The fossil fuel industry is fighting for its survival. Though it may not look like it, it's starting to lose.
THE DAILY BEAST — At the moment, much of the world’s wealth is controlled by Baby Boomers. That’s quickly changing, however. As more and more members of this generation retire or pass away, their wealth—over $40 trillion globally—is being transferred to Millennials. With that transfer comes a completely different perspective on capitalism.
“This new socially conscious generation of 80 million strong,” a 2014 report from Brady Capital Research noted, “will be looking to invest in innovative companies that are disrupting the status quo and doing social good.” Many of its members desire an economic system that heals the planet rather than profiting from its demise. As Millennials ascend to positions of power in society over the next few decades, the Brady Capital report went on, their worldview will be “an influential force on corporate America and Wall Street.”
At the same time, the financial risks of destroying the planet are growing. Carbon Tracker has estimated that if and when governments take serious steps to limit global warming to relatively safe levels, more than $300 billion worth of oil, coal, and gas reserves could become effectively worthless. In the meantime, such investments are becoming less and less socially acceptable—a trend that Morgan Stanley, for one, has attributed directly to student-led fossil fuel divestment movements. “Though divestment has a mixed track record as an investment strategy, it often leads to increasing public pressure to take regulatory action,” the bank concluded. “It has sparked a robust debate among investors about how to address fossil fuel risk in their portfolios.”
The Divest campaign, started in 2012 at Harvard University by students like Chloe Maxmin, immediately forced school administrations into a debate about the morality of the fossil fuel industry. “It’s simplistic but it’s true: Are you going to keep investing in an industry that is literally destroying our planet, and everything we love and care about, or are you going to take a stand and chart a new course?” Chloe later explained. “The choice defines the person or institution.” All those local choices, and the student-led actions that caused them, were then amplified by the larger divestment movement. They became plot points in a developing story. “It’s an inherently empowering framework,” she said. Divestment provided a powerful outlet for young people’s frustration with the world’s political and corporate leadership. In an era of gridlock and polarization, it let students take direct action on their campuses against a very clear target: their school’s fossil fuel investments.
By 2015, Divest Harvard wasn’t only making a moral argument; it was making an increasingly strong economic one. In the final months of 2014, a global oversupply of oil caused the price to plummet from $100 a barrel to less than $50. In 2015 it would fall a further 30 percent. With it went the earnings of the planet’s largest oil companies. ExxonMobil, for one, saw its revenues drop by $26 billion. Its rival Chevron lost $14 billion over the same time period. Fortune magazine warned of “major disruptions in the oil industry in the near future.” At the same time, clean energy investment soared. A study called Tracking the Energy Revolution found that a record $367 billion was invested in clean energy in 2015, almost 50 percent more than in fossil fuels. “It’s clear that clean energy is going mainstream,” its authors concluded.
For Chloe and other student activists, the irony was hard to miss. The Harvard administration had argued for years that divesting from fossil fuels would threaten financial returns. But in the spring of 2015, an investment firm called Trillium Asset Management determined that the reverse was true. Plunging oil prices had wiped an estimated $21 million from the school’s endowment.
In the meantime, divestment continued to gain global momentum, and it surged even higher in the lead-up to the international climate talks in Paris that December. In early fall the state of California passed legislation requiring its two largest pension funds to sell off investments in coal mining firms. A month later the London School of Economics divested its $140 million endowment from coal and oil sands. Halfway through the climate talks, 350.org calculated the value of these commitments. Since divestment began, institutions worth $3.4 trillion had joined the movement (a number that’s now surpassed $5 trillion). Though it represented only a fraction of global economic activity (about 3 percent), 350.org believed “investors are reading the writing on the wall and dramatically shifting capital away from fossil fuels.” A new status quo was quickly emerging. The Swiss bank UBS agreed. This was “a social movement with legs,” it argued. “Time, youthful energy, and stamina are on the side of the fossil fuel divestment campaign.”
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