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Fossil fuel divestment: Ways to go about it

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This article, published in the July-August 2018 issue of NewsNotes, is the second in a series of articles designed to educate Catholic organizations about ways to participate in the fastest growing divestment campaign in human history - the fossil fuel divestment movement.

Read all three articles in the series 

Deciding to remove fossil fuels from your investment portfolio is only the beginning of an adventure of introspection and questioning. It provides a time for individuals and organizations to consider their guiding values and how their investments can best represent those values. There is a wide range of ways to participate in the fossil fuel divestment campaign.

Follow the guide

The Global Catholic Climate Movement and Trocaire, the overseas development agency of the Irish Catholic Church, created a guide to help Catholic and other faith-based institutions work through the process of realigning their investments in light of climate change. The Divest-Invest website also provides guidance for individuals and organizations to do the same.

Choose your level

There are various levels of fossil fuel divestment, ranging from “full” divestment – removing all investments in fossil fuel corporations (direct ownership, shares, commingled mutual funds containing shares, corporate bonds) – to “partial” divestment –  removing specific categories of fossil fuels (coal, oil, natural gas, etc.) and companies with the largest reserves of fossil fuels – to “specified” divestment – removing specific high polluting fuels  (coal and tar sands or only coal). 

Managers of large funds also need to decide to which asset class they will apply the divestment policy, for example, equities, international equities, property, fixed interest, alternatives, infrastructure, sovereign and corporate debt. 

Use positive and negative screens

Catholics have long used their values to guide their investments and Scripture supports the ideas behind the divestment campaign. Traditionally, faith-based investors create both negative and positive screens: avoiding investments in companies producing weapons, addictive substances, or pornography, for example, while favoring companies with progressive employment practices, involved in community development or public goods like public transport or sustainable housing.

With the new reality of climate change, these negative screens would begin to include fossil fuel companies and infrastructure as well as fossil-fuel intensive products, while positive screens would incorporate investments like energy efficiency technologies, environmentally sustainable goods and services, and technology transfers to the Global South. Another positive screen is investments in businesses that are leaders in their class in terms of environmental, social, and governance standards.

Invest just enough for Shareholder Advocacy

Some organizations such as Christian Brothers Investment Services have decided not to divest from fossil fuel companies, but rather, to continue to use their holdings to pressure corporations from within through engagement and shareholder resolutions, as they have done for many decades. Others maintain that while shareholder engagement has been marginally effective in compelling companies to change certain practices, it is unlikely such advocacy can move a company to change core business practices as climate change requires.

A possible compromise for larger investment funds is to maintain a $2000 investment in fossil fuel companies, which is the minimum needed to propose shareholder resolutions. This would preserve the possibility of engagement while not profiting greatly.

The Christian Brothers are part of the Portfolio Decarbonisation Coalition, a group of investors that, rather than divesting from fossil fuel companies, are striving to lower the overall greenhouse gas content of their investments by measuring and publishing the carbon footprint of their investments each year while looking for opportunities to switch to more energy efficient companies and pressuring companies to decrease their footprint. More than 120 investors with over $10 trillion in assets have signed on to the coalition’s Montreal Pledge committing to measure and publicly disclose the carbon footprint of their investment portfolios. The Global Investor Coalition on Climate Change created a helpful guide for investors wanting to decarbonize their investments.

Divest and Invest

Finally, as individuals and organizations divest from fossil fuel ompanies, they can look to invest in climate positive companies. Some say the fossil fuel divestment campaigns should be more accurately called a fossil fuel divest-invest campaign. Investors can chose from many companies working to ease climate change, environmental destruction, and social inequality. The growing field of “impact” investing helps match investors with such companies. The Catholic Impact Investing Collaborative provides support as well as the Fossil Free Funds site where you can see how your current investments stack up in terms of carbon footprint and investments in dirty and clean energy as well as links to numerous fossil free investment funds.

Read the first article in our series on fossil fuel divestment, "The case for Catholic fossil fuel divestment," published in the May-June 2018 issue of NewsNotes.