October 4, 2013

Keeping carbon in the ground

Adapted from a speech by Charlie Wood at the ANU Great Green Debate

open cut mineThe assets sitting on the fossil fuel industry’s balance time bomb when it comes to climate change.  However awareness that we need to keep 80% of fossil fuel reserves in the ground is growing and by acknowledging this issue of ‘unburnable carbon’ we are reaching the very heart of the current climate crisis.  

This rising awareness should give us great hope -we can really do something to alter the catastrophic trajectory we are currently travelling on. But if we are to make any real inroads towards a clean energy future and stable climate it is essential that fossil fuel expansion is curbed.  Keeping carbon in the ground is one of the best ways to achieve this end.  Here are three thoughts as to how this can be done.

This means disclosure by companies and investors, of their carbon exposure. It mightn’t sound sexy but in reality getting the industry naked is fun and one of THE most powerful keys to unraveling the high-carbon economy.  After all, you can’t change what you can’t see.

Currently, the carbon exposure of the investment sector is cloaked in invisibility. How many of us know that, of the $64 trillion in investment capital worldwide, 55% of it is in high-carbon sectors while only 2% is in low-carbon? OR, that our super funds account for almost half of this?

And that’s the problem. Most of us are unknowingly investing in the high-carbon economy. This is not to vilify the investment sector. Carbon risk is a new concept.  In fact, a recent TCI survey found that 84% of Australian super funds didn’t know how much of their portfolio was invested in high climate impact sectors.  By asking investors to explain where our money is invested, we elicit important information and show them we care. But, of course, they won’t all voluntarily surrender which is why we also need regulators to enforce mandatory disclosure.

Fortunately, there are some great disclosure initiatives underway. The Vital Few campaign helps members to get their super funds accounting for their investments with a view to shifting them into low carbon sectors. NGO Market Forces is campaigning to expose the massive role that our Big 4 banks play in funding fossil fuel expansion. And the Carbon Tracker Initiative publicises the top 200 fossil fuel companies upon whose balance sheets unburnable carbon lies.


Direct engagement with fossil fuel companies and investors is the second step we can take. This means educating companies about the financial disaster that looms if they invest in or extract unburnable carbon.

We can achieve this by means such as shareholder questions and resolutions at company AGMs. In fact, the first carbon risk resolutions were lodged earlier this year. Both highlighted how fossil fuel companies will be dangerously overvalued in a carbon-regulated world, thus creating a “carbon bubble” that could one day pop.

But, one can overstate the power of engagement. Many investors “engage” to avoid real action, promoting their gentle encouragement of companies to “take climate change seriously”, while the companies spend millions fossicking for more fossil fuels, polluting ecosystems and devastating communities.  Ultimately, while voting for climate friendly resolutions will help, it won’t solve the problem. It’s difficult to imagine a regular group of shareholders ever voting willingly for a pure-play fossil fuel company to keep 80% of its carbon reserves in the ground.

Without proof that a legally binding global deal to keep warming to 2 degrees is around the corner, calls by shareholder activists to “act before the bubble pops” risk falling upon deaf ears With the rapidly closing window for action therefore, we also need – step 3!


Contested to the hilt, but a maximum impact sport!

For just over 18 months 350.org – has been running a campaign called Go Fossil Free, which invites public institutions to sell their shares in fossil fuel companies. Already, the campaign’s won divestment commitments from 16 local governments (including San Francisco and Seattle), 13 religious institutions, 6 universities and 3 major foundations.

And already this call to halt fossil fuel investments is penetrating the mainstream investment world. Norway’s largest insurance company, Storebrand,  recently sold 19  of its coal and gas stocks; Rabobank, a major Tour de France sponsor, announced it will never invest in shale gas. The World Bank, the European Investment bank, the US and all Nordic countries have all publicly committed not to invest in new coal.

Leading authorities – Mercer, the IEA, even Obama have also all recommended divestment as a tool for tackling climate change. And global fund manager Aperio Group has demonstrated that removing fossil fuel companies from an investment portfolio has negligible impacts upon returns and may even generate better returns.

Divestment critics love to stress that dumping fossil fuel shares won’t in itself financially hurt the fossil fuel industry. True, but the primary goal of divestment isn’t to inflict an economic wound – a near impossibility considering the market capitalisation of a BHP or Rio.  The primary goal of divestment is to make it transparently clear that fossil fuel companies are the pariah corporations of our time, to strip their social license and thereby reduce their political clout. Divestment achieves this in no uncertain terms. As investors publicly commit to divest, they sow seeds of doubt about the morality of the industry’s social license to profit from the planet’s wreckage.

Who would have predicted the growth of the divestment movement in the past year?  Who would have anticipated that leading Australian investment heavyweights would flock to hear Bill, a Vermont activist, sing divestment’s praises at Goldman Sachs earlier this year?  Or that Obama would give divestment a shout-out when introducing his new climate policy? Or that the Uniting Church would effortlessly generate weeks of local, national and international media upon announcing its intention to divest. Only when we’ve taken the fossil fuel industry down a notch, and raised the volume of our movement significantly will we be able to win bold, global and legally binding climate action.

 In conclusion, keeping the ‘unburnable’ 80% of our proven fossil fuel reserves in the ground demands action from all, but civil society holds tremendous power for good.  By pressing investors and companies to disclose, we can expose the extent to which they are funding a post-2 degree world and perhaps even convince them to change. By engaging directly with companies we can, coupled with regulatory action, build a greater appreciation, within the industry, of the financial risks associated with investing in fossil fuels.  And bydivesting, we can erode the social license that the fossil fuel industry has to radically alter the atmosphere.

Although time is running out, there is hope when we see that growing awareness of “unburnable carbon” is focusing energies and facilitating a new wave of targeted strategies that coulds just turn this ship around before it’s too late.