With the world’s climate increasingly stressed by human activity, and deadlines for environmental targets looming ever closer on the horizon, divestment has become something of a buzzword in the energy industry. This process, by which companies and governments withdraw investment from fossil fuel companies to reduce the world’s economic reliance on polluting industries, could help break the strong relationship between fossil fuel production and economic power.
A report published in February this year by UK Divest found that between 2017 and 2021, local councils across the UK cut their investment in fossil fuels from £16.1bn to £9.9bn, a fall of 40% that suggests that the UK is on the right path to reaching its climate goals.
Yet this rate of decline is unlikely to be enough to ensure the UK meets its climate targets, and a total investment of close to £10bn remains a high figure. The UK Divest report noted that a few local authorities, such as Teesside, Dyfed, and Dorset, invest more than 4.7% of their pension funds into fossil fuels, a total of more than £440m across just these three councils.
As a result, much of the responsibility for encouraging divestment has fallen to yet smaller groups, from academic institutions to local organisations, with small-scale protests and campaigns around the UK pushing for greater fossil fuel divestment.
Oxford and Cambridge
The UK’s leading universities have been at the front of this local drive for divestment, with individual colleges at Oxford and Cambridge committing to large-scale divestment. This year, Cambridge’s Trinity College and Oxford’s Somerville College announced plans to divest from fossil fuels by 2031 and July 2021 respectively. The latter has gone one step further, implementing a waste management strategy and replacing its lights with more efficient models to minimise its environmental damage.
Close to 6,000 people in Sussex have signed a petition calling on East Sussex County Council to divest the region’s pension fund from its holdings in fossil fuel companies, following support from both Labour and Conservative councillors for divestment as early as 2016.
There is a particular urgency for divestment in the area, located on the UK’s southern coast. More vulnerable to flooding and the extreme weather events that are caused by global warming, and by extension the continued work of fossil fuel companies, this is an issue of practical safety, not just ideals regarding the elimination of fossil fuels.
Northern Ireland has the potential to strike a significant blow for the cause of divestment, with a report from Friends of the Earth noting that the country’s pension scheme currently invests more than £300m in fossil fuel companies, and pulling the plug on these investments could shake the industry.
The group has also raised an economic argument for the divestment, noting that many fossil fuel assets are likely to become stranded assets, rather than the safe haven investments that they have been traditionally. With the growth of electric vehicles alone set to cut demand for oil by two million barrels per day by 2025, divestment in Northern Ireland could be a prudent environmental and economic decision.
A number of councils in London have come under pressure for their failure to adequately divest from fossil fuels. Divest UK has set up pressure groups in a number of boroughs, including the northern area of Enfield, and worked with Extinction Rebellion to put pressure on Hackney Council for its failure to divest around £34m from the borough’s pension funds.
The council responded that it has cut the relative contribution of fossil fuel investments to its total pension commitment, from 3.6% of the pension fund’s total value in 2015 to 2.4% today. However, activist groups have been united by the idea that the borough council is not doing enough, and not acting quickly enough, to protect the environment.
The northernmost point of the UK has also come under pressure for its commitments to fossil fuels. A branch of the Scottish Green Party has put pressure on the Shetland Islands Council to divest from fossil fuels, after a Friends of the Earth report revealed that the council is still committing around £20m of its pension fund to fossil fuel companies.
This is a relatively small part of the £1.2bn invested in fossil fuel companies by pension funds across Scotland, and the council’s commitment to other clean energy projects, such as the creation of a green hydrogen export business using offshore wind, could help reassure locals that the council is committed to improving its environmental performance.
The Midlands has seen some of the most intense pension fund investment into fossil fuels, with the UK Divest report finding that the West Midlands Pension Fund has the third-highest exposure to fossil fuels of any local government pension scheme in the country, putting £508m into fossil fuel companies as recently as the 2019/20 financial year.
While this figure has since fallen to £187m, activists are still pushing for annual reductions in fossil fuel investments of 7% in order to meet the most ambitious environmental targets of cutting global greenhouse gas emissions in half by 2030.
Wales’ recent history in divestment has been somewhat chequered. Last year, the Welsh Assembly Member Pension Scheme announced plans to cut its investment in fossil fuels from around 30% of its total funds to less than 2% and move around £6m of assets to a “sustainable return fund”. The change comes as the body looks to both reduce its reliance on polluting industries and help set up new energy structures to take their place.
However, the UK Divest report found that this year, Welsh local government pension funds were still committing £550m to fossil fuels, with more than one-tenth of this total in the Cardiff and Vale pension fund alone, suggesting that local governments have struggled to make good on their ambitious promises so far.
Newcastle University has also come under pressure from its students to divest from fossil fuels, and in recent years the university looked to be achieving these goals. Between September 2017 and October 2018, the university cut the proportion of its funding going towards oil and gas from 8.8% to 4.4%.
It also increased its investment in technology from 9% to 13.2%, suggesting a commitment to new technological investments to balance the loss of oil and gas investment.
However, the university’s commitment to a vague “industrial” sector increased over this period, from 10.5% to 11.6%, and the university drew criticism in October 2018 for a perceived lack of activity in cutting down its fossil fuel investments.
One of the more unusual sources of local pressure has been the Quakers, a Christian movement with around 17,000 members in the UK. The group’s website reports that around one-third of all Quaker meetings in the country have agreed to divest from fossil fuels, with the Norfolk and Waveney Area withdrawing over £1m of investment from polluting energy sources.
While the Quaker movement in particular operates predominantly on small scales, their work in Norfolk is an effective example of the influence that religion and faith can have on providing ethical justification behind financial decisions.