20

Nov

2018

No more money for oil: divest or engage?

 

This article was first published in the November edition of Reform magazine.

With climate experts announcing that we have 12 years to contain climate change, is it time for all Churches to stop investing in fossil fuel companies, asks Operation Noah’s James Buchanan. Next month, the United Reformed Church’s investors respond.

Credit: Antonio Garcia

What do New York City, the Royal College of GPs and the Anglican Church of Southern Africa have in common? All three have made commitments to end their investments in fossil fuel companies.

Churches have long been at the forefront of ethical investment, excluding areas such as arms, tobacco and gambling from their financial portfolios. Yet, when Operation Noah’s Bright Now campaign for fossil-free Churches was launched in 2013, the ethics of investment in fossil fuels had received little attention among most investors.

Since then, Quakers in Britain, the United Reformed Church National Synod of Scotland and the Church of Ireland have committed to full divestment from fossil fuels. However, most UK Churches continue to invest millions in oil and gas companies.

Both the Methodist Conference in 2017 and the Church of England General Synod in 2018 voted to support the principle of divestment from oil and gas companies whose business investment plans are at odds with the UN Paris Agreement on climate change.

The URC has investigated and debated the issues and took the positive step of divesting from coal and tar sands after the publication of its ethical investment guidelines in November 2015. Following the publication of the Intergovernmental Panel on Climate Change report in October 2018, which emphasised the urgency of action required to limit global temperature rises to 1.5C, it seems a good moment for the URC to review its policy on engagement with oil and gas companies.

As Christians, our faith calls us to act on climate change out of love for our neighbours, especially for poor and marginalised people. We also have a responsibility to care for God’s creation, a gift that has been entrusted to us.

Climate change is a justice issue, since it is affecting the world’s poorest communities first and hardest, with a disproportionate impact on women and children. Yet climate change will affect us all, and we are already witnessing patterns of ever more extreme weather closer to home. The Royal College of GPs has warned that climate change could put the NHS under severe strain in hotter summer months as well as in winter. Given the impact of climate change around the world, is it ethical for the Church to continue investing in fossil fuel companies?

We already know the location of so much fossil fuel that if we were to burn it all we would have no chance of meeting the Paris Agreement goals. Despite this, major oil and gas companies are ploughing billions of pounds every year into exploring for new reserves.

While most Church denominations in the UK have divested from the most polluting fossil fuels, many have pursued a policy of ‘engagement’ with oil and gas companies, arguing that activities such as putting forward resolutions at shareholder meetings can have more influence. This has been the policy of the URC since it was debated in 2015. The hope of influence with these companies has not been borne out by their response however, with Shell and BP continuing to pursue business plans ‘consistent with 3-5C+ of global warming’ (ShareAction, 2017). While investors have succeeded in getting resolutions passed at oil and gas company AGMs on ‘climate risk disclosure’, there is a big gap between companies reporting on climate risk and taking concrete action to reduce those risks.

At the AGM of Shell in May 2018, a resolution supported by Church investors called for the setting of clear carbon emission reductions in line with the Paris Agreement. The motion was opposed by Shell’s Board of Directors and received only 5.5% of shareholder votes. This has led many people, including the former Archbishop of Canterbury, Rowan Williams, to question whether engagement is working with the urgency needed to prevent the worst impacts of climate change.

While fossil fuel companies have historically been very profitable, they are an increasingly risky investment. Since their business models are based on the use of much more carbon than can safely be burned, they run the risk of being left with ‘stranded assets’ – worthless fuel stocks that either regulation will prevent from being burned or that can only be consumed at unimaginable cost to us all.

The Carbon Tracker thinktank, in partnership with several institutional investors, found that five out of six of the world’s largest oil companies risk wasting more than 30% of potential future investments on projects that can never be pursued if we are to keep the average global temperature rise below 2C.

A 2018 survey of the UK’s largest fund management companies was conducted by the UK Sustainable Investment and Finance Association together with the group of charity trusts known as Climate Change Collaboration. The survey found that 90% of fund managers expect at least one climate-related risk to impact the valuation of international oil companies significantly within two years. Also, importantly, recent studies by Newton Asset Management (February 2016) and the University of St Andrews (April 2018) suggest that excluding fossil fuel investments from share portfolios would not appear to have had a long-term impact on financial performance.

Along with fossil fuel divestment, investment in clean alternatives is vital to support the transition to other forms of energy. Christiana Figueres, the former UN climate chief, has said that $1trillion USD of investment in climate action is required by 2020 to meet the targets of the Paris Agreement. Churches should be at the forefront of efforts to support the growth of clean technologies by increasing their own investments in this area and encouraging other investors to do the same.

What can the URC do to accelerate the shift to a fossil-free future? At a national level, the URC should move swiftly to strengthen its policy on fossil fuel divestment, as the Methodist Church and Church of England have done recently. We urge more synods to follow the lead of the URC National Synod of Scotland, which committed to full divestment from fossil fuels in 2015. Local churches can play their part by making divestment commitments of their own.

Churches have both an opportunity and the responsibility to demonstrate moral leadership, to protect the poorest and safeguard God’s creation for future generations. Let us urge them to support the transition to a brighter, cleaner future and encourage other investors to do the same.

James Buchanan is Bright Now Campaign Manager for Operation Noah. The campaign’s ‘Fossil Free Churches’ report is available here. The ethical investment guidelines approved by the United Reformed Church in 2015 can be found here.

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