The collective power of one movement, 2000+ individuals, and 400 institutes, equals 2.6 trillion dollars — all being divested from old, unclean energy sources such oil, coal, and gas. Right now, Leonardo DiCaprio is just as fired up as the Divestment movement is, and for the first time in a long time, a clear message is being sent not only to world leaders, but also, perhaps more importantly, to corporations.
The message comes in a language they certainly know well, and that is dollars. The divestment movement is asking institutions whose profits are derived from oil, gas, and coal to simply divest that money into renewable energy sources and climate solutions. This time last year the world’s largest private bank, UBS, was urging investors to join the clean, renewable energy movement. Analysts at the bank said that power plants in Europe might be extinct within the next 10 to 20 years. According to an economic analysis report done by Arabella Advisors, factors contributing to people becoming more aware about our planet and how we are impacting it are apparent. Here are highlights of the report and what some of the numbers show.
Big Corps Are Pledging
Traditionally, it has been faith-based communities, NGOs, universities, and mission lead initiatives that have jumped on board for climate change solutions and other social issues. Now, huge pension funds, municipalities, and private-sector players like insurance companies and some entertainment houses have signed on. With these large backers, which hold 95% of the total amount being committed to divestment, there is no telling where else this movement can spread.
The climate risk to investment portfolios is one that investors cannot ignore, in fact it’s what is exponentially driving the divestment from corportaions and individuals. Reports by Citigroup analysts, HSBC, Mercer, the International Energy Agency, Bank of England, Carbon Tracker Initiative, and others have offered evidence of a significant, quantifiable risk to portfolios exposed to fossil fuel assets in a carbon constrained world. The leaders of several of the largest institutions to divest in the past year have cited climate risk to investment portfolios as a key factor in their decisions.
While historically focused in the United States, the divestment movement now spans the globe. In 2014, 78 percent of divesting institutions were US-based. Today, 57 percent are US-based. Institutions that have chosen to divest represent more than 646 million individuals around the world.
Invest in Solutions
Internationally, investment in clean energy reached $310 billion in 2014. Among those pledging to divest, many are also committing to invest in climate solutions (this ranges from: renewable energy, climate justice initiatives, resilient infrastructure, sustainable agriculture, water projects, and more). Those institutions and individuals that have pledged to both divest and invest in clean energy collectively hold $785 billion in assets.
From an economic point of view, if the market is changing then so should your investments. Thomas Van Dyck, managing director of the SRI Wealth Management Group, said the new level of consciousness among individuals and institutional investors is palpable. According to Van Dyck, the findings of the Arabella report “underscore what I see every day as a financial advisor—that the demand for fossil-free investment products is increasing.” But this shift is not just reflective of a desire to save the world, it is also logical for those concerned about paying attention to what the scientific and economic studies are saying about the future of the fossil fuel market. “More and more investors are reducing their carbon risk today and diversifying their portfolios with the goal to harness the upside in the sustainable clean growth industries of the future,” Van Dyck added.