Bill McKibben, a prominent environmental journalist and founder of 350.org, claims that “it makes no sense to pay for one’s pension by investing in companies that make sure we won’t have a planet to retire on.” A highly debated issue within the United States, and the rest of the world, is whether or not human activity contributes to global climate change. Within this argument, people just cannot seem to come to a consensus on whether or not divesting in fossil fuels is going to make an impact on global climate change.
A “divestment” is a term used to describe the opposite of an investment. When you divest your shares in a fossil fuel company, you are essentially selling them to someone else. So, instead of investing in companies that burn fossil fuels for energy, environmentalists are pushing for people to stop investing in those very companies.
According to CBC news, major corporations with almost eight trillion U.S. dollars have committed to divest from big gas companies like Shell and Exxon. Additionally, environmental campaigners 350.org announced that more than 1,000 companies had joined their fossil fuel divestment cause.
The divestment movement has been a powerful tool in that it is spreading awareness for the drawbacks of burning fossil fuels and showing the public that proper environmental action is necessary and can be achieved.
As an environmental scientist, which should automatically make me an environmentalist, one would think that I would be all for the divestment movement. However, while I believe that the environmental awareness portion is extremely important, the facts and figures have encouraged me to believe that divestment will not make much of a difference in the big picture.
Consumers are drawn to energy supplies that are the most affordable, reliable, and pervasive, which is why world energy demand is controlled by fossil fuels such as oil, coal and natural gas. Thus, both the US and the world energy demand is controlled by fossil fuels such as oil, coal and natural gas. This demand will not go down just because people are divesting from fossil fuels, so it will not have a significant financial impact on large energy companies. William MacAskill, a writer for The New Yorker states that “unless the financial fundamentals of a company change, such as cash flow or debt ratio, selling energy stocks for morality purposes creates more of a bargain for other buyers.” Essentially, MacAskill is saying that the more people divest in fossil fuel companies, the more buying opportunity there is for others who benefit from investing in them.
According to Robert Bradley Jr., a writer for Forbes, “divestment simply transfers wealth from anti to neutral fossil-fuel investors while pro-carbon-based energy advocates smile all the way to the bank.” This consequence actually hurts divestment advocates because no one is stopping the actual act of burning of fossil fuels, they are just encouraging others to do it even more.
Basic economic principles dictate that if energy demand is increasing, the supply must also increase for the economy to continue to flourish. Because Trump’s energy policies are encouraging a rise in demand for fossil fuels, then investments in fossil fuel companies are going to be that much more attractive. So in that light, divestment is actually hurting the environment by increasing the investment opportunities for oil, coal, and natural gas.
Does the divestment movement mean well for the environment? Yes. But is it actually going to help improve the environment in the big picture? Probably not. Although divestment might work in smaller communities, the larger and more powerful corporations are just going to continue profiting off of those who divest and sell their fossil fuel company shares to other hungry buyers.
