Zero Waste

A to Z of Zero Waste: I – Investing and divesting

Welcome to our series of posts on the A-Z of zero waste!

An overview of everything that has been shared so far can be found here.


We are often told to "vote with our money" and that where we choose to spend our money matters, whether that's on supporting local businesses, ethically made products or zero waste items. But it is also true for the money that isn't sitting in our wallets but in banks, investment funds and pensions. The reasons that we are able to make interest on our savings is not because the banks are kind and generous, but because they are incentivising us to deposit our money with them so they can use it until we need it again, and by doing so earn themselves more money than they give us. Banking like most things is a business and is designed to make profits.

Unfortunately we don't directly have control over what the money in our banks, funds and pensions are invested into whilst we are saving them. We don't get a choice whether our money is being used to give loans to support fracking, fund the arms trade, or support fossil fuels. The only way we can control how that money is used is by choosing who we invest our money with wisely, which is the basis of the Divestment movement.

The definition of investing is "To commit (money or capital) in order to gain a financial return" and divesting is the opposite of it, so taking money out of something or away from something. Although it means taking money away from anything you don't support, today it generally centres on divesting money from fossil fuel industries.

In this article, we are going to talk about personal investing and divesting and how it can have a large impact on fighting climate change, but also focus on larger scale divestments. Now I'm not a financial expert so I am not telling you precisely what to do or how to do it, but we will be talking about why it is important and where you can find out more information.

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Why does it matter?

Well, the extraction and burning of fossil fuels have a huge part to play in global warming and our current climate crisis. Coal mines, oil wells, fracking and other methods to isolate and extract coal, oil and gas, have a damaging environmental impact themselves as they are huge industries requiring large energy and water supplies. They may also require increased transportation to remove the final product, for example the proposed Adani coal mine in Australia would need about 500 more coal ships to travel through the Great Barrier Reef (a World Heritage Area) every year (1). But burning these non-renewable resources, and releasing green house gases into the atmosphere is a large cause of this climate breakdown.

The IPCC report found that in order to limit global warming to 1.5°C "global net human-caused emissions of carbon dioxide (CO2) would need to fall by about 45% from 2010 levels by 2030, reaching ‘net zero’ around 2050" (2). Fossil fuels release a large amount of carbon dioxide so if we need to reach carbon neutral by 2050, we need to start moving away from them now. That can be done by stopping banks from giving loans and credit to fund fossil fuel industries, so they cannot mine for more fossil fuels. 33 banks have funnelled $1.9 trillion into fossil fuels since 2016 (3) so imagine the impact if banks stopped funding it. More than half of global industrial emissions since 1988 can be traced to just 25 corporate and state-owned entities (4), the impact if they were no longer funded could be enormous. 

The way we get banks to stop supporting fossil fuel industries is to take our money away from them and to invest it with banks who don't support non-renewable energies. Most importantly, telling the bank we left, that we moved as we do not support funding fossil fuels. If banks, like any business, lose profits as their actions don't line up with customer values, they are likely to change their practices quickly. The more people who divest their money from banks who support fossil fuels, the faster this change will start happening.

What's more is that it works. In 2016, one of the world's largest coal companies announced bankruptcy, counting the divestment movement as one of the reasons as it was more difficult to raise funds (5). Shell acknowledged the risk of the divestment movement in their Strategic report, stating:

"Additionally, some groups are pressuring certain investors to divest their investments in fossil fuel companies. If this were to continue, it could have a material adverse effect on the price of our securities and our ability to access equity capital markets." (6).

Banks are also responding to the divestment movement, and moving away from funding non-renewable energies and fossil fuels, with the World Bank Group pledging to no longer finance upstream oil and gas after 2019 (7), and there are more ethical banks available to invest your money with.

How do I even begin?

So there are really two main ways to divest - personally with your own finances, and campaigning for wider divestment, say at a university or in your local council.

Personal Divestment

This is the area most people now think about when talking about divesting. It is simpler than trying to convince corporations to divest, but it doesn't have the same impact as you are unlikely to have as much money as a corporation. However if many people personally divest their finances then it still has the possibility to make a large difference.

Here is where I am not going to go into specifics because every individual will have a different financial situation. Luckily however, Ethical Consumer has a good guide to carbon divestment and recommends good options for more ethical banks and building societies. They also have specific guides about Cash ISAs and Current accounts. Banks such as Triodos Bank, Charity Bank and Ecology Building Society are good places to start looking, and for high street options, Nationwide Building Society often ranks best in comparison to highstreet banks (8).

Fran from Ethical Unicorn has an amazing overview of the Ethical Consumer's data, and you can also find more information about how to find an ethical Independent Financial Advisor here.

Another way to simply divest your personal finances from fossil fuels is to change to a renewable energy supplier, which I have talked about a few weeks ago.

Corporate Divestment

In 2016 350.org claimed that "$3.4 trillion had been divested from the fossil fuel industry and listed 518 formally divested institutions around the world.  These include the Church of England, the University of Edinburgh, the British Medical Association and WWF-UK" (8). By the time of publishing this post, over 1000 institutions had divested with the figure standing at $9.94 trillion (9) and you can see up to date information here. Campaigning big organisations to divest can mean a lot of money is removed from funding fossil fuels. Go Fossil Free is a world-wide campaign to move away from fossil fuels and is a great source of information. They show local Carbon Divestment groups which you can lend your support to, but they also provide information about starting your own divestment group if your local area, work place or university doesn't have its own group. Joining in a local group campaigning for fossil fuel divestment is obviously more intensive than just moving to a new bank, but the possible impact of for example getting your local council to divest their pensions from fossil fuels, or getting your business to divest is huge. UK local council pension funds have £16.1 billion invested in fossil fuels (10). If this was taken away from those industries it could make a large impact.

For example this can be really important in your place of work. In the UK, we have state and work pensions, but you don't have control over where this money is being kept. By campaigning in your workplace you may be able to get this money divested from fossil fuels so that your money isn't funding them. It could also earn you a bigger pension as the fossil fuel sector has badly underperformed on the market over recent years, and as a non-renewable resource its future is not certain (5).

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Campaigning is working, with New York City planning to divest its "$189bn pension funds from fossil fuel companies within five years" (11), Ireland has become the first nation to divest its public funds (5), and a cross party group of 270 MPs is calling on the parliamentary pension fund to divest from fossil fuels (12).


It's also important to consider another side of investing which focusses less on personal gain but instead on what your investment can do for others. As well as divesting from fossil fuels, we also need to invest in the things you want to see more of. This can be both financially and with your time or skills. Investing in this way means supporting businesses like local zero waste shops, ethical fashion brands, green energy suppliers, educational groups, ethical banks, local libraries and tool libraries, and is something we will be talking more about in coming weeks.

 

This week is zero waste week and is focussing on climate change. This week can you commit to learning more about how you can divest your personal finances or support a local divestment group?

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