In the face of increasing public awareness of climate change’s causes, the threat posed to financial markets is twofold: to public companies susceptible to an increasingly environmentally aware investing community, and to shareholders whose portfolios could see diminishing returns for investments in companies with carbon-intensive operations.
Divestment from the fossil fuels industry has been building momentum in recent years. According to 350.org's campaign Fossil Free, faith-based organizations, philanthropic foundations, governments, educational institutions, and pension funds make up the top five divesting institutions in terms of funds withdrawn. These actors have led the way in mainstreaming the notion that a portfolio's integrity is just as important as its returns.
As a result, the market capitalization of firms that significantly contribute to climate change stands to see steady decline in growth in the upcoming decades, as individual stakeholders and various funds withdraw assets, and—perhaps just as influential—the latest generation of investors makes it a point of principle to avoid irresponsible investments.
Steering clear of risky and disreputable assets through divestment
According to a recent report by impact investment firm Arabella Advisors, “the value of assets represented by institutions and individuals committing to some sort of divestment from fossil fuel companies has reached $5 trillion,” a value which doubled in the 15 months before December 2016. The momentum of this trend is unlikely to slow in the near future, considering the breadth of actors and interests involved.
Divestment from fossil fuels is a defining plank of CCA’s platform, part of our conviction that it is by making responsible business decisions that we will maintain our financial stability.