After years of pressuring banks and other institutions to stop investing in fossil fuels, climate campaigners are making some progress. So how does divestment work?
For years, climate activists have been pushing banks and other big institutions to divest from fossil fuels. New research from climate advocacy group 350 Aotearoa shows that this public pressure has in many cases been effective, but that New Zealand’s Australian-owned big banks are well behind their domestic peers.
What is divestment?
Divestment (or disinvestment) is the opposite of investment – choosing not to invest money in particular companies or causes. This can simply be withdrawing money from a company that isn’t doing well financially, but globally, it’s been used as a way to exert public pressure on organisations to no longer invest in areas that are considered harmful. 350.org, an international organisation with a New Zealand branch, has led a push to get big organisations to stop investing in fossil fuels around the world.
“A project can’t go ahead without the finance to back it,” says Adam Currie, a campaigner from 350 Aotearoa. “If they don’t provide funding, coal companies can’t get it out of the ground. ” If there is widespread divestment from fossil fuels, then these projects can be stopped; it’s an alternative to making laws that ban fossil fuel extraction.
As well as banks, divestment can target institutions like universities and insurance companies; for instance, in 2021 Harvard University in the US announced that it would end investments from its $US41.9bn endowment in fossil fuels.
Which bank in New Zealand is the best at not investing in fossil fuels?
Since 2015, 350 has been examining New Zealand banks to see which ones are best for the climate. Its latest round of research, released last week, showed serious progress: nearly every bank has already exited or has plans to exit funding thermal coal mining by 2030, and New Zealand-owned banks Kiwibank, Cooperative, SBS and TSB have no major fossil fuel investments.
The research is based on publicly available information as well as through discussions with the banks themselves. “When we engage with banks, the detail they provide shows how engaged they are with this issue, and how much the public cares about fossil fuels,” Currie says.
“This shows that banks are moving in the right direction, they just have to put their foot on the accelerator,” Currie adds. He laughs, thinking about his metaphor. “Or maybe I mean pull the fossil-fuel-free brake.”
Kiwibank, the world’s first bank to commit to withholding banking services from coal, oil and gas companies, is top of the list in terms of sustainability. ANZ, whose parent company in Australia has financed fossil fuel expansion projects that will create 5.3 billion tonnes of carbon, is the worst, according to the 350 research.
Of the big Australian-owned banks – Westpac, ASB, BNZ and ANZ – their New Zealand arms have minimal fossil fuel investments. However, their Australian owners (Westpac Group, Commonwealth Bank of Australia, National Australian Bank and ANZ Australia respectively) still have significant fossil fuel interests.
“The big four are in contractual relationships [with fossil fuel companies] and aren’t divesting,” Currie says. While Westpac Group has made the most progress, and promised to exit thermal coal funding by 2025, five years sooner than other banks, it still has $AU1.18bn invested in fossil fuel projects with plans to expand.
What impact has pressuring banks to stop investing in fossil fuels had?
Currie says that the near-universal commitment by banks to stop providing funding to thermal coal projects is a sign that divestment tactics are working. “Thermal coal is one of the worst emissions creators – it’s an outrageous investment because it’s so damaging to the climate.”
Divestment can make it harder for coal, oil and gas producers to get funding for their new mining projects, slowing these developments down. However, there are loopholes, where banks can fund separate entities that then invest in fossil fuel expansion, and overseas groups can also continue to put money into these developments.
There are strong financial reasons to not invest in fossil fuels: surveying, extraction and processing are expensive activities, and require large amounts of up-front investment. A decade ago, fossil fuel companies were some of the most profitable in the world, but now, the energy sector is the smallest sector represented in key stock market index S&P500.
“It’s a moral signal to other companies – a way to use their influence to stop fossil fuel production,” Currie says. While many banks have expressed commitments to stop putting money into climate-damaging companies, he says progress needs to go faster. In a climate crisis, Currie says, “winning slowly is losing.”
What will happen next for divestment campaigns in New Zealand?
Other big organisations that invest significant amounts of money and work with the public also need to divest, Currie says. For example, last year shares owned by ACC were responsible for making about 3.5 million tonnes of carbon dioxide. For comparison, New Zealand’s per capita emissions in 2021 were 15 tonnes; the average in Kenya was 2.1 tonnes. Other government funds, like the New Zealand Super Fund, have already committed to not funding fossil fuel projects to make their money more resilient to climate change. However, many Kiwisaver schemes are still putting New Zealanders’ money into fossil fuels.
As a consumer, Currie says that one of the best things you can do is to switch to a bank that is fossil fuel-free. If you switch banks then you should tell your bank why you’re switching, to make it clear that it’s because of its fossil investments. “If it’s not possible to switch, you can also send a letter encouraging your bank to change,” he says. From a financial as well as an ethical perspective, it makes sense to him to reduce the amount of money invested in fossil fuels. “Lots of people want to live their day-to-day lives and not have their savings for their kids’ future to be funding the destruction of their kids’ future.”