Global fossil fuel divestment push hits a record-breaking $3.4tr

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More than 500 institutions with assets worth $3.4tr have now joined global movement to move investments out of carbon intensive assets

Over 500 global institutions representing more than $3.4tr in assets have pledged to divest at least part of their holdings from fossil fuels, in the latest sign that global capital is shifting towards low-carbon technologies.

The record-breaking figure was announced today at the UN's Paris Climate Summit by campaign groups 350.org and Divest-Invest. The update came alongside a slew of new divestment pledges from 19 French cities, including Lille, Bordeaux, Dijon and Rannes.

The $3.4tr represents the total assets under management by all the institutions, not the amount of money being divested - which is difficult to track accurately, according to 350.org.

The update follows a wave of new divestment pledges in recent weeks as a host of cities including Melbourne, Oslo and Münster pledged to go fossil fuel-free ahead of the UN climate summit taking place this week. Europe's largest insurance company Allianz and Dutch pension fund PFZW have also made pledges to divest from coal companies in recent weeks.

Meanwhile, the University of Sheffield this week became the latest UK higher education body to divest, pledging to exit its £39m endowment from all fossil fuel companies. The move makes Sheffield the 12th UK university to divest from fossil fuels in the run up to the UN climate summit in Paris, after the London School of Economics also announced last week that it would divest its £97.2m endowment from coal and tar sands.

"The University of Sheffield and the Students' Union are committed to a shared effort to tackle climate change," said Professor Sir Keith Burnett, Vice-Chancellor of University of Sheffield and Christy McMorrow, President of University of Sheffield Students Union, in a joint statement. "Given the overwhelming evidence of the impact of fossil fuels on climate change, this commitment will lead us to disinvest within the next academic year."

Institutions joining the divestment movement hope their actions will add to the pressure on governments to reduce subsidies for fossil fuels and shift public money into cleaner energy sources. However, the nature of divestment pledges are varied, with many institutions committing to only partial divestment in fossil fuels or reducing their exposure to particular carbon intensive fuels, such as coal.

The news is the latest indication that companies are choosing to distance themselves from fossil fuels in favour of channelling greater investment into cleaner energy sources.

It follows a flurry of clean energy funding pledges earlier this week at the opening of the Paris summit, including the launch on Monday of the Breakthrough Energy Coalition. The project will see billionaires including Microsoft founder Bill Gates and Amazon founder Jeff Bezos use their own capital to help bridge the gap between the R&D stage for emerging clean technologies and commercial viability.

Meanwhile, Hermes Investment Management, an investment firm with £29.5bn of assets under management, yesterday published a new report detailing the growing risks carbon emissions and climate change poses to investment portfolios.

The report, entitled Turning Down the Heat, set out the business and investment case for better considering climate risks when making investment decisions.

"It is crucial that we create the right outcomes from our investment decisions - and the right outcomes on a 30-year time horizon are those that mitigate risk, including carbon risk," said Saker Nusseibeh, chief executive at Hermes Investment Management, in a statement. "In just 20 years, if circumstances don't change, we will already be approaching dangerous levels of warming. Reducing risk ensures better returns for our beneficiaries by minimizing potential expenditure incurred by negative factors later on. We also have a better chance of leaving to our children and our grandchildren a world they can live in."

The report sets out a four point plan for helping investors account for climate risks, including assessing climate risk exposure, integrating long term risks into investment decisions, engaging with companies to reduce carbon risk, and pushing policy makers to deliver a low carbon transition.

"There is an odd but prevalent view that the investment community sits somehow outside of what it invests in," said Nusseibeh. "But we are indigenous to the system. We do not merely observe from afar. Our actions, our beliefs and our investment decisions shape the system. There is still a long way for us to go in recognising that the economic system is not separate from society. Carbon risk cannot and should not be ignored. It is time that we in the investment industry help to address it."

This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.

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