Climate-driven divestment is all the rage. Recent high-profile announcements by large
investors, such as the Norwegian sovereign wealth fund, that they are considering selling
out of companies whose business relies on the production or consumption of coal has set
the cat among the pigeons in the fossil fuels world.
The coal lobby has denounced the move on the grounds that well-meaning westerners have no right to deny
cheap energy to the developing world and to destroy jobs in the coal-producing heartlands of the United States
and Germany. Some oil company executives, sensing that they are next on the hit-list, have claimed that
divestment will be ineffective because, for every seller of these shares, there will be a willing buyer who doesn’t
care about climate impact. Interestingly, other ‘oil’ companies have decided that they are in fact ‘gas’ companies
and have broken ranks by calling for a global carbon tax. At the same time, we are seeing a leading power
company moving to break itself up into a ‘good’ utility (renewables-based) and a ‘bad’ utility (fossil and nuclear).
What should we take from this? Whilst it is difficult to assess what impact the divestment campaign will ultimately
have, the first thing to note is that the mere mention of it has some people running scared. When busy
executives take the time to explain in detail just why they are not concerned about this issue and to outline the
reasons why it’s not going to impact them, then you know they are at least worried. One of the questions that
must be occupying them is whether divestment is simply an attempt by the climate lobby to influence public policy
or whether it reflects an evaluation on the part of hard-headed investors that regulation is now moving against the
fossil industry and they need to cut-and-run before the coal and oil reserves become ‘stranded’ and destroy the
balance sheets of the producers.
To be continued …