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Opinion

Let’s turn up the heat on global leaders to divest from fossil fuels

It’s time to make our money part of the solution to the climate crisis, writes Molly Scott Cato, the Green Party’s finance spokesperson.

We are hearing a lot about China in the run-up to COP26, November’s UN climate conference in Glasgow. Specifically about the fact that China is still investing in coal-fired electricity generation.

I have noticed that the people who favour this agenda are the very same people who, until very recently, have said climate change is not a problem.

So what is the real story on coal? Who is really still putting money into coal and why?

Much of the action to end fossil fuel investment is taking place under the label of ‘divestment’. That is to say, campaigning to pressure those holding valuable assets to shift their money away from fossil fuels and towards the sustainable economy of the future.

Understanding divestment is key to understanding what your money is doing in the world.

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Even if you don’t have investments, you may have a pension or insurance, and that means your money is sitting with investment managers who have to find a way of making a return on it.

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They do this by buying stocks and shares in companies, or lending money to those companies as a bond. So it makes a huge difference to the direction our economy takes which companies they invest in– and any investment in fossil fuel firms is incompatible with a climate-safe future.

The fossil fuel divestment movement was inaugurated in 2010, and claims credit for having shifted $14trillion out of fossil fuels since then. Much of the focus of the divestment movement has been on pension funds because they are such large global investors.

The UK’s Local Government Pension Scheme had an estimated $19.8bn invested in fossil fuels in2017. That is why councillors across the country are campaigning to ensure that they are no longer unwittingly driving the climate crisis.

But even if you didn’t care about the climate, it would be unwise to have your money invested in companies that clearly don’t have a future. Pension fund managers have what is called a fiduciary duty to ensure that they do their best to guarantee you a good income in retirement.

Assets based on fossil fuels clearly have no future as the world gets serious about climate action. So this is an entirely hard-headed reason to divest from fossil fuels.

Over the last four years, the British government has supported £21bn of UK oil and gas exports

Research from Carbon Tracker found that “the value of share offerings in fossil fuel producing and related companies dropped by $123bn in the last decade” –while renewable energy stocks have outperformed the market average.

This cannot all be considered the achievement of divestment campaigns, but the combination of changing government policy and active local campaigning is making fossil fuel investment sun profitable. It has now become a part of portfolio managers’ fiduciary duty to respond to this by divesting from fossil fuels.

So where does that leave us?

Divestment activists have led a brilliant campaign to draw attention to the need to keep at least two-thirds of known fossil reserves in the ground, but a more urgent priority for the COP26 negotiations is to draw attention to the way that governments around the world– including our own– are still giving public money – our money – to support the further development of fossil fuels.

The first and urgent priority must be to end these subsidies.

Over the last four years, the British government has supported £21bn of UK oil and gas exports through trade promotion and export finance. That means spending our money to support British companies to encourage lower-income countries to become locked into the fossil fuel infrastructure that we know is a thing of the past.

The decision to end this practice that benefitted UK companies at a huge cost to countries of the global south and the planet was only ended less than a year ago.

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Our government is not alone in this. Figures from the International Energy Agency show that the three countries that provide the largest value of subsidy as a share of GDP are Iran, China and India, followed by Saudi Arabia, Russia and Algeria. And in spite of its pride in its Green Deal, the EU is still providing subsidies to the fossil industry, with nearly a third of the €159bnspent on energy subsidies going to fossil fuels.

We can think of money as being like the fuel that keeps the machine of the capitalist economy running. Where that fuel goes determines how the machine runs and what it does. So a focus on the financial sector really matters, and understanding what your money is doing really matters too.

Ask questions about your pension and check out your insurance company and bank. Make sure your money – and those who invest it on your behalf – are part of the solution and not part of the problem.

Molly Scott Cato is the Green Party Finance and Economy Spokesperson

@GreenPartyMolly

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