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From Sacramento to Paris, Bringing Divestment to Government as a Tool for Social Change

On Wednesday at COP21, divestment was king, as California touted its success, and Bill McKibben announced a major shift in global capital away from carbon.
chinese coal pollution cop21

On the outskirts of Beijing, a Chinese woman dons a face mask as she walks near a coal plant, November 27, 2015. (Photo: Kevin Frayer/Getty Images)

Kevin De León has traveled a very long way to talk about divestment.

As president pro tempore of the California state senate, De León spearheaded the state's effort to pass a resolution divesting two of the world’s largest pension funds—the California Public Employees’ Retirement System and the the California State Teachers Retirement System—from fossil fuels, and he's proud the bill was signed into law. So proud, in fact, that on Wednesday he made a cameo at the Paris Climate Conference to explain why the rest of the world should follow suit.

And not just with regard to divestment.

"California is the seventh-largest economy on planet Earth," he says. "We have successfully, to date, delinked and decoupled GDP from carbon." What that means, he explains, is that the state's economy has actually grown while simultaneously reducing carbon emissions. "We have proven successfully—not in a white paper, not as academics in a theoretical space but in real life—that you can decouple and delink carbon from GDP." That lofty goal is at the heart of California's divestment push, he says.

De León is speaking at an event organized by climate advocacy groups and Divest-Invest, where the big announcement is that more than 500 global institutions representing more than $3.4 trillion in assets have pledged to divest holdings from fossil fuels, a sign that global capital is shifting toward low-carbon technologies. Divestment, for the uninitiated, is a form of socially responsible portfolio management; specifically, it means not investing in companies that have been deemed "unethical"—in this case, unethical with regard to the climate. It's something the California state government has done, and something more institutions are considering globally.

So how much real-world effect are these divestment campaigns actually having? It depends how you define their aim.

It's a big leap forward for the climate-divestment movement, which as recently as September comprised just 400 institutions representing roughly $2.6 trillion in assets making the pledge. Still, that progress comes with some caveats: Many of the commitments are only for partial divestments. (Full divestment here means divesting from coal, carbon, and gas, while partial divestment means divesting from just one or two of the three.) And the $3.4 trillion figure represents the total assets represented by the institutions—not the total money divested, which institutions' disclosure policies make difficult to track.

The new numbers arrive alongside a spate of new divestment pledges from 19 French cities, including Lille, Saint-Denis, Rannes, and Ile-de-France, as well as an endorsement from French parliament. These endorsements, too, are a significant step forward for a movement that has historically relied more on universities than on government to make its mark.

Divestment has become a fixture of ethical financing at universities. That's because, as Noelie Audi-Dor, president of London School of Economics' divestment program, explained at Wednesday's event, the pressure to divest is embedded in the mission of the university. "Universities' main concern is to effectively prepare students for their future life," she said. "They do an incredible amount of research around climate change and its impacts, including financial ones. It is thus extremely difficult for universities to justify the fact that they are profiting from the destruction of our future society as well as neglecting their own research."

By asking schools to divest from coal, gas, and oil, Audi-Dor added, "we are simply asking them to apply their research to the real world."

So how much real-world effect are these divestment campaigns actually having? It depends how you define their aim. If the goal of the movement is to directly reduce companies' profitability through reducing their share prices on the market, there's reason to think these campaigns are largely ineffectual.

That is not, however, how these groups, states, and cities are defining success.

When I ask Nicolas Haeringer, a campaigner for the French chapter of, if the movement is more about awareness and symbolism than about reducing share prices, he says that it's about both. Its primary purpose is definitely not to drain the pockets of the oil and gas sector, he says—those pockets run too deep—but it's not merely symbolic either: "The idea is to put into question the social legitimacy that we give to the [carbon] sector every day and the fact that this sector is actually fueling our daily life—our pensions, our universities, our museums, our insurance companies. The idea is to say we don't want that anymore."

Increasingly, it seems, government is catching on. Haeringer is hopeful that the endorsement of the French parliament could be a step toward achieving what De León did in California: a bill requiring that some of the country's largest pension funds divest from companies whose bottom line is deleterious to the planet. In California, that meant divestment from any profits related to mining or the use of thermal coal.

It's a direction that Pascal Canfin, the former development minister of France and senior advisor for international climate affairs at the World Resources Institute, is very excited about. As the divestment movement spreads into the political mainstream, he predicts the issue "will more and more become a judiciary issue," which is to say, ethics with the force of law, as is now the case in California. "It's not only anymore an ethical view, it's not only anymore a financial issue."

And if De León's efforts in California are any measure, Canfin may well be right.

When I catch up with De León as he winds through the convention's crowds after the press event, he tells me that what he really wants to talk to other leaders about is a bill that passed recently in the state senate—S.B. 350—and that Governor Jerry Brown just signed into law, which will require that utilities generate half of their electricity from renewable sources.

"We're doubling down on energy efficiency for the whole state of California," he says. "So divestment is part of it, but it's not the biggest part of it. It may be the sexier part, but the big, big thing is actually renewables and moving our utilities away from traditional fossil fuel electricity generation."

Got that? Divestment is the sexy part. Now he wants to tell it to the world.


Catastrophic Consequences of Climate Change” is Pacific Standard's year-long investigation into the devastating effects of climate change—and how scholars, legislators, and citizen-activists can help stave off its most dire consequences.