption result in an unresponsive investment in fracking would supposedly earn policy environment. South Africa’s current long term financial returns and be better used socio-political climate and developmental path to further low carbon transition. However, dependency illustrates the potential future again this activity reflects the kind of short- failings of inaction and calls for policy-makers, termist thinking that does not – and politically investors, business and citizens alike to respond it seems, need not – take account of the full responsibly. environmental, social, health and natural resource costs that accrue with this activity. It is as a result of the absence of movement Maintaining energy as an economic commodity by both the private and public sectors that the that is centralized in fossil fuels prevents a shift Divestment Movement seeks to mobilize public in the perception of what future sustainable opinion and mass action. Indeed, recognising

Page 16 The Divestment Campaign: A just response to climate inaction 350Africa.org the entrenched and co-dependent barriers of This has not only critically constrained growth the “Toxic Triangle”, the Divestment Movement’s and development at a critical juncture in the effort is designed to compel mass action by country’s democratic transformation; it has common citizens, awakening them to their limited government’s ability to meet service responsibility and to their power to demand delivery promises and produced a knee jerk leadership action that will reframe goals and reaction to continue along the well-trodden development trajectories towards a just and path of coal-based energy. This mix of energy sustainable future. The threat of a large-scale crisis, path dependence and a lack of compelling change in public opinion and the consequences vision have resulted in more investment being of such change on both voting and financial poured into large scale coal-fired power stations behaviour are what will drive change in public at Medupi and Kusile, locking South Africa and private sector actors seeking to maintain in to an emissions trajectory it cannot afford position through securing their proletariat and but quelling the urgent demand for energy for power in the future. development in the near term. The economic costs of Medupi alone is 200% over the original Divestment as a strategy in coal- budget, making the power station the most dependent or developing economies: Is it expensive coal powered station in the world, valid in the case of South Africa? with the environmental and social costs still to be tallied.53 In analyzing the carbon footprint of South Africa’s carbon-intensive energy the two stations, the opportunity cost equates challenge to R6.3 billion and R10.7 billion a year.54 “Future economic growth does “Delaying action means locking in not have to copy the high-carbon, to technologies, infrastructures and unevenly distributed model of the behaviours that will be more costly to past. There is now huge potential reverse or retrofit at scale later.”xix to invest in greater efficiency, However, notwithstanding – or perhaps structural transformation and because of – energy challenges of the past technological change in three key decade, South Africa today has another, though systems of the economy.”xviii different, energy crisis looming: one that will result from the significant increase of emissions he South African economy is profoundly associated with even more fossil fuel-based Tlinked to the country’s rich mineral energy supply systems deployed to power deposits, the mining and processing of which growth and development. This “emissions- demand substantial energy resources directly climate-energy crisis” stems from the contributing to the capital and energy intensive structurally defining “energy-minerals complex” structure of the economy. Referred to as the that remains active in South Africa today. “minerals and energy complex”50, this historical relationship has resulted in a “political, economic Considered alongside the “Toxic Triangle” and institutional structure that lies at the and coupled with very real developmental, heart of South Africa’s economy [creating] a institutional and governance constraints, the fundamental structural challenge in moving nature of energy provision in South Africa adds towards a lower carbon economy”.51 Without to the wicked nature of the problem: one that is commitment from, or massive challenge to, the profoundly structural in nature and controlled by vested interests (including government) that powerful vested interests which make it difficult still control resource and investment decisions to transform. Whilst the potential exists for today, policy will not translate into action. renewable energy systems and technologies to come to the fore at this critical juncture, and Unfortunately, South Africa’s energy supply, indeed some (small) progress is being made in which received insufficient maintenance and this regard, there is a high path dependency of expansion investment for years, has become the energy innovation system that has centred tenuous at best over the last decade with South Africa’s research and technological disastrous economic impacts on business and capability on fossil fuel technologies; a situation industry, with an estimated loss of R80 billion reinforced by the historic and entrenched 52 a month due to the country wide blackouts. monopolistic nature of energy service provision

Page 17 The Divestment Campaign: A just response to climate inaction 350Africa.org in the country.55 The consideration in recent and pay as you go cell phone technology have years of fracking as an alternative before helped micro-grid developments in Kenya’s renewables reflects just how entrenched this rural areas to overcome investment barriers path dependence remains and how perceived and enabled increased energy access in remote financial gain drives energy decisions. communities.57 Furthermore, the savings for households that renewable energy offers are At the core, then, South Africa’s policy efforts considerable and the technological advances must face the fundamental challenge of how in, for example, LED lighting, result in reduced to reconcile “sustainable development goals, energy use (and therefore emissions) of five to such as mitigating greenhouse gases (GHGs), ten times that of incandescent light.58 alleviating poverty and creating employment, with the current structure of the economy [and The assumption of development trajectories the nature of energy production systems]”.56 being dependent on fossil fuels is paradoxed by The issue is not whether South Africa can the obvious existing and ultimately increasing reduce its energy use whilst still achieving costs associated with such dependence. its development goals but rather how it can Technological abilities and social and economic achieve its development goals whilst reducing benefits all support the “leap-frogging” of energy emissions; how it can effectively Africa over fossil fuel dependency and towards decouple GHG emissions from energy provision clean energy development. Just as was or development. Hiding behind the excuse of demonstrated by Africa’s “leap-frogging” of poverty and a need for development is not a telecommunications technology, renewable viable reason for honouring vested interests technology could enable African countries or pandering to political influence. Energy for to “leap-frog” outdated, centralized grid development does not have to be cheap and infrastructure to get straight to clean energy dirty energy, especially in light of the increasing economies.59 Indeed, many parts of Africa and opportunity for cheap and clean energy Asia are demonstrating this, despite the lack of technologies in developing world countries. strong policy enabler.60 To date, despite widespread articulation and consensus of the absolute need to structurally transform the economy, the implications of actions necessary to achieve this end (dismantling the energy-minerals complex, retiring fossil fuel production plans, leaving assets in the ground, etc) has resulted in political paralysis and no fundamental implementation. How to steer the course through this political minefield of unpopular decisions, vested interests and private investor capital without losing socio-economic development gains, value or progress achieved to date is something that current leadership has not been willing to negotiate.

A low-carbon economy for South Africa is there for the taking Figure 3. South Africa’s solar potential. ogically, the sheer size and low density of LAfrica’s scattered population points to the potential for effective use of decentralized, In the case of South Africa, solar power makes locally-accessible and economically cost- up a small fraction of the energy mix despite the effective, clean energy initiatives over grid- fact that the country is argued to have the best based power. The opportunity of diversifying potential for concentrated solar power in the away from centralized energy production also world62. The overwhelming evidence supports presents social and financial opportunities for the view that investment in clean energy could both developed and, more especially, developing not only help South Africa leapfrog past fossil countries. For example, cloud-based software fuel dependency but that it would significantly

Page 18 The Divestment Campaign: A just response to climate inaction 350Africa.org fulfill social and political responsibility of poverty to urgently stand up and challenge the lack of alleviation and sustainable development. accountability, transparency, political will and Glaringly obvious too is the fact that intractable above all, the lack of leadership to challenge and policies and intact vested interests are disabling change the status quo, rid the socio-political the move towards a low-carbon future. Tipping order of elite vested interests, and demand the triangle to reverse these dynamics would a swift and just course of action towards a enable significant progress towards a low- low-carbon future. It rests on the belief that carbon future to be realised in a very short time the “Toxic Triangle” can be overturned by the frame. collective power of individuals: a groundswell of individuals who have a vested interest in Tipping the Triangle: The need for a a sustainable future world order, a vested Divestment Movement interest in their health, wellbeing and livelihoods. Most importantly it emphasizes immediate “People of conscience need to break consequences of action that is too slow and too their ties with corporations financing small. the injustice of climate change.”xx “Economies with accountable ritics of the divestment movement argue institutions and responsive policy Cthat calm engagement with Big Oil and frameworks will be better placed to Big Coal, and the investors that support them, is likely to be significantly more fruitful and adapt, evolve, embrace and manage orderly in achieving the outcomes necessary change, to reallocate resources to secure planetary sustainability. Initiatives more efficiently, and to foster such as ShareAction63, Carbon Tracker64, growth opportunities. They will have AODP65, CIEL66, UNPRI67 and Client Earth68 the flexibility to tap new markets all seek to use engagement to empower and adopt new innovations. The expressions of individual investment agency alternative, of resisting change, through awareness and access to information. These initiatives are all, by and large, aligned protecting vested interests, propping to a similar outcome though this is presented up declining industries and delaying as “responsible investment”. All ultimately action, risks locking in less productive seek to achieve a common goal with that of the growth and leaving investors, divestment movement: a move away from a firms and households vulnerable to fossil fuel-dependent future. shocks. Resisting change may enable Problematically, however, there are no economies to squeeze a little more benchmarks or yardsticks against which out of their existing structure in the the progress of engagement action can be short-term, but it is unlikely to benefit measured. There is currently no roadmap to then in the medium- to long-term.”xxi guide how investors and/or NGOs can engage and no end goal or measurable indicator to It is important to emphasise that the divestment determine whether engagement is having a movement does recognise the need for, desirable or sufficient impact. What precisely and indeed advocates for, an orderly and constitutes engagement, how to know if has just transition to a fossil fuel-free future. been successful, and when it will achieve Appreciative of the fact that the transition an objectively measurable outcome to meet towards a low-carbon economy could create a the requirements of science and planetary degree of “economic dislocation” that calls for necessity, are also not well defined. Perhaps the proactive involvement of companies and most ironically for critics of divestment, government,69 there is an acute awareness of successful engagement will amount to the the fact that “tipping the toxic triangle” is not same outcome – divestment from high-carbon about transcending political and economical projects. However, it is likely to happen over a boundaries, but rather about reshaping them protracted period and might not achieve the to encompass the reality of what measures are necessary outcome in time. being needed to mitigate the impacts of climate change and at what pace. In contrast, the divestment movement seeks to mobilize civil society and ordinary citizens

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Despite this understanding, it is apparent that behaviour. It could be likened to the armed political inertia remains a fundamental barrier,70 struggle of the ANC, to the last resort action of perhaps the single most effective barrier that a populace whose peaceful negotiations were ultimately perpetuates financial short-termism unheard and who, left without a voice in policy, in and vested interests, inhibiting “right” action at the markets, or in a sustainable future turned to scale. This demands that we find an answer to strident action to achieve results. the question of “Where to from here? How can the “toxic triangle”, so powerfully entrenched in Conclusion our modern socio-economic and political model he science is steadfast. Global warming is of the world, be tipped? Taccelerating with the continued combustion The role and potential power of the individual of fossil fuels as the most prevalent form of as a protagonist for change is paramount energy. The socio-economic costs associated to answering this question. It is the basis of with this are increasingly evident and their divestment movements across history. The impact is particularly regressive. The future power of divestment lies in the demand from trajectory of investment flows will have a direct people for change, it lies in the purchasing and impact on the future of the world’s climate 71 political power that each of them ultimately systems. Opportunities for economic growth holds, purchasing and political power that can and improvement of social and ecological act in concert to change the future. “Tipping resilience can be realized through aggressively the triangle” starts with a groundswell, a social addressing climate change and mitigating movement that mobilizes the masses and further impacts. A change in path dependency demands a change to the social, political and from the assumed reliance on fossil fuels for economic order, not out of hysteria, but out of a development and growth is imperative as the response to science and social justice combined. short-term tradeoffs of continued fossil fuel investment become increasingly expensive “The divestment campaign has in every conceivable sphere. These costs are been important to bring focus to the further heightened in the context of exposed issue. It has sent a strong message and vulnerable populations and the dynamics of unforeseen, runaway changes, which are to the market and to policymakers increasingly no longer just an idle threat.72 that investors are concerned.”xxii Responsible investment behaviour can promote Whilst superficial critics may respond to better governance, compliance – and perhaps divestment as environmental activist hype, even commitment to new opportunities on the the trend towards greater awareness, the part of business. However, the direction of demand for increased corporate responsibility policy and regulatory changes and the display and accountability that is being driven by the of brave and bold political leadership could divestment movement is accelerating. It is not maximize opportunities for, and the progression purely an industry-focused, economic boycott. towards a low-carbon green economy, as well It is also about assigning responsibility to each as prevent those most vulnerable to the impacts and every stakeholder. of exploitive profiteering by big oil and coal Consistent communication and “noise” companies. Putting the power of investment generated by the movement for fossil fuel into the hands of stakeholders aligns the divestment and others on responsible collective moral standing of these individuals investment, has the potential to tip the “Toxic to the investment seen to be most responsible. Triangle”. It speaks to a lack of political will, But as highlighted throughout this paper, the a short-term focus in the minds of investors, intertwined and co-dependent disablers of this of business and of governments. It demands necessary change are entrenched in current engagement with the issue of continuing a markets and policy behaviour. Therefore noise world order based on fossil fuel combustion and must be made and mass action must be taken to highlights its ramifications, morally, socially, speak out and stand up to those in power. ethically, politically, financially and economically. Contrary to superficial criticisms, the call for It encompasses engagement but highlights the divestment is inclusive of large measures of road to a lack of responsive ethical conduct engagement and sensitive to the need for an to reasonable attempts to encourage correct economically-responsible transition. However,

Page 20 The Divestment Campaign: A just response to climate inaction 350Africa.org the divestment movement also recognises that just socio-economic cause to prevent the engagement without a powerful, immediate impacts falling most directly on vulnerable and urgent demand for action, without a populations. timeframe, without a consequence, simply becomes empty conversation. It is argued 3. Remove vested interests: Removing here that the divestment movement is a subsidies and incentives, addressing market rational and justifiable response to inaction. mispricing and leveling the playing field for Undermining the importance of this argument innovative new technologies will significantly by labeling it a hysterical reaction by anti- overcome vested interests by enabling capitalist environmental activists reflects a capital to move to greater financial (and grave misunderstanding of its purpose and social) benefit. of the urgency of its necessary outcome – a 4. Develop clear and comprehensive reallocation of capital away from fossil fuels messaging suited to audience: The to ensure a viable, sustainable future in a low- divestment movement must counter efforts carbon economy. The divestment movement at misinformation and speak to audiences in is, in fact, an essential protagonist for change; the language they most readily understand. change that will secure a viable planetary future Making use of consistent, clear and easily in the long term by avoiding short-termist gains. accessible messaging, presented in simple, unemotional language will ensure that Recommendations “hype” and “hysteria” cannot be attached to The following recommendations seek to its communities. Furthermore messaging promote the goal of a climate-resilient future; should clearly demonstrate the social, one that is common to both the divestment and financial, individual and collective costs engagement movements. They stem from an and consequences associated with not understanding of the critiques of the divestment divesting and the benefits/opportunities of movement and reflect an appreciation of divestment. the fact that the message of the divestment 5. Recognise common goals: By demonstrating movement has been misunderstood – whether alignment between disparate engagement willfully or not. Each recommendation speaks efforts, all of which hold divestment as to an element of the “toxic triangle” and strives the ultimate consequence for inaction, to define the means through which an enabling the divestment movement could illustrate environment for change can be created. that differences between engagement Importantly, the final recommendation speaks and divestment are more semantic and to the need to more clearly recognise that there substantial. Increasing cooperation is a common goal shared by multiple and often between these efforts could enable more disparate efforts that use engagement as a meaningful outcomes to be achieved in a means to drive the transition to a low/no carbon time frame that is meaningful for a climate future. agenda. Collaboration in the carbon cause is 1. Overcome short-termism: By adopting a imperative for urgency to be met. long-term view of the future, business and investors have the opportunity to capitalize on a growing market for clean energy that is founded upon corporate sustainability, responsible investment and holistic fiduciary duty. Being champions in this regard has the potential to distinguish the “winners” from the “losers”. 2. Encourage responsible policy: The political imperative to respond to climate impacts and mitigate increasing future vulnerabilities is absolute and must be proactively addressed by governments. Policies should be responsive, should address the drivers of global warming directly and be based on

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24. Exxon website: http://corporate.exxonmobil.com/ Endnotes 25. Goldenberg. S. (2015). The Guardian: http://www.theguardian. com/environment/2015/may/19/peabody-energy-exploited- 1. Razouk. A. W. (June, 2014): http://www.sindicatum.com/ ebola-crisis-for-corporate-gain-say-health-experts. four-part-series-by-assaad-w-razzouk-on-reviving-and- 26. Klare. M (April, 2014). Big Oil Won’t Let Developing World reinventing-the-global-climate-movement/ Kick the Habit: http:// http://www.motherjones.com/ 2. Miller. H. (May, 2015). Divestor Asks: Is the Carbon Bubble a environment/2014/05/big-energy-developing-country-oil- Form of Fraud?: http://triplepundit.com/2015/05/divestment_ exxon-coal investment_/ 27. World Coal Association (WCA). Coal Matters: Divestment and 3. UNPRI (2015). Deconstructing the divestment debate: http:// the Future Role of Coal: http://www.worldcoal.org/resources/ www.unpri.org/events/deconstructing-the-divestment- coal-statistics/coal-matters/ debate/ 28. Ibid 4. United Nations Development Programme, World Energy 29. Lenferna. A. (April, 2015). Why Africa Should Join the Assessment (2000) http://www.undp.org/content/dam/ Divestment Movement: http://www.thoughtleader.co.za/ aplaws/publication/en/publications/environment-energy/ mandelarhodesscholars/2015/04/29/why-africa-should- www-ee-library/sustainable-energy/world-energy- join-the-fossil-fuel-divestment-movement/ assessment-energy-and-the-challenge-of-sustainability/ 30. Examples of decentralised energy schemes in under World%20Energy%20Assessment-2000.pdf. capacitated areas: http://practicalaction.org/decentralised- 5. Kasperson, R.E., E. Archer, D. Caceres, K. Dow, T.Downing, energy; http://www.ruralelec.org/fileadmin/DATA/ T. Elmqvist, C. Folke, G. Han, K. Iyengar, C. Vogel, K. Wilson Documents/06_Publications/ARE-Best-Practice- & G. Ziervogel. (2005). Vulnerable Peoples and Places. (Eds) Africa-2014_final.pdf; http://www.greenpeace.org/africa/ Hassan R, Scholes R and Ash N. Ecosystems and Human- global/africa/publications/climate/renewableenergyreport_ Well-being; Millennium Assessment Report: Current State poweringthefuture.pdf and Trends. Washington D.C.: Island Press. 31. Fulton.M & Capalino. R. (2014). Investing in the Clean Trillion: 6. Oxfam Briefing Paper (2014). Food, Fossil Fuels and Filthy Closing the Clean Energy Gap: http://www.ceres.org/ Finance. https: ://www.oxfam.org/sites/www.oxfam.org/ resources/reports/investing-in-the-clean-trillion-closing- files/file_attachments/bp191-fossil-fuels-finance-climate- the-clean-energy-investment-gap change-171014-en.pdf 32. Polin. R. (2012). Getting Real on Jobs and the Environment: 7. Bandura, A. (1999). Moral disengagement in the perpetration Pipelines, Fracking or Clean Energy: http://www.peri.umass. of inhumanities. Personality and Social Psychology Review. edu/fileadmin/pdf/other_publication_types/magazine___ [Special Issue on Eviland Violence],3, 193-209: http://www. journal_articles/Pollin--Getting_Real_on_Jobs- uky.edu/~eushe2/Bandura/Bandura1999PSPR Environment---NLF_9-12.pdf 8. Ibid 33. Exxon Mobil. ExxonMobil’s views and principles on policies 9. Ibid to manage long-term risks from climate change: http:// 10. Yeo. S. (April, 2015). Four ways to divest from fossil fuels. The corporate.exxonmobil.com/en/current-issues/climate- Carbon Brief. http://www.carbonbrief.org/blog/2015/04/hsbc- policy/climate-policy-principles/overview outlines-four-ways-to-divest-from-fossil-fuels-(1)/ 34. According to the IEA, global fossil fuel consumption subsidies 11. Carrington. D (May, 2015). http://www.theguardian.com/ are almost 6 times higher than global renewable subsidies. environment/2015/may/18/fossil-fuel-companies- http://instituteforenergyresearch.org/analysis/developing- getting-10m-a-minute-in-subsidies-says-imf; Elliot. countries-subsidize-fossil-fuel-consumption-creating- L (September2015). http://www.theguardian.com/ artificially-lower-prices/#_edn4 environment/2015/sep/21/oecd-nations-200bn-subsidisies- 35. Carbon Tracker Initiative. Are the world’s financial markets fossil-fuels-climate-change. carrying a carbon bubble?: http://www.carbontracker.org/ 12. Campanale. M (July, 2015) Founder of the Carbontracker wp-content/uploads/2014/09/Unburnable-Carbon-Full- Initiative. Personal communication. rev2-1.pdf 13. Oxfam Briefing Paper (2014). Food, Fossil Fuels and Filthy 36. Carbon Tracker Initiative (2013). Unburnable Carbon: Wasted Finance. https: ://www.oxfam.org/sites/www.oxfam.org/ capital and stranded assets: http://carbontracker.live.kiln.it/ files/file_attachments/bp191-fossil-fuels-finance-climate- Unburnable-Carbon-2-Web-Version.pdf change-171014-en.pdf 37. The word “largely” seeks to clarify that use of some carbon 14. The Lancet (June, 2015). Health and climate change: policy assets in applications other than as fossil fuel is undoubtedly responses to protect public health:www.thelancet.com/ going to continue into the future where alternatives are commissions/climate-change-2015; http://www2.epa.gov/ not yet identifiable. This includes, for example, use of oil in cleanpowerplan/learn-about-carbon-pollution-power- pharmaceuticals etc. plants; https://www.ec.gc.ca/indicateurs-indicators/default. 38. Stracke, D.; Martin, A. and Malchenko, M. (2014). Seattle City asp?lang=En&n=D4C4DBAB-1 Employment Retirement System, Fossil Fuel Divestment. 15. The Guardian (June, 2015). Do no harm: the Wellcome Trust NEPC, USA. should not profit from the fossil fuel industry: http://www. 39. UNPRI (2015). Deconstructing the divestment debate: http:// theguardian.com/environment/2015/jun/25/do-no-harm- www.unpri.org/events/deconstructing-the-divestment- wellcome-trust-should-not-profit-from-fossil-fuel- debate/ industry 40. Ibid 16. The Lancet (June, 2015). Health and climate change: policy 41. Ibid responses to protect public health: http:// www.thelancet. 42. The Unequal Benefits of Fuel Subsidies: A Review of Evidence com/commissions/climate-change-2015 for Developing Countries Javier Arze del Granado, David 17. Ibid Coady, and Robert Gillingham 18. Ibid 43. Carbon Trust (June, 2015). Titans or Titanics? Understanding 19. Razouk. A. W. (June, 2014): http:// sindicatum.com/four-part- the business response to climate change and resource series-by-assaad-w-razzouk-on-reviving-and-reinventing- scarcity: http://www.carbontrust.com/resources/reports/ the-global-climate-movement/ advice/titans-or-titanics 20. Ibid 44. The Lancet (June, 2015). Health and climate change: policy 21. Ibid responses to protect public health: http:// www.thelancet. 22. Ibid com/commissions/climate-change-2015 23. Dellink, R. et al. (2014), “Consequences of Climate 45. America: The National Catholic Review (April, 2014). Getting Change Damages for Economic Growth: A Dynamic out of oil: http:americamagazine.org/issue/getting-out-oil Quantitative Assessment”, OECD Economics Department 46. The New Climate Report Economy Report (2014): http:// Working Papers, No. 1135, OECD Publishing http://dx.doi. newclimateeconomy.report/. org/10.1787/5jz2bxb8kmf3-e Page 22 The Divestment Campaign: A just response to climate inaction 350Africa.org

47. Aghion. P, Hepburn. C, Teytelboym. A and Zenghelis. D. story/2014/11/fromdivestmenttoengagement/ (November, 2014). Path dependence, innovation and the iii. Davidson, C. and Kaufman, C., (23 January 2015) Is economics of climate change. Centre for Climate Change reinvestment a good strategy for the fossil fuel divestment Economics and Policy Grantham Research Institute on movement? Truthout http://truth-out.org Climate Change and the Environment, a contributing paper to iv. http://gofossilfree.org/whatisdivestment/ the New Climate Economy: http://newclimateeconomy.report/ v. Carbon Tracker Initiative. Gone Fishing: Divestment & wp-content/uploads/2014/11/Path-dependence-and-econ- Engagement: http://www.carbontracker.org/divestment_ of-change.pdf engagement/ 48. Ibid vi. Powell. A(November,2014) From Divestment to Engagement: 49. Ibid Harvard Gazette: http://news.harvard.edu/gazette/ 50. Winkler, H., & Marquard, A. (2009). Changing development story/2014/11/fromdivestmenttoengagement/ paths: From an energy-intensive to low-carbon economy in vii. Organisation for Economic Co-operation and Development South Africa. Climate and Development, 1(1), 47-65. (2013). OECD Work on Climate Change 2013 – 2014: 51. National Planning Commission (2011). National Development Pg. 8: http://www.oecd.org/env/cc/Work-on-Climate- Plan: Vision for 2030. National Planning Commission. Pretoria. Change-2013-14_web.pdf P.181. viii. World Energy Assessment: http://www.undp.org/content/ 52. http://businesstech.co.za/news/general/83429/eskom- dam/aplaws/publication/en/publications/environment- blackouts-cost-south-africa-r80-billion-per-month/ energy/www-ee-library/sustainable-energy/world-energy- 53. http://www.terrafirma-academy.com/the-most-expensive- assessment-energy-and-the-challenge-of-sustainability/ coal-power-station-in-the-world/ World%20Energy%20Assessment-2000.pdf 54. Blignaut. J (2012). Climate Chane: The opportunity cost of ix. The Guardian (June, 2015). Do no harm: the Wellcome Trust Medupi and Kusile power stations. Journal of Energy in should not profit from the fossil fuel industry: http://www. Southern Africa. Vol. 23. No. 4. theguardian.com/environment/2015/jun/25/do-no-harm- 55. Pegels, A. (2010). Renewable energy in South Africa: wellcome-trust-should-not-profit-from-fossil-fuel- Potentials, barriers and options for support. Energy Policy, industryhttp://www.theguardian.com/environment/2015/ 38(9): 4945-4954. jun/25/do-no-harm-wellcome-trust-should-not-profit- 56. Winkler, H., & Marquard, A. (2009). Changing development from-fossil-fuel-industry paths: From an energy-intensive to low-carbon economy in x. Klare. M (April, 2014). Big Oil Won’t Let Developing World South Africa. Climate and Development, 1(1), 47-65. Kick the Habit: http:// http://www.motherjones.com/ 57. http://www.ashden.org/files/case_studies/ environment/2014/05/big-energy-developing-country-oil- SteamaCo%2C%20Kenya.pdf exxon-coal 58. Popov. J (March, 2014). Cab Africa Leapfrog the Energy Age?: xi. Ibid http://www.aljazeera.com/indepth/opinion/2014/03/can- xii. Fulton.M & Capalino. R. (2014). http://www.ceres.org/ africa-leapfrog-carbon-ener-201433114400319289.html resources/reports/investing-in-the-clean-trillion-closing- 59. African Development Bank Group (May, 2013). Technology the-clean-energy-investment-gap Can Help Africa Leap-Frog Development Challenges: http:// xiii. Powell. A(November,2014) From Divestment to Engagement: www.afdb.org/en/news-and-events/article/technology- Harvard Gazette: http://news.harvard.edu/gazette/ can-help-africa-leap-frog-development-challenges-11840/ story/2014/11/fromdivestmenttoengagement/ 60. Examples: http://www.ashden.org/files/case_studies/ xiv. The New Climate Economy Report, Chapter 7 SRSP%20Pakistan.pdf; http://www.ashden.org/ (2014). Transformation Through Innovation: http:// files/Azuriwinner.pdf; http://www.ashden.org/files/ newclimateeconomy.report/innovation/ Aprovecho2006.pdf; http://www.ashden.org/files/ xv. Arze del Granado, J., Coady, D., and Gillingham, R. (2010) The ToughStuff%20winner.pdf; www.economist.com/news/ Unequal Benefits of Fuel Subsidies: A Review of Evidence middle-east-andafrica/21653618-falling-cost-renewable- for Developing Countries. IMF Working Paper, Fiscal Affairs energy-may-allow-africa-bypass Department. 61. https://en.wikipedia.org/wiki/Solar_power_in_South_Africa xvi. The New Climate Economy Report, Chapter 5 (2014). 62. https://en.wikipedia.org/wiki/Solar_power_in_South_Africa Economics of Change: A framework for Growth: http:// 63. www.shareaction.org newclimateeconomy.report/economics-of-change/ 64. www.carbontracker.org xvii. Aghion, P., Hepburn, C., Teytelboym A., and Zenghelis, D. 65. www.aodproject.net (November 2014). Path dependence, innovation and the 66. www.cielgroup.com economics of climate change. Centre for Climate Change 67. www.UNPRI.org Economics and Policy. Grantham Research Institute on 68. www.clientearth.org Climate Change and the Environment. http://www.lse.ac.uk/ 69. Fulton. M & Capalino. R. (2014). Investing in the Clean Trillion: GranthamInstitute/wpcontent/uploads/2014/11/Aghion_et_ Closing the Clean Energy Gap: http://www.ceres.org/ al_policy_paper_Nov20141.pdf resources/reports/investing-in-the-clean-trillion-closing- xviii. The New Climate Economy, Executive Summary (2014): http:// the-clean-energy-investment-gap newclimateeconomy.report/wp-content/uploads/2014/08/ 70. Oxfam Briefing Paper (2014). Food, Fossil Fuels and Filthy NCE_ExecutiveSummary.pdf Finance. https: ://www.oxfam.org/sites/www.oxfam.org/ xix. Aghion. P., Hepburn. C., Teytelboym. A., and Zenghelis. D. files/file_attachments/bp191-fossil-fuels-finance-climate- (November 2014). Path dependence, innovation and the change-171014-en.pdf economics of climate change. Centre for Climate Change 71. The New Climate Economy, Executive Summary (2014): http:// Economics and Policy. Grantham Research Institute on newclimateeconomy.report/wp-content/uploads/2014/08/ Climate Change and the Environment. http://www.lse.ac.uk/ NCE_ExecutiveSummary.pdf GranthamInstitute/wpcontent/uploads/2014/11/Aghion_et_ 72. The New Climate Economy Report, Chapter 5 (2014). al_policy_paper_Nov20141.pdf Economics of Change: A framework for Growth: http:// xx. Tutu. D (2014): http://www.theguardian.com/ newclimateeconomy.report/economics-of-change/ commentisfree/2014/apr/10/divest-fossil-fuels-climate- change-keystone-xl xxi. The New Climate Economy Report, Chapter 5 (2014). Quote references: Economics of Change: A framework for Growth: http:// i. Davidson, C. and Kaufman, C., (23 January 2015) Is newclimateeconomy.report/economics-of-change/ reinvestment a good strategy for the fossil fuel divestment xxii. Reynolds. F. (2015). In Grene. S article: Divestment Refuseniks movement? Truthout http://truth-out.org. May Yet Save the Planet: http://www.ft.com/intl/cms/s/0/ ii. Powell. A(November,2014) From Divestment to Engagement: da6bb79ad87611e48a6800144feab7de.html#axzz3f1N9OeM0 Harvard Gazette: http://news.harvard.edu/gazette/

Page 23 The Divestment Campaign: A just response to climate inaction 350Africa.org

About 350Africa.org About Fossil Free Africa We are part of a million-people strong global South Africa’s dirty banks are greenwashing climate movement that campaigns through their work while funding Africa’s growing grassroots organising and mass public actions addiction to fossil fuels at the same time. in 188 countries. The number 350 means Behind closed doors, banks like Nedbank are climate safety: to preserve a liveable planet, financing massive coal power stations, oil scientists tell us we must reduce the amount refineries and drilling rigs. This contributes of CO2 in the atmosphere from its current level to climate change, uses and pollutes huge of 400 parts per million and rising, to below amounts of scarce water and affects people’s 350 ppm. health. Climate change will hit Africa hardest so this fight is about climate justice. Many of the As part of the global divestment movement, poorest Africans, in particular, women and the Fossil Free Africa campaign is calling on children are already facing more drought, banks like Nedbank to stop funding future fossil floods and extreme weather that threaten their fuel projects and for people of conscience, livelihoods and push food prices up. The fact is universities and faith based organisations to climate change is going to affect all of us. commit to divesting from coal and oil. We believe that an African grassroots movement can hold our leaders accountable to the realities of science and the principles of Contact climate justice. That movement is rising from 350Africa.org the bottom up all over the continent and is Facebook.com/350Africa.org coming together to champion solutions that will Twitter.com/350Africa ensure a better future for all.

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