The growing scope for ethical personal finance
Will Van de Pol, Market Forces | 25 March 2015
Increasing awareness of how personal finances are invested and a rise in ethical options being offered are facilitating individual divestment from the fossil fuel industry.
The global push to remove money from the fossil fuel industry – known as the divestment movement – has gathered astounding momentum over the past three years, having even been labelled “one of the fastest moving debates… I’ve seen in my 30 years in markets” by FTSE managing director Kevin Bourne.
The environmental imperative behind the divestment movement is founded on the notion that, if the most catastrophic effects of global warming are to be avoided, then the vast majority of the world’s current known fossil fuel reserves must remain underground.
This is based on the work of climate scientists and organisations such as the Carbon Tracker Initiative and Fossil Free Indexes, which are committed to ensuring the world shifts towards a low carbon economy before the probability of catastrophic global warming becomes overwhelming.
Divestment action works to simultaneously remove finance from fossil fuel companies and raise public and political awareness about the need to shift away from our current reliance on the industry.
Previous successful divestment campaigns include those levelled against big tobacco and South African apartheid. As noted in a 2013 report by Oxford University’s Smith School of Enterprise and the Environment, the stigmatisation and weight of public pressure coming from those respective divestment campaigns undoubtedly helped to bring about positive change on the issues.
In the current campaign’s largest showing of strength so far, February’s Global Divestment Day saw some 450 activities in more than 180 countries, raising the current estimate of total worldwide divestment from fossil fuels to US$50 billion according to campaign group GoFossilFree.org.
In Western Australia, climate campaigner Maureen Flynn used Global Divestment Day to close her two remaining accounts with Commonwealth Bank, having explained to the bank that she was leaving due to their continued investment in the fossil fuel industry.
Prior to the event, Ms Flynn used her blog to proclaim, “I’ll be going to the Global Divestment Day activities in Subiaco and joining with people all over the world to send a powerful message that investment in fossil fuels has to stop.”
There have also been a growing number of institutions that have taken a stand and publicly divested large sums from the fossil fuel industry, including more than 20 US colleges and universities, the Rockefeller Brothers’ Fund and, more locally, the City of Moreland and some dioceses of the Uniting Church in Australia Assembly to name just a few.
These institutional divestment actions have consistently been attributed to the overarching climate risks posed by fossil fuel use, however many more localised and specific environmental dangers are driving individuals to join the movement.
Here in Australia, the proposed expansion of the Abbot Point coal port and the resulting dangers posed to the Great Barrier Reef have caused a groundswell of opposition, leading many to call on Australia’s big four banks to refuse to finance the project.
The threat that fossil fuel projects pose to the reef was the catalyst for Felix Riebl of band The Cat Empire deciding to leave ANZ last year.
“I’ve decided to divest from my bank because they are the biggest investors in fossil fuel projects around Australia,” Riebl explained at the time. “Where my money goes is important, I can do something about it, and I’m not going to support a bank that is investing terribly.”
Riebl is one of many concerned Australians who have divested money from the big four banks in response to their continued financial support of fossil fuel companies and activities operating within the Great Barrier Reef world heritage area.
Similarly, local environmental concerns surrounding AGL’s coal seam gas operations in NSW’s Manning Valley – recently vindicated by the detection of harmful chemicals in flow-back water from the company’s Waukivory site – have caused many residents to investigate the level to which their bank, superfund or investment portfolio is invested in AGL.
Helping with these investigations are a number of non-profit organisations and projects that are working to expose financial institutions’ investments in the fossil fuel industry and champion the divestment movement.
The Responsible Investment Association Australasia (RIAA – formerly the Ethical Investment Association) has noted a growing number of super funds and fund managers committing to finding and offering more ethical investment options to meet this growing demand.
While the body represents a much wider focus than environmental friendliness and avoidance of fossil fuels, they have noted an increase in demand for ethical investment options, and environmentally friendly ones in particular.
One of the key findings of RIAA’s 2014 Benchmark Report reads, “Public demand for responsible investment [is] increasing: for the first time in a decade, the report shows a small but significant increase in people choosing to invest their money responsibly… With the growing public interest and scrutiny of superannuation, we expect this to be the start of a continuing upward trend.”
Following the release of the report, RIAA chief executive Simon O’Connor wrote an opinion piece for The Guardian, stating, “As managers of the capital that fuels the economy, the scrutiny and expectations on investors are rapidly rising. Banks, pension funds, universities, religious groups, cities and councils are under intense pressure to demonstrate a response to risks posed by climate change.”
O’Connor also went on to note that, “For members of the public who want to align their finance with their concerns about climate change… there are now super funds, managed funds and banking options that have massively reduced their fossil fuel investments.”
From an environmental and climate viewpoint, some of the leaders in this new generation of ethical personal finance options can be found by using the online resources of the various non-profit organisations and projects working to support the divestment movement.
With the increasing availability of these more environmentally responsible options, informed and concerned members of the public are able to send a strong message by shifting their personal finances away from institutions that continue to prop up the destructive and dangerous fossil fuel industry.
Will Van de Pol is a researcher at Market Forces, a non-profit project working to expose fossil fuel investments and support divestment action.