Why divestment and investment must go hand-in-hand
I recently met with my financial advisor to talk about divesting my retirement savings from fossil fuels.
But that wasn't the extent of our conversation.
Alongside me engaging (educating?) him on the very real financial risk of a carbon bubble, he engaged me on how easy it is to invest in solutions.
"Look, you've got money in Rio Tinto. Why don't we move it to this fund that invests in energy efficiency?"
"Hmm, this company produces coal. These guys are heavily invested in solar power."
You get the idea. Often, when I write about fossil fuel divestment, someone will pipe up that divestment is useless—someone else will buy those stocks, and they'll be less motivated to engage the fossil fuel companies in mending their ways. But this argument misses several important points:
1) Ordinary investors like me have very little leverage over the companies we invest in.
2) Even institutional investors will have their work cut out "reforming" companies whose central business is in the production, sale or consumption of fossil fuels.
3) The divestment movement has always been as much about symbolism as it has finances—by tarnishing the image of fossil fuels, we undermine their moral license to operate.
4) Increasing concern over unburnable fossil fuels provides a real financial case for divestment, regardless of ethics.
5) Often, as in my case, when people or organizations divest from fossil fuels, they move some or all of that money toward investing in solutions.
It's points 4 and 5 that are, I think, most important in the long run. As it becomes increasingly clear that we can't even burn all of the existing fossil fuels reserves we already have, financial experts are sounding alarm bells about companies sinking vast amounts of money into exploration and recovery of fuels that will eventually become worthless.
And as investors move away from such risky bets (see Bank of America dumping "risky" coal mining investments just last week), they will be looking to invest in those forward thinking businesses that are positioning themselves as part of the solution. From bonds backed by solar power to peer-to-peer slow money financing or a bank that only invests in positive solutions, the options for us ordinary citizens are growing.
Heck, as everyone from Apple to Verizon to gigantic utilities beef up their commitment to clean energy, and begins severing their ties with polluting fossil fuels, many "ordinary" investments will become low carbon (and eventually fossil fuel-free) too.
Being a part of the problem is increasingly risky. Being a part of the solution may prove exceedingly profitable.