Divestment and Socially Responsible Investment

What is Divestment?

Divestment is the reduction of investment of assets which can serve financial, ethical, or political objectives. Perhaps best known for the movement urging investment institutions to sell stocks connected to the apartheid regime of South Africa in the 1970s, divestment campaigns have successfully targeted a host of issues, including use of sweatshop labor and tobacco advertising. While economic impacts of divestment are debated, the University of Oxford’s Stranded Assets Program concludes the fossil fuel “divestment campaign is likely to lead to a change in market norms” which may exert downward pressure on the valuation of fossil fuel intensive industries – particularly coal stocks. As investors divest from fossil fuel holdings, these funds become more stigmatized and may face a diminishing pool of debt finance which encourage company investment in alternative sectors. By avoiding investment in fossil fuel industries, investors can send a strong policy message supporting renewable energy that can complement other greenhouse gas mitigation efforts.

What is Socially Responsible Investment?

While divestment focuses on screening out or avoiding investment in fossil fuel intensive companies, “socially responsible investment” (SRI) works to help investors identify holdings that align with organizational values to promote positive change. Also known as “sustainable,” “socially conscious,” or “ethical investing”, these terms reflect a strategy of considering social good as well as financial returns. In practice, particularly with groups concerned about environmental stewardship, this typically entails partial fossil fuel avoidance, which means that investors limit holdings in companies with high fossil fuel exposure. In addition to negative screening, investor Amy Domini who authored Ethical Investing describes shareholder advocacy and community investing as pillars of socially responsible investing. SRI can add investments to high impact entities to support positive change.

How Do Divestment and Socially Responsible Investment Relate to Land Trusts?

Fossil fuel divestment and socially responsible investment portfolios enable organizations to align their values with their goals. Land trusts are uniquely situated to engage in dialogs about divestment and SRI organizationally and with donors because avoiding significant increases in global temperatures is a critical conservation objective. Identifying a significant investment gap based on a 2012 International Energy Agency (IEA) report, Ceres has identified ten recommendations  for investors, companies, and policy makers to increase annual global investment in clean energy to at least $1 trillion by 2030 – the amount the IEA has estimated is needed to have an 80% chance of limiting the increase of global temperatures to two degrees Celsius in order to “avoid the worst impacts of climate change”. In order to support the scaled deployment of renewable energy technology necessary to limit global warming, significant increases in the renewable energy sector are necessary. By assessing their existing portfolios and avoiding investments in fossil fuels, land trusts can maximize their contributions of capital flows into the clean energy sector that support the pressing conservation imperative to mitigate global climate change.

Learn More

• Debunking Myths About Fossil Fuel Divestment
• Extracting Fossil Fuels From Your Portfolio, Trillium Asset Management, 2014
• Fossil Fuel Divestment: Reviewing Arguments, Implications & Policy Opportunities
• Guide to Fossil Fuel Divestment and Clean Energy Reinvesting, Green America
• Investing to Curb Climate Change, US Forum for Sustainable and Responsible Investment
• Socially Responsible Investing: What You Need To Know, Forbes, 2013
• Your Roadmap to Divestment, Fossil Free USA