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Global Divestment Day: Shifting Investments to Clean Energy

An estimated 40,000 people participated in the People's Climate March in London on Sept. 21, 2014, the same day that 400,000 hit the streets in New York City. (Photo: Sleeves Rolled Up)

This Friday and Saturday, more than 400 events will be held on six continents as part of Global Divestment Day. (Yes, Global Divestment Day is actually two days—Feb. 13 and 14.) From Boston to Bangladesh, people concerned about climate change will call on public and private institutions to divest from fossil fuels. As the nonprofit organization 350.org explains the movement, "200 publicly traded companies hold the vast majority of listed coal, oil and gas reserves. Those are the companies we're asking our institutions to divest from."

The impetus for the movement is clear. If we are to avoid the most catastrophic effects of climate change, fossil-fuel companies will have to leave 80 percent of their current reserves in the ground, according to a recent study published in Nature. Meanwhile, those companies are spending billions in pursuit of ever-riskier extraction methods, from deepwater drilling to earthquake-inducing fracking. The idea behind the divestment movement is not only to find an economic thrust to climate activism, but also to stigmatize the fossil-fuel industry and create a shift in social norms. Edith Ismene Nicolaou-Griffin writes in The Huffington Post, "Shifting social capital can thus effect change in political landscapes, which play a key role in enabling the fossil-fuel industry's profitable image and ostensible viability. Fossil-fuel companies' profits, as well as their stock market returns, heavily depend on governmental tax breaks, subsidies and land concessions."

The divestment movement has already scored big victories, with more than 800 institutions having pledged to divest their holdings in oil, gas and coal. But divestment from one industry must be paired with investment in another, and so this movement becomes much more robust when public and private actors expand investment in renewable energy. As Naomi Klein writes in "This Changes Everything," her definitive book on the clash between capitalism and the climate, "There is no more powerful weapon in the battle against fossil fuels than the creation of real alternatives. Just the glimpse of another kind of economy can be enough to energize the fight against the old one." This article will explore the growing divestment movement as well as the investment landscape of renewable energy.

Divestment

The fossil-fuel divestment movement is only about three years old, and it has been gaining meaningful momentum. Last year, the number of divestment commitments more than doubled. By the end of last year, the coalition of institutions making divestment pledges represented $50 billion in assets, and that number is growing by the day. In January, Nordea Asset Management—the largest Nordic fund manager, with $228 billion in assets—announced plans to blacklist about 40 coal-mining companies from its investment portfolio. Also in January, Norway announced that its $850 sovereign wealth fund is divesting from coal and tar sands companies. Such high-ranking individuals as U.N. Secretary General Ban Ki-moon, World Bank President Jim Yong Kim and former archbishop Desmond Tutu have all endorsed the campaign.

Divestment commitments have come from a diverse range of institutions, including The Rockefeller Brothers Fund; 37 cities in the United States, Australia and Europe; and a host of foundations and faith-based organizations all over the world. The health sector is being pressured to divest on moral grounds, as it did previously with tobacco investments, and the British Medical Association became the first medical organization to divest from fossil fuels.

Institutions of higher education have become a focal point in this movement, with student-driven campaigns gaining traction in the United States and parts of Europe. Glasgow University became the first academic institution in Europe to divest from fossil fuels in October, after more than 1,300 students campaigned for a year. When Stanford University divested from coal last May, 350.org founder Bill McKibben called it "a dramatic beachhead for the movement." The student-led organization Fossil Free Stanford led that effort, and the group plans to continue pushing for divestment from all fossil fuels. While 24 colleges and universities have signed on, others like Duke and Harvard have rejected entreaties.

Harvard has really been under the spotlight on this issue recently. In addition to refusing to divest its $32.7 billion endowment, the world's richest university dramatically increased its stake in oil and gas companies in the third quarter of 2014, from $11.8 million to $79.5 million. Seven Harvard students have brought a lawsuit against the university, arguing that these investments harm students and future generations, and a hearing was set for this week. Harvard President Drew Faust wrote a long letter in October 2013 in response to calls for divestment. Part of her argument was that the university should "be very wary of steps intended to instrumentalize our endowment in ways that would appear to position the university as a political actor rather than an academic institution." As a counterargument, take McKibben's comment from the film Do the Math: "It is inconsistent with the purposes of these institutions to invest in something that is dedicated to the destruction of civilization."

Nelson Mandela and Desmond Tutu credited university involvement as a catalyst for the divestment movement in the 80s and 90s that helped bring an end to apartheid in South Africa. A report by Oxford's Smith School points out several differences between the apartheid and fossil-fuel campaigns, but it supports the idea that the momentum garnered by the involvement of high-profile institutions can lead to bigger gains at the corporate and government levels. The report states that the fossil-fuel divestment movement is likely to have a limited impact on the market capitalization of fossil-fuel companies, but that it could lead to a change in market norms. For example, the report says, "some banks, particularly multilateral institutions such as the World Bank, may stop lending to fossil-fuel companies, particularly coal."

Investment

The fossil-fuel industry wields enormous influence over policy, which presents obvious challenges for the renewable-energy industry. Global investment in clean energy increased 16 percent last year, to $310 billion, but fossil-fuel subsidies still outmatch renewable-energy subsidies by a ratio of six to one. The fossil-fuel industry spends hundreds of millions of dollars each year lobbying policymakers in the United States and the European Union. According to an analysis published by the Atlas Project, during the 2014 U.S. election cycle, the fossil-fuel industry spent $721 million on lobbying, ads and campaign contributions—while likely contributing much more to outside groups. With this in mind, it's slightly less shocking that the majority of Republican Senators deny the reality of climate change, or that the 114th U.S. Congress is currently trying to push through the Keystone XL pipeline, expedite the export of fracked gas, and overturn the Obama administration's carbon emissions rules for new coal-fired power plants as well as new regulations for methane emissions from oil and gas wells and pipelines.

Despite these challenges, renewable energy is gaining steam. While solar power currently makes up less than 1 percent of the electricity market, the International Energy Agency expects solar to be the biggest power source by 2050. Tom Randall writes in BizNews.com, "The reason solar will soon dominate: It’s a technology, not a fuel. As time passes, the efficiency of solar power increases and prices fall. … Prices are falling so fast that solar will soon undercut even the cheapest fossil fuels, coal and natural gas. In the few places oil and solar compete directly, oil doesn’t stand a chance." Dubai, for example, just tripled its solar target, aiming to get 15 percent of the country's power capacity from solar by 2030.

Clean-energy technologies proliferate a lot faster when governments support them. China ranks first globally in terms of clean-energy investments, having invested $89 billion in wind, water and solar sources last year, according to a report by Bloomberg New Energy Finance and the Business Council for Sustainable Energy. It has also stepped up support for electric vehicles. China is motivated by a few different factors, including suffocating pollution in urban centers, emissions targets it has set in international negotiations and energy security. John Mathews writes for Clean Technica, "Chinese leaders well understand that as their reliance on imports of fossil fuels rises (oil, coal and gas) so their vulnerability to geopolitical shifts becomes more pronounced. … Renewables offer the advantage that they provide energy generation devices that are independent of resource flows and resource prices (such as the price of oil) because they are based on manufacturing. Manufacturing can be done anywhere. And manufacturing is something of a Chinese specialty."

The United States ranked second in clean-energy investments in 2014 at $52 billion, driven mostly by wind farms and rooftop solar. Two recent projects highlight renewable energy's potential. In December, the Desert Sunlight Solar Farm began operating in California. It is one of the largest solar plants in the world, capable of powering more than 160,000 homes a year, which moves California a big step closer toward meeting its goal of deriving 50 percent of its electricity from renewable sources by 2030. The U.S Department of Energy (DOE) gave the project about $1.5 billion in loan guarantees. The DOE has now provided $4.6 billion in loan guarantees to support large solar projects. Then in January, the U.S. government approved a $2 billion renewable-energy transmission line that will span 515 miles across New Mexico and Arizona. The Department of the Interior says the project, overseen by SunZia, is one of seven pilot projects that the Obama administration is fast tracking in an effort to boost renewable development.

Governments can support renewable-energy development through a number of policy methods, including but not limited to tax incentives, renewable portfolio standards, net metering, and renewable-energy certificates and rebates. Countries in Europe and Asia have also introduced feed-in tariff (FIT) policies, which provide the revenue certainty needed to attract low-cost financing. FIT policies are particularly effective during the early phases of technology development. Germany's FIT policy has been credited with driving down the cost of solar PV panels for the rest of the world. At the state level, Virginia introduced a FIT program in 2013, whereby those who generate electricity through renewable sources are paid about 50 percent above retail rates for the electricity they feed back to the grid.

In the private sphere, investment innovations are emerging that facilitate sustainable development. Green bonds have exploded, with issuance tripling in 2014 to $36.6 billion for the year. Green bonds act like other bonds, only they are designated for climate-friendly projects. Right now, any debtor can label its bonds green, though, which makes it difficult to distinguish between bogus and legitimate proposals. For instance, after French utility GDF Suez sold $3.4 billion of green bonds last May, activists claimed that the proceeds were being used to fund a dam project that hurts the Amazon rainforest in Brazil. But these bonds are new, and the kinks are being worked out. Hannon Armstrong is the first company to attach a carbon dioxide metric to its "sustainable yield bonds," which gives investors a way to determine whether they are getting "the biggest bang for their buck in terms of greenhouse gas emissions," as Hannon Armstrong CEO Jeff Eckel puts it. Also exploding are yield cos, which are companies that are formed to free up capital and reduce risk for renewable-energy investments. "The sector has gone from nothing to $20 billion in 18 months," says Citibank and Deutschbank Managing Director Tim Buckley. "If you put the green bonds and yield cos together, it’s an absolute game changer."

Facing off against a fireball

If left to their own devices, fossil-fuel companies will keep drilling and mining and burning until they've stripped the Earth of all its resources, or until the Earth becomes uninhabitable for humans—whichever comes first. They see in only one color: green. And not the kind of green that climate activists are interested in. Our leaders too often have acted on behalf of multinational corporations instead of the future of the planet, also swayed by the wrong kind of green. And so we find ourselves in a high-stakes fight.

This is a fight with multiple fronts, and while the divestment movement is an important arrow in the quiver, the fight requires visible confrontation as well. People all around the world are fighting fossil-fuel companies on the front lines, blocking roads and waterways, facing off against bulldozers and security agents at the site of extraction projects. This usually occurs when the water and wilderness near people's homes are threatened. Protesters took action in New South Wales, Australia and Inner Mongolia, China when coal-mining operations came to town; in Pungesti, Romania when the first shale-gas exploration well landed on their doorstep; in British Columbia, Canada when tar sands pipelines were proposed, threatening land that indigenous people have cherished for generations. Just last week, 8,000 fractivists marched in Oakland, pushing California Governor Jerry Brown to ban fracking. If you want people to hear you, sometimes you have to get in their faces.

As vital as this localized dissent is to the climate movement, the thing about climate change is, it knows no borders. People in the poorest countries are sure to get hit first and worst, but eventually the heat and the storms and the droughts will come for everyone. Naomi Klein writes, "When we marvel at that blue marble in all its delicacy and frailty, and resolve to save the planet, we cast ourselves in a very specific role. That role is of parent, the parent of the Earth. But the opposite is the case. It is we humans who are fragile and vulnerable and the Earth that is hearty and powerful, and holds us in its hands. In pragmatic terms, our challenge is less to save the Earth from ourselves and more to save ourselves from an Earth that, if pushed too far, has ample power to rock, burn and shave us off completely."

Joshua Pringle is a journalist and novelist living in Los Angeles. He has a master's degree in international relations from NYU and is the senior editor for Worldpress.org.

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