Ditching fossil fuel stocks and replacing them with green energy investments will have little effect on greenhouse gas emissions until there are government and institutional policy changes, according to a new report.
The white paper, written by two University of British Columbia (UBC) researchers working with the Pacific Institute for Climate Solutions, finds that even if divestment campaigns – now being waged at more than 30 Canadian universities – are successful, there will be minimal impact on emissions, partially because governments, rather than shareholder companies, control the vast majority of the world’s oil reserves. If conventional energy companies were serious about avoiding surpassing the 2 degrees Celsius temperature limit recommended by scientists and policy makers, that would require "deep structural changes," the authors, Hadi Dowlatabadi and Justin Ritchie, argue.
However, the good news for those fighting for divestment, is that, with the right policies in place, divestment could speed up the change to a low carbon economy and change social norms when it comes to investing, the researchers concluded.
“Divestment movements are socially significant, but currently exert little influence on financing transition to sustainability," Dowlatabadi said.
“A lot of very well-meaning people put a lot of energy into the divestment campaigns and they are our friends – we believe that the symbolic value of their activities is significant,” Dowlatabadi told the Globe and Mail. “But for that symbolic value to be translated into progress towards decarbonization of the economy, all sorts of supported policies are needed.”
One of the reasons divestment may not be enough to tackle climate change is that fossil fuel energy is integrated into multiple areas, including low carbon industries.
“This means that divestment may end up being greenwash, when money is taken away from fossil fuel companies and reinvested, for example, in banks, which, typically, fund such companies anyway,” Dowlatabadi said.
Among policy changes suggested for municipal and provincial governments are the creation of an energy transition bank that could offer bonds and help ease investors into the low carbon economy while supporting B.C.’s green tech sector, a low carbon transition investment tax credit and support for public fund managers.
Universities and other institutions should set timelines for divestment, review their goals and screening of investments and use in-house expertise to come up with divestment strategies.
Those working on divestment campaigns should consider launching a separate low carbon or fossil free endowment fund so the performance can be compared to traditional funds, possibly with crowdfunding help, and explore how investment returns fit with broader campus sustainability goals, the paper says.
The University of Victoria and Simon Fraser University are circulating student and faculty-led divestment petitions and more than 200 UBC professors recently voted for the university to divest from the 200 most polluting companies over the next five years. The UBC Faculty Association is currently voting on whether the endowment fund should divest.
In December, Concordia University committed to divest itself of $5-million of fossil fuel investments and has plans for a new sustainable investment fund.
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