Committing to divest from fossil fuels seems like a profound pro-climate statement. Selling off fossil fuel investments, the logic goes, will choke off capital from the fossil fuel companies and make it harder for them to operate. Eventually, divestment will lead to the sector’s demise and create a better environment for accelerating renewable energy efforts. By pulling money out of fossil fuel investments, companies can demonstrate how they’re taking a material step towards a more sustainable world.
How Fossil Fuel Divestment Falls Short
Selling these assets allows someone else to operate them — exactly the opposite of what’s intended.
November 04, 2022
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Summary.
Divesting from fossil fuel assets makes a big statement. Its impact, however, is murkier. Selling off an asset requires someone else to buy it, which, in the case of fossil fuels, can mean breathing new capital into the exact assets companies are trying to choke. But there’s another approach: running those assets into the ground. By holding onto fossil fuel assets, investors can resist efforts to improve their output and extend their lives. By planning to sunset these assets, they maintain control and can ultimately have more of an impact than if they simply washed their hands and dumped these investments from their books.