What is divestment, and why is it a critical part of the fight against climate change?
We’re glad you asked - with the help of Australian Ethical Super, we've pulled together a simple guide to divestment.
What is divestment?
Simply put, divestment is the opposite of investment. When money is removed from somewhere it is invested, it is divested.
Divestment can be a tool to drive change. Past divestment campaigns have targeted tobacco, gambling industries and even the apartheid regime in South Africa.
Today, there is a global divestment movement that encourages people, industries, companies, and even governments, to divest from fossil fuels (coal, oil and gas) as we join together to take climate action.
The fossil fuel divestment movement encourages people to find out where their banks, super funds, and are invested. This movement has now expanding to include utilities, such as electricity and telephone providers, that a household uses.
The movement highlights that people can take their money and invest it with transparent companies, where they can be certain their money is not contributing to the climate crisis.
Can divestment make a difference?
One person switching their super, electricity or banking might leave them feeling good. But when more people take action and a movement builds, it has real impact and can help to drive industry wide change!
Globally, divestment is making a real difference. Norway’s US$1 trillion sovereign wealth fund has ditched holdings in companies that derive more than 30% of their business or revenue from coal.
BlackRock, one of the world’s largest fund managers, has also committed to divest from thermal coal.
In Australia the divestment campaign is gaining traction, so much so that in late 2019, Prime Minister Scott Morrison threatened to ban ‘secondary boycotts’ aimed at companies that service the fossil fuel sector. This would mean it would be illegal for us to divest from a company that provides services to the Adani coal mine. Which Australian Ethical Super just did, by the way.
The anti-apartheid movement in the 1980s called on US colleges and universities to divest from South African companies as well as any company with South African interests. Along with international sanctions and consumer boycotts, this divestment helped lead to the end of apartheid in 1991.
In 2020, the fossil fuel divestment movement is telling companies who extract coal, oil, or gas, that they do so without a social licence. As a society, we refuse to accept their business activities.
The release of harmful greenhouse gases into the atmosphere is destabilising life on our planet. And we want the whole investment industry to join us by divesting from fossil fuel companies. Divesting from fossil fuel companies frees up capital that can be invested in renewable energy and other technology to help mitigate climate change.
Does my investment really matter?
Yes! We all have a role to play in climate action.
Perhaps you’ve switched to a reusable coffee cup or try to walk more places in an effort to reduce your carbon emissions. But if you’re invested in fossil fuel companies through your super or supporting banks and utility providers that invest in fossil fuel, it’s undermining all your action elsewhere.
When you switch to renewable energy provider, Enova, each customer saves 1.99 tonnes of CO2 from being emitted into the atmosphere every year.
And switching to a brand like Australian Ethical, you reduce your personal emissions by 75% compared to funds that don’t invest ethically. Plus they invest in future-building industries like renewable energy, technology and healthcare while advocating against issues like deforestation.
Reducing financial risk without compromising returns
Fossil fuel companies need to extract the fossil fuels to stay in business. So, by investing in these companies there is a risk these financial assets will become worthless if international agreements on climate change are met.
What’s more, professional investors like Australian Ethical have shown ethical investment does not mean sacrificing returns.
Enova's view on divestment
At Enova we believe that the time for ethical businesses delivering positive impact has well and truly come!
It’s up to all of us to make informed and strongly values-driven decisions to ensure that the companies delivering essential products like electricity, behave ethically, do no harm and in fact, do good.
Every time we spend money, we’re choosing what impact we want to create in the world. Our spending choices are a responsibility not to be taken lightly, as each dollar is going toward creating an environmental and social impact, whether it be a positive and regenerative, one or a destructive one.
By spending some time to really get to know the impact your choice of energy provider, bank and superannuation fund is having, you can make a difference. It has been exciting over recent years to see the impact divestment campaigns are having.
We recognise that what’s considered ethical by one person may not be the same as the next person. Ethics will always be a subjective field, and it’s up to you to decide where you want your money to go and what values are important to you!
Time to take action!
A coalition of investors (including Australian Ethical) called Climate Action 100+ engages with companies most at risk as the world transitions away from fossil fuels. So far pledges from some of the biggest companies have been made, including BP, Shell and coal giant Glencore to better align their business with the Paris Climate Agreement.
If we are to avoid the worst effects of climate change, there must come a point when divestment, consumer boycotts and government action ends the widespread use of fossil fuels. We believe that denying a social licence to dangerous fossil fuel companies is an important first step towards that goal.
Enova is proud to be part of the the Triple Switch for Earth Campaign
This September, we are very proud to be partnering with Bank Australia and Australian Ethical Super in the fight against fossil fuels - joining forces to urge Australians to take one simple action during September and dramatically reduce their carbon emissions.
You can find out more here!