The student movement transforming the global economy
We’re so used to stories of snowflake students having meltdowns over Halloween costumes that it’s refreshing to remind ourselves they really can change the world for the better.
Middlebury College in Vermont is home to the world’s first undergraduate course in environmental studies, established way back in 1965. In the mid-noughties, students in the course started a Sunday Night Group to discuss new forms of climate activism. They linked up with visiting environmental studies scholar Bill McKibben to form 350.org, an organisation that tried to persuade governments to stop catastrophic climate change. By 2012, McKibben admitted that attempt had failed. Governments would make pious speeches about the existential threat of climate change, and committed at the Paris agreement to try and limit global warming to two degrees celsius. But they just couldn’t resist the revenues from new fossil fuel discoveries.
That’s when McKibben read a 2011 report by a UK consultancy called Carbon Tracker. The report was called Unburnable Carbon: Are the World’s Financial Markets Carrying a Carbon Bubble? It did some basic number-crunching. If the world is really going to limit climate warming to two degrees celsius, we have to limit our CO2 emissions over the next thirty years to 565 gigatonnes. However, if you add up all the proven reserves of fossil fuel companies, and how much CO2 they would emit if burnt, they add up to 2,795 gigatonnes.
The market value of these companies is based on the value of their total reserves. But it is highly likely that, as climate change gets worse in the next decade and renewable energy becomes a lot cheaper, most of those fossil fuels will remain in the ground.
In other words, the fossil fuel industry is massively over-valued, with $20 trillion in proven reserves likely never to be burned. Carbon Tracker warned its investor clients that they should divest out of fossil fuel companies, and out of countries that are highly dependent on fossil fuel revenues (Kuwait, Iraq, Saudi Arabia, Oman), before the tipping point is reached in the 2020s. Otherwise, they risk holding ‘stranded assets’ – assets once worth something but now worthless, like Betamax recorders or Boris Johnson’s reputation.
McKibben and his army of student activists read this report and saw an opportunity: make the inevitable happen quicker, with a worldwide campaign to persuade investors to divest from fossil fuels, in the interests of their clients and the interests of their planet. Don’t be the last investor left holding worthless fossil fuel shares. The campaign launched in 2012 with an article by McKibben in Rolling Stone, called Climate Change’s Terrifying Math.
The fossil fuel divestment movement started as a student-led campus movement, aiming to persuade university endowment funds to divest their billions in assets. This was a strategy taken from the South African anti-apartheid movement in the 1980s. Students successfully persuaded university endowments to divest out of South African stocks, and that snowballed into a global campaign, with 155 campuses, 80 cities, 25 states and 19 countries boycotting South African stocks. Desmond Tutu has said the divestment campaign was a major contributing factor to the successful ending of apartheid.
The fossil fuel divestment campaign started slowly, with some high-profile failures. Harvard refused to divest. So did Middlebury, where the movement began. This year, Cambridge University refused to divest, despite three undergraduates going on hunger strike.
Battles may have been lost, but the war is being won. As of September, investment funds worth $6.4 trillion have pledged to divest from fossil fuels, up from $56 billion four years ago. In July, Ireland became the first country to commit to fossil fuel divestment. The cities of London and New York – both of which face serious long-term flooding challenges - pledged to divest out of fossil fuels this September, and New York is also suing five major oil and gas companies, ‘to shift the costs of protecting the city from climate change impacts back on to the companies that have done nearly all they could to create this existential threat’.
For pension and insurance fund managers, there isn’t just a financial risk to continuing to invest in fossil fuels. There’s a legal risk – trustees have a fiduciary responsibility to protect their clients’ financial interests. If they are warned about an incoming iceberg and don’t take action to avoid it, they will be sued. The law-firm Baker & McKenzie says ‘it is only a matter of time before a trustee faces litigious action’. In fact, a 23-year-old climate activist in Australia bought the first such case against his pension fund this June.
In a speech this year, Mark Carney, governor of the Bank of England, warned that ‘too rapid a movement towards a low-carbon economy could materially damage financial stability’. In other words, investors have to start planning now to limit their exposure to the carbon bubble. Many of the world’s largest investment funds, including the two largest, Blackrock and Vanguard, now insist that companies disclose their climate-change exposure in company reporting. In its annual report this year, Shell publicly acknowledged that the fossil fuel divestment movement poses a material risk to its business. That’s right pal. It’s you or us, and it’s you that’s going down.
This is a movement we can all join. If you have a pension fund, you can make sure it’s divested from companies with high-greenhouse-gas emissions, to protect your retirement fund and protect the planet. Many funds say they’re coming under growing pressure to accommodate this consumer demand. Blackrock, the world’s largest investment fund, predicts that ethical shares funds will grow from $25 billion today to $400 billion in a decade.
I told my pension fund manager, Moneyfarm, that if they didn’t give me the option to divest I’d cash out, as soon as the market improves, and go to a firm that did give me this option. I was told: ‘We are very much considering a ESG (environmental, social and governance) offer in the pipeline but with new products they do take a while to go ahead. I will pass on your thoughts as a recommendation and hopefully we will be able to provide such a product as you are correct there is a market for it.’
If you’re a student or member of the public, you can lobby your university, your company or your city to divest from fossil fuels. Middlebury College, by the by, is voting again this January on whether to divest. It will be a fitting move for a college where students started a $6.4 trillion shift in assets. Good work, snowflakes.