FAQ

What is divestment?
Why is climate change a problem for us?
Why target fossil fuel companies?
What is the carbon bubble?
Will divestment from fossil fuels affect YOUR pension?
Who supports divestment?
Who has divested from fossil fuels?

What is divestment?

Divestment is the opposite of an investment–it simply means removing stocks, bonds or investment funds that are unethical or morally ambiguous from an investment portfolio. Fossil fuel corporations are a risky investment for both investors and the planet–that’s why we’re calling on institutions to divest from these companies.

The largest and most impactful divestment campaign came to a head around the issue of South African Apartheid. By the mid-1980s, 155 campuses—including Hampshire College (the first to completely divest), University of California, Rutgers, etc.—had divested from companies doing business in South Africa. 26 state governments, 22 counties, and 90 cities also took their money from multinationals that did business in the country. The South African divestment campaign helped break the back of the Apartheid government, and usher in an era of democracy and equality. We believe Somerville has an opportunity and responsibility to be part of similarly positive change now on the issue of climate change.

Why is climate change a problem for us?

In just the last few years, the U.S. has struggled to contend with extreme weather events linked to climate change: from Hurricane Sandy flooding the East Coast to droughts in the Midwest and California to wildfires in Colorado. These events are serious reminders of the need to take bold action to curb climate change now. In Massachusetts alone, a study has shown that by 2050 a sea level rise of 26 inches in Boston, from carbon pollution and unmitigated global warming, could damage assets worth an estimated $463 billion (Lenton et al., 2009). As a densely populated coastal community, Somerville is at high risk.

To grasp the seriousness of both the climate crisis, you just need to do a little math. Fossil fuel corporations have 5 times more oil and coal and gas in known reserves than climate scientists think is safe to burn. We have to keep 80% of their fossil fuels underground to keep the earth in livable shape.

There are 3 simple numbers to remember:

  1. 2 degrees — Almost every government in the world has agreed that any warming above a 2°C (3.6°F) rise would be unsafe. We have already raised the temperature .8°C, and that has caused far more damage than most scientists expected. A third of summer sea ice in the Arctic is gone, the oceans are 30 percent more acidic, and since warm air holds more water vapor than cold, the climate dice are loaded for both devastating floods and drought.
  2. 565 gigatons — Scientists estimate that humans can pour roughly 565 more gigatons of carbon dioxide into the atmosphere and still have some reasonable hope of staying below two degrees. Computer models calculate that even if we stopped increasing CO2 levels now, the temperature would still rise another 0.8 degrees above the 0.8 we’ve already warmed, which means that we’re already 4/5 of the way to the 2 degree target.
  3. 2,795 gigatons — The Carbon Tracker Initiative, a team of London financial analysts, estimates that proven coal, oil, and gas reserves of the fossil-fuel companies world governments equals about 2,795 gigatons of CO2, or five times the amount we can release to maintain 2 degrees of warming.

According the Intergovernmental Panel on Climate Change’s scientific consensus statement, failure to stay within these limits “could threaten society with food shortages, refugee crises, the flooding of major cities and entire island nations, mass extinction of plants and animals, and a climate so drastically altered it might become dangerous for people to work or play outside during the hottest times of the year” (NYT, 11/2/14).

Why target fossil fuel companies?

Despite the fact that a wide range of measures to address climate change are popular with the general public, they consistently fail to gain political support at the highest levels. Instead, in a time when we need to be urgently moving away from fossil fuels, the fossil fuel industry continues to receive billions of dollars each year in subsidies and tax breaks. In fact, across the globe more total money is given to fossil fuel companies in subsidies and tax breaks than all the money spent by governments to fight climate change!

This is in large part because the fossil fuel industry is one of the biggest lobbies in Washington and the world. In 2014 alone they spent $144 million on lobbying members of the US congress and employed 754 lobbyists (nearly two per congress member). They fight tooth and nail against even the most commonsense measures to reduce fossil fuel usage and increase alternatives. Not surprisingly, research shows that congressional votes are predicted well by fossil fuel industry donations. In addition to their lobbying efforts, fossil fuel companies fund climate change denial and other efforts to mislead the public about the science and seriousness of climate change.

Simply put, fossil fuel companies are committed to using their enormous wealth and power to prevent a transition away from fossil fuels, and currently Somerville’s pension fund is helping to fund these efforts.

What is the carbon bubble?

Since all governments have agreed upon a maximum 2o Celsius rise in global temperatures in Copenhagen, at some point legislation will prevent the burning of additional carbon reserves. Additionally, the devastating impacts of climate change will impose economic costs on countries. Once investors are wary of this fact, the value of fossil fuel investments and oil-producer country sovereign debts is predicted to implode. This overpricing of the stocks of fossil-fuel companies and the debt of fossil-fuel producer countries is called the carbon bubble.

This financial bubble and its consequences have been laid out in detail in two reports by the Carbon Tracker Institute and London School of Economics. The bubble has been estimate at over $20 trillion—10 times as large as the recent housing bubble.

Will divestment from fossil fuels affect YOUR pension?

A number of studies by investment firms have examined the impact of fossil fuel divestment. They have shown that the most likely short-term effects of divestment are a small increase in investment returns with reduced risk and volatility. In the long-term, divestment limits exposure to significant risk due to the looming carbon bubble.

For more information, see our working paper “Will Fossil Fuel Divestment Hurt My Pension?”

Who supports divestment?

In Somerville, fossil fuel divestment has the support of every elected official in Somerville: Mayor Curtatone and all 11 members of the Board of Alderman have publicly indicated their support for divestment.

World leaders including Desmond Tutu, Ban Ki-moon, Al Gore, Barack Obama, Paul Krugman, Christiana Figueres (UN Climate Chief), and many others have spoken in support of divestment.

Who has divested from fossil fuels?

Many institutions and cities around the world have already committed to divesting some or all of their funds from fossil fuels stocks including Hampshire College, Stanford University (coal only), Syracuse University, Oakland, CA, Seattle, WA, and many local and national churches and foundations. For more information see: http://gofossilfree.org/commitments/

There is currently a bill in the Massachusetts State House (S.1225) requesting the state pension fund divest from fossil fuels. Learn more here.