When the United Church of Christ voted to divest from fossil fuels, the case was largely made on an ethical and moral basis. After all, presuming you accept the overwhelming consensus on anthropogenic climate change, then profiting from the continued production and consumption of fossil fuels is morally questionable at best.
But what does a coal or oil company care if one congregation or left-leaning college divests from its stocks? There will be plenty of profit-motivated professional investors looking to take their place.
Or will there?
From moral to economic arguments
Recently, the conversation around divestment seems to be shifting from a purely moral one, to one with to a decidedly hard-nosed economic undertone. Just as the broader societal conversation has shifted from does climate change exist to what and how much should we do about it, so too the question of fossil fuel divestment seems to be moving from whether we should consider it to how fast we can and should make it happen.
Investors have lost fortunes on low oil prices
Bruce Watson over at The Guardian poses an interesting and provocative question on this front, asking whether we have "reached the tipping point" when it comes to investing in renewable energy. After all, there can't be many big investors out there who haven't lost a fortune on the recent crash in oil and coal prices. (Watson points out that between 2014 and 2015, New York City’s biggest pension fund alone lost $135m!) And while many may pin their hopes on an eventual recovery of those prices, that recovery may be significantly delayed by the fact that renewables are beginning to compete directly with fossil fuels and show no signs of letting up.
Renewables increasingly profitable
Meanwhile, says Watson, renewable energy investment funds are seeing returns of 5.5 percent and 7 percent. And utility-scale solar and wind installations are beginning to compete directly on price with their fossil fueled competition, in some cases without any subsidies at all. It's worth noting, too, that renewables provide a more predictable long-term cost structure (after a hefty initial investment, their running costs do not have to account for fuel expenditure). Given that the Paris climate agreement saw almost every nation on Earth sign up (on paper at least!) for a medium- to long-term shift to a low carbon economy, it would seem fair to say that some of the fundamentals that have made conventional energy such a "sure bet" among investors are beginning to look like they are shifting.
Recovery is harder once there's true competition
True, it's unlikely that fossil fuels will go down without a fight. We may see oil producing countries slowing down production in the hopes of pushing up prices, it's much harder for the OPECs of this world, for example, to institute an oil embargo at a time when the No. 1 luxury car burns literally zero drops of gasoline. Similarly, it's much harder for a utility to build new coal-fired power plants when many states are already approaching grid parity for residential solar. And while it's possible to temporarily make connecting solar to the grid more expensive, the rise of affordable home energy storage means that homeowners may soon opt out entirely if utilities seek to force their hand. In other words, every maneuver that powerful fossil fuel interests could once make to sure up their margins or increase their market share becomes that much harder because it inadvertently makes the case for their competitors.
In a world where even mainstream investors are beginning to talk about a carbon bubble, and where even BP admits that some existing oil reserves will have to remain in the ground, fossil fuel divestment is no longer a fringe concern or merely an activist tool. It's worth noting, of course, that not all fossil fuel investments are equally risky. And there may be a case to be made for a more rapid divestment from the dirtiest of fossil fuels — both Norway and the Church of England have recently divested from coal and tar sands operations, while maintaining an interest in other fuels like natural gas. Assuming that any political action will focus on the highest emissions first, the decision to partially divest has an economic as well as a moral angle too.
In the end, though, all of us are going to have to divest from fossil fuels to some degree. The question will just be how fast we'll do it, and whether we'll go all the way.