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The divestment landscape

This content forms part of the DivestInvest guide.

Learning about your choices

You may have heard people say there are many different ways to approach divestment – all you need is to find the right methodology for your organisation. This is easier said than done when you do not have full knowledge of the range of methodologies on offer, nor the means to determine their suitability. This is why the DivestInvest Philanthropy Guide has been developed – to provide you with the information, the steps and the confidence to develop the best strategy to reflect your organisation’s values and approach to investment.

It is also worth highlighting some oft-repeated advice proffered by many foundations which have already undertaken the divestment process – if you believe this the right thing for your organisation, to align important operational procedures with your values, then don’t wait for the perfect solution – make the commitment to start the process.

Let’s begin by considering the three main approaches:

  1. Full divestment from fossil fuels
  2. Partial divestment or portfolio decarbonisation
  3. Engagement with invested companies on their climate change mitigation strategies and their plans and actions to transition to a zero carbon economy.

If you believe this is the right thing for your organisation, to align important operational procedures with your values, then don’t wait for the perfect solution — make the commitment to start the process.

Policy statements

Reading a range of policy statements is a good way to see how others approach divestment. Sample statements and some specific examples from organisations illustrate the three different approaches to consider.

Full divestment

Sample statement: We will “divest from direct investment in the prospecting, extraction, transport, sale and burning of fossil fuels and maintain our investments as fossil fuel free.”

Mining

Specific examples

  • The Wallace Foundation Fund “will avoid investments in companies that play key roles in the exploration, production, and retailing of fossil fuels, especially coal”
  • The Rockefeller Brothers Foundation Fund “pledged to a two-step process to address its desire to divest from investments in fossil fuels with immediate focus…on coal and tar sands”
  • The RS Group has decided to “divest from all exposures to coal, oil and gas exploration and production companies”
  • City of Melbourne
    • “commits to not directly investing in any fossil fuel or fossil fuel aligned companies into the future
    • requests management write to the Trustees of Council’s default superannuation fund, Vision Super, and request a Fossil Free Investment option be available to members”
    • resolves that [responses from banks regarding] “their exposure and support to the fossil fuel sector…are to be taken into consideration when deciding to award the transactional banking
      services contract.”
  • Monash University “has confirmed it has no direct investments in companies whose primary business is production of fossil fuels…[and]…has now been successful in proactively excluding companies whose primary activity is coal production from more than 90 per cent of its indirect investment portfolio with the remaining 10 per cent of the portfolio unlikely to contain coal investments but the University will actively work with fund managers to exclude companies whose primary activity is coal production from its indirect investment portfolio.”

Partial divestment

Sample statements

  • “We will divest from all companies where 20 per cent or more of overall revenue is derived from the prospecting, extraction, transport, sale and the burning of fossil fuels.”
  • “We will divest from all companies engaged with the prospecting, extraction, transport, sale and the burning of thermal coal and coal seam gas.”
  • “We will measure the carbon intensity of our entire equity portfolio and reduce this by 30 per cent over three years.”

Specific examples

  • Norwegian Government Pension Fund guidelines on the observation and exclusion of companies includes a criterion which “targets mining companies and energy producers who derive 30 per cent or more of their revenues from thermal coal or base 30 per cent or more of their operations on thermal coal.”
  • “The Anglican Diocese of Melbourne resolved to take, within two years, all reasonable steps to divest its shares in corporations whose revenues from fossil fuel extraction or production exceed 20 per cent of their total revenue.”
  • Swinburne University’s “investment objectives take account of environmental and social impacts giving particular consideration to the development of appropriate approaches including potential divestment processes in respect of companies that generate significant revenues from activities inconsistent with these aims, such as Fossil Fuels extraction or where such fuels are used for power generation.”
  • La Trobe University “committed to divesting from the top 200 publicly-traded fossil fuel companies ranked by the carbon content of their fossil fuel reserves within five years.”
  • Australian National University “requires its external manager to exclude companies that draw more than 20 per cent of revenues from coal.”
  • The University of Sydney “will ask its listed equity fund managers to build a portfolio of investments that enables the University to reduce its carbon footprint by 20 per cent – in just three years.”
  • HESTA will restrict investment in “companies that derive more than 15 per cent of revenue or net asset value from exploration, new or expanded production, or transportation of thermal coal.”
  • Local Government Super “will not actively invest in companies that derive 33.3 per cent or more of their revenue from high carbon sensitive activities — including coal mining, oil tar sands and coal-fired electricity generation.”

Sample statement

We will use engagement and voting strategies to work actively with companies to reduce their carbon intensity and climate risk exposure and develop diversification strategies in keeping with international commitments to limit global warming to between 1.5 and 2°C.

Specific examples

  • California Senate Bill 185 (SB185, de León) – Public Divestiture of Thermal Coal Companies Act, requires 2 of the 3 largest US public pension funds, California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS) “to constructively engage publicly traded coal companies that generate 50 per cent or more of their revenue from mining thermal coal. If following engagement a Company is not transitioning its business model to adapt to clean energy generation, SB185 directs CalPERS to sell or transfer any investments in that Company.”
  • RS Group
    • “…demand that asset managers working on its behalf better incorporate climate risks in their investment processes and in their engagement with companies.
    • Actively consider climate change issues when voting proxies, participating in resolutions and engaging with companies.”

Divestment gathers speed

France’s biggest insurer AXA axes coal investments
Sydney Morning Herald, 25 May 2015
France’s largest insurer, AXA, will scrap holdings in coal companies because of concerns about climate change, broadening support for the fossil fuel divestment movement to a major mainstream investor. AXA Chief Executive Officer, Henri de Castries, said he’s working to sell 500 million euros of coal assets and triple ‘green investments’ to 3 billion euros by 2020.