Stakeholder Trends and Insights
How Much Are Divestment Pledges Worth? No One Really Knows

On Tuesday, Divest-Invest proudly announced that “Fossil fuel divestment pledges surpass $2.6 trillion.” However, as Tim McDonnell reported on Mother Jones, that “flashy number” might be a little misleading.

The $2.6 trillion figure represents the total assets held by the 430 institutions and 2,040 individuals who have pledged to divest from fossil fuels, according to an Arabella Advisors report. The number is impressive – it demonstrates a fifty-fold increase in the total combined assets of those who have pledged to divest compared to last year, when Arabella reported that 181 institutions and 656 individuals representing over $50 billion in assets had made the commitment.

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New Metrics '15.“The Arabella Report shows that 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,” said Thomas Van Dyck, Managing Director-Financial Advisor at SRI Wealth Management Group. “That underscores what I see every day as a financial advisor – that the demand for fossil-free investment products is increasing.”

Unfortunately, the assets represented by those who make divestment commitments is not synonymous with the amount they are actually going to divest – and even farther from the amount they may have already divested. It depends on how much of the assets held by the firm or individual are invested in fossil fuels and the timeline over which they will divest those assets. What are those numbers? According to McDonnell, “No one knows.”

McDonnell provides the example of the University of California (UC) system, a fund listed in the Divest-Invest press release as a high-profile new entrant to the divestment movement. The Arabella Advisors report uses UC’s total endowment, $98 billion, despite that it only divested $200 million worth of its holdings from coal and tar sands oil and still have an undisclosed amount invested in oil and gas. The report lists a figure 490 times higher than the amount of money that was actually divested.

Ellen Dorsey, director of the Wallace Global Fund, made the announcement. She could not confirm whether any of the institutions that have pledged to divest had any fossil fuel holdings whatsoever in their portfolios before deciding to invest. She gave an estimate of a 3 to 7 percent portion, based on the value of the S&P 500 that comes from fossil fuel companies, which would put the amount somewhere between $78 and $182 billion. The global market for coal, oil and gas, as McDonnell points out, is about $6 trillion.

In an interview following the announcement, May Boeve, director of activist group 350.org, said she did not think the framing of the announcement was misleading.

“If these numbers tell us anything, it’s that the divestment movement is catching fire,” Boeve is quoted in the press release. “Since starting on the campuses of a few colleges in the U.S., this movement has struck a chord with people across the world who care about climate change, and convinced some of the largest and most influential institutions in the world to begin pulling their money out of climate destruction. That makes me hopeful for our future, and it’s sending a clear message to world leaders as they head into Paris: It’s time for them to follow suit, and divest our governments from fossil fuel companies too.”

The announcement from Divest-Invest has been one of several to emerge from Climate Week NYC, where various climate-action initiatives – particularly commitments around transitions to 100 percent renewable energy – are gaining traction with multinational companies.