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WHERE

RANDS
MEET
REASON

As the world finally embraces the moral and financial logic of decarbonisation,
South Africas fossil fuel intensive economy is a major hurdle for far-sighted and
progressive local investors, argues David le Page. The absence of easy new energy
investment opportunities remains a significant problem, but direct spend in the
built environment may be part of the solution.

o reader of earthworks is likely to be in


any doubt about the considerable threat
to human wellbeing posed by climate
change. The concentration of carbon
dioxide (CO2) in the atmosphere is now the highest
it has been for a million years, and on current
targets we are headed for a very dangerous three
degrees of global warming thanks to humanitys
burning of fossil fuels. Africans are even more
vulnerable climate change is accelerating faster
on this continent than the global average warming.
Until the United Nations (UN) Paris climate
change summit in December 2015, it was not
clear that the worlds governments were yet
truly resolved to stop dangerous climate change.
Unfortunately, while Paris was undoubtedly a big

132 // www.earthworksmagazine.co.za // issue 32

advance, it still remains to be seen whether global


warming can be contained within safe limits. What
few people appreciate is that the targets set by the
UN are based on a carbon budget that is designed
around technologies for carbon capture that do not
actually exist yet, and the combined pledges of the
worlds nations still add up to a likely three degrees
of warming.
The carbon budget is the amount of CO2 that
can still be released into the atmosphere without
causing dangerous global warming. Unfortunately,
the worlds reserves of fossil fuels coal, gas and
oil would, if burnt, greatly exceed any safe carbon
budget. Oil, coal and gas companies in effect have a
business plan exploiting all their current reserves
that almost guarantees the end of human

OPINION:
DIVESTMENT IN
FOSSIL FUELS

LOCAL MOVEMENT
Here in South Africa, the Anglican Church and
the Desmond and Leah Tutu Legacy Foundation
have called on financial institutions to create
financial vehicles that will facilitate divestment.
The University of Cape Town, encouraged by Fossil
Free South Africa, has committed itself to some
form of ethical investment policy for its R4 billion
endowment and is looking into whether that policy
should include divestment.

If humanity is advancing morally, as hopefully


we are, then those advances are built on a series
of transitions, wherein some pioneers of empathy
recognise behaviour that causes suffering, and
then slowly persuade everyone else that that
behaviour is no longer acceptable. Past examples
include slavery, child labour, racism, sexism and
homophobia. Despite these problems still existing
in many and varied forms, they are at least for the
most part no longer socially acceptable.
Sometimes, these moral struggles take great
lurches backwards, as they did, for example, when
the US decided that torture was an acceptable way
of trying to acquire intelligence. In respect of
climate change, we face another possible ethical
transition where the burning of fossil fuels
and the companies that facilitate such activities
become socially unacceptable. If we are lucky,
future generations will look back with horror to
see that even 30 years after the science and danger
of climate change became clear, investing in the

Takver/Flickr Creative Commons

civilisation, according to most climate scientists. A


climate crisis that ends civilisation wont happen
soon, but when combined with other negative
tipping points resource depletion, biodiversity
loss, ocean acidification, soil loss and fresh water
mismanagement, unstoppable and cascading
interlinked crises could arise far sooner than we
initially thought.
George Monbiot, the noted Guardian
environmental columnist, points out that one
of the big gaps in the Paris treaty was that
while it goes some way towards addressing the
consumption of fossil fuels, it does nothing to stop
their production. This is not surprising these
companies are extremely powerful, and have
spent billions of dollars over the past few decades
working to undermine the science of climate
change and to undermine political efforts to
regulate carbon emissions.
What is encouraging, though, is that 90% of new
electricity production capacity built in 2015 the
hottest year on record was renewable energy
capacity. But even if this trend is accelerating, as it
should be, we cannot afford to rest easy.
Over the past three to four years, one of the
most salient areas of climate activism has been the
international campaign for divestment from fossil
fuels. This campaign was started by the climate
action group 350.org, and has spread to hundreds
of campuses in the United States. Hundreds of
civil society bodies, from the British Medical
Association and the California State pension fund
to Stanford University and the Rockefeller Brothers
Fund, have committed to greater or lesser degrees
of divestment. Globally, funds worth in excess of
$3 trillion have committed themselves to some
degree of divestment.

COP21 Paris 2016: Pre-press photo opportunity by activists


announcing escalation of mobilisations in 2016 against fossil fuel
assets and infrastructure and the people who fund these projects.

OPINION: DIVESTMENT IN FOSSIL FUELS

production of fossil fuels was still considered


socially acceptable. Its up to each of us, by
deciding in our own hearts to quietly lead, to
speed the moral transition most vital for our
civilisations survival.

THE CLINCHER
There is another great danger to being invested
in fossil fuels, and its one that might move even
the most hardened of climate sceptics. The fact
is that the worlds unburnable carbon represents
a huge economic resource, which many of us
are inadvertently gambling on, either directly or
indirectly, through savings and pension funds,
which banks and other supposedly trustworthy
financial service providers manage on our
behalf, investing via bonds and the stock market
in fossil fuels.
But the current market valuations of fossil
fuel companies are based on the assumption
that they will one day be able to burn their
declared reserves. This assumption, in a world
that is moving rapidly away from the use of
fossil fuels, is looking increasingly unlikely, and
these companies may be overvalued by as much
as 60%, according to Green America. (Indeed,
todays low oil prices are quite likely the results
of countries like Saudi Arabia rushing to sell
their oil reserves before everyone else does. In
the meantime, Saudi Arabia is also hastening to
move its economy beyond fossil fuels, having
just established a $2 trillion fund for the postoil era.)
This problem of so-called stranded assets is
a particularly relevant one for South Africans,
with our incredibly fossil fuel-dependent
economy. Already, analysis shows that a
portfolio based on the JSE Top 40 companies
would have done slightly better over the past
three years had fossil fuel-intensive stocks like
Sasol and Anglo Coal been excluded.

FROM RISK TO OPPORTUNITY


Not only do we risk seeing our investments
in such companies decline dramatically, but
were also, for the most part, missing out on
the incredible opportunities for investment in
renewable energy. This spiral will only continue
new wind and solar energy are already cheaper

than new coal, even in South Africa, according to a


research report from Mainstream Renewable Power.
In the era of aggregated managed investments like
unit trust and pensions funds, its hard to find easy
ways to divest. South African portfolio managers are,
on the whole, extremely conservative, and reluctant
to exclude fossil fuels from portfolios. Fossil Free
South Africa is trying (struggling, to be honest) to
encourage the creation of fossil fuel-free investment
funds, but at present the only way to divest is to go
offshore, where there are many divested funds, or to
manage your own local stock portfolio (which, it is
true, few have the time or confidence to manage).

THE FLIPSIDE
Here enters the opportunity for those working
in the built environment and property sectors. A
number of US campuses have recently discovered
that investments in energy efficiency and oncampus renewable energy have been offering very
high effective rates of return on investment. The
University of Hawaii, for example, has invested
heavily in campus energy improvements. Cornell
University pulls energy from micro-hydro power.
On average, according to the US Green Building
Council, energy improvements yield a 19.2%
return on investments, a rate that is extremely
competitive with conventional market returns.
A local opportunity for such investment (albeit
on a very small scale) is being pioneered by the
Stellenbosch Waldorf School, which has created a
pioneering community energy cooperative offering
a likely 10% annual return on investment, launched
late last year on Indiegogo look them up at www.
thesunexchange.com.
We live in a moment of extraordinary combined
danger and opportunity. Embracing the moral and
practical logic of fossil fuel divestment and finding
the best opportunities to invest in the new energy
economy is now a vital step for us all, both as
societies and as individuals.
David Le Page is an
environmental journalist and
coordinator of Fossil Free
South Africa. He recently won
the 2015/16 Eco-Logic Award
in the Eco-Warrior category.

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