Fossil Fuel Divestment Has Kicked into Overdrive

A movement that began on college campuses to reverse investments in fossil fuel companies is now measuring its impact in the trillions.

More than 400 organizations and 2,000 individuals across the world with $2.6 trillion in assets have pledged to divest from fossil fuel companies, according to a new report from Arabella Advisors, a consultancy firm for philanthropies. A year ago, the total amount of assets being divested from fossil fuel companies was just $50 billion.

It’s a huge acceleration for a campaign that began at just a handful of colleges in 2011. Back then, students were struggling to convince their universities to reroute their endowment investments away from companies that make oil, coal and natural gas. Today, 40 educational institutions have pledged to divest. They’ve been joined by philanthropic organizations, state governments, faith-based institutions, medical organizations and celebrities.

“What began as a spark of conscience on college campuses and in faith-based organizations has a lit a fire,” Ellen Dorsey, the executive director of the Wallace Global Fund, said at a New York press event Tuesday announcing the new divestment milestone.

Just this month, the University of California system announced that it has sold off $200 million worth of investments in coal and oil sands companies. California state lawmakers also passed a bill to divest $476 billion in state pension assets away from coal companies.

While divestment advocates have long argued moral and health reasons organizations should divest, they now say there’s a financial incentive as well. Stocks of fossil fuel companies have taken a beating over the last year amidst increased regulations on coal production and a collapse in the price of oil. Some environmentally conscious investors are betting these stocks will continue to be losers in the long term. “There are quantifiable risks directly associated with owning carbon assets,” says Tom Van Dyck, the managing director of SRI Wealth Management Group.

It’s not clear exactly how much the divestment movement is affecting fossil fuel companies’ bottom line. Dorsey said that a typical organization has about 3% to 8% of its assets invested in fossil fuels, meaning the actual money leaving the sector is well below that $2.6 trillion mark. Divestment is also a slow process that can take as long as five years.

The fossil fuel industry says the growth figures that divestment leaders are touting are overblown. In an emailed statement, Matt Dempsey, a spokesman for the Independent Petroleum Association of America, noted that the University of California system hasn’t fully divested from fossil fuels and that leading philanthropist Bill Gates opposes divestment as a general strategy. “The actual number they’re using is pure invention, but that tends to be how these guys operate on lots of stuff,” Dempsey said.

Still, the movement is gaining momentum with increasingly big names. Leonardo DiCaprio, for instance, was on hand for the New York event to announce that he will divest from fossil fuels both with his personal wealth and his nonprofit foundation.