1. Governance
April 28, 2015updated 20 Jul 2021 2:16pm

Oslo has joined the dozens of cities pledging to divest their holdings in the fossil fuel industry

By Adam Weymouth

Two years ago, the online advocacy group 350.org launched a campaign to persuade investors to move their money away from the fossil fuel industry. By 2014, according to a study by the University of Oxford, it was the fastest growing divestment movement in history – and last month, Oslo became the first capital city to pledge to divest from coal, the most polluting of fossil fuels.

The movement has been gathering pace through Europe, America and Australasia, bringing together bodies as diverse as the Church of Sweden and the Rockefeller Brothers Fund, the British Medical Association and Stanford University. It has received the backing of the UN and Archbishop Desmond Tutu, who oversaw similar tactics help bring Apartheid in South Africa to an end. Now more than forty cities across the world have committed to divestment.

The campaign is premised upon the fact that there are five times more carbon in known reserves than the world is permitted to burn, if warming is to stabilise at 2C above pre-industrial levels, a figure broadly taken as the safe upper limit. The argument for divesting is two-fold. Firstly, says 350’s founder Bill McKibben, if it is morally wrong to wreck the planet, then it is wrong to profit from it, too.

It is not an aphorism that is universally accepted, but there is also an economic incentive. The stock prices of the fossil fuel companies rest upon these as yet untapped reserves; and if the two degree figure becomes legally binding, then they risk becoming stranded assets. It is this that is persuading bodies such as HSBC, the International Energy Agency and the World Bank, not usually known for their progressive stance on climate change, to take notice.

In 2013, Seattle became the first city to commit to divesting its cash pool, earning itself a nomination for RTCC’s Green City of the Year. Not wanting to have their liberal credentials overshadowed, a swathe of other cities down the West Coast followed suit: Portland, Oregon, San Francisco, Santa Monica.

From there the movement spread across the US – there are nine cities in Massachusetts alone – and then to Europe and Australia. In March, the London Assembly passed a motion calling on the Mayor to divest the Greater London Authority’s Group Investment Syndicate, and to ask the same of the London Pension Fund Authority. Only the three Conservatives members present voted against.

Each city that topples gathers international headlines: “Sweden’s first!” “New Zealand’s first!” and so on. Yet whilst some cities are making good on their commitments – Örebro, Sweden, divested two-thirds of its fossil fuel investments in the first three months – others are struggling to implement their pledges. Two years on, with a new mayor in office, Seattle is yet to ratify the scheme to divest its pension plan. San Francisco, meanwhile, has just voted to invest $100m in environmentally friendly funds, but is still a long way from divesting the $540m that it holds in fossil fuel companies.

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The London motion, filed by Green Party Assembly member Jenny Jones, now awaits Boris Johnson’s response. Whilst the London Pension Fund Authority are technically separate from the Assembly, Johnson appoints the chair and half of the board, and so is in a strong position to push the motion through.

“The stigmatisation process… poses the most far-reaching threat to fossil fuel companies”

Were London to divest, it would be the campaign’s biggest coup yet. Chelsea Edwards, a campaigner with Divest London, believes that, with the motion supported by all parties except the Conservatives, divestment could play a big role in the 2016 mayoral elections. In the meantime she is refusing to give up on Johnson. “One of the things he came into office with was saying that he was going to reduce carbon emissions by 60 per cent by 2025, and if we want to do that, we need to stop paying for them,” she says. “We’re going to carry on trying to hold him to that.”

The London Assembly has given Johnson a scorecard of 4.6 out of 10 in his pursuit of his climate change adaption and mitigation targets; campaigners are hoping that the mayor will use the vote as an opportunity to redress the balance.

Yet a statement from City Hall has said that, whilst the Mayor takes climate change mitigation “extremely seriously,” a sudden divestment of pension funds would be irresponsible. “It would cause huge disruption to the world economy, let alone the retirement plans for millions of UK residents,” said a spokesperson.

And yet, as with other divestment campaigns, its power rests as much in making a pariah of the industry as it does in withdrawing funds. The University of Oxford report, authored by the Smith School of Enterprise and the Environment, recognises this. “The outcome of the stigmatisation process, which the fossil fuel divestment campaign has now triggered,” it writes, “poses the most far-reaching threat to fossil fuel companies and the vast energy value chain. Any direct impacts pale in comparison.”

London’s Pension Fund Authority has just 2 per cent of its money in fossil fuels, whilst Oslo’s divestment of coal amounts to just 40m krone (£3.3m), hardly enough to make Rio Tinto tremble. But Oslo’s finance commissioner Eirik Lae Solberg, believes it sends an important message, and is in keeping with Oslo’s target of being carbon neutral by 2050. “It is natural that our efforts to reduce Oslo’s carbon footprint are reflected in our pension fund’s investment strategy,” he says.

Despite that, there are no current plans for further divestment from other fossil fuels. “Oslo’s responsibility to contribute to sustainable development must be balanced by achieving return on investment to secure the pensions of our current and former employees,” he says. “We hope that we in the future can place an even greater share of our investments in funds with a renewable profile.”

For all that, and despite the small sums currently involved, the divestment campaign does seem to be stepping beyond the symbolic. The Bank of England has recognised climate risk as a potential danger for investors, and London-based Carbon Tracker, a group that helps pension companies to consider the potential impacts of their fossil fuel investments, supports the London Assembly vote.

A year ago, the world’s biggest fund manager, Blackrock, and FTSE launched a set of new fossil-free indices in what the Financial Times described as “a sign that a global campaign against fossil fuels is entering the financial mainstream”. Now the Norwegian Government Pension Fund Global, the world’s largest sovereign wealth fund, has divested from coal and is considering full divestment – a move which could catalyse the debate as to the economic risks with the fossil fuel sector.

Melanie Mattauch, Europe Communications Coordinator at 350, believes that the movement will continue to build. “There are campaigns popping up in more and more places around the globe,” she says. “I think we will see the first capital pledging to divest from coal, oil and gas very soon.”

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