Last week the mayor of London rejected the London Assembly’s call for City Hall and the £4.8bn London Pensions Fund Authority (LPFA) to divest from fossil fuels. In the Guardian on Friday, Matthew Pencharz, the Mayor’s senior advisor on environment and energy, expanded on Boris Johnson’s rejection, arguing that there needs to be a managed transition away from fossil fuels, to avoid “a sudden cliff edge,” and that we need domestic fracking to meet our energy demand for the medium term.
It’s a blow to those of us that have been working so hard on this divestment campaign – from the near unanimous vote at the London Assembly, to the hundreds of people that turned up on the mayor’s doorstep on Global Divestment Day – not least because it misses the point of divestment.
It is misleading to suggest that divestment is solely about natural gas. Putting the health, safety and emissions concerns of fracking aside (and our fundamental disagreement with the mayor’s position), the LPFA invests in coal – through companies BHP Billiton and Rio Tinto – the use of which the Conservative government has committed to ending.
The fund also invests in Chevron, BP, Nexen, Shell, Suncor Energy and Total. These companies are variously engaged in extracting Arctic oil, deepwater reserves and tar sands – expensive, carbon-intensive fuels that scientists say must stay in the ground to avoid catastrophic climate change.
The mayor has committed to a 60% reduction of London’s carbon emissions by 2025, in line with a pledge from the Conservative government to limit global warming to below 2C. How does the mayor reconcile these commitments with the LPFA’s £48 million of indirect investments in the aforementioned companies?
Publicly-traded fossil fuel companies can only burn 20-40% of their known reserves if we are to keep global warming below the ‘safe’ level of 2C. Yet, in 2013 they spent £443bn exploring additional reserves. These companies are betting that leaders fail to enforce their emissions caps.
Shell and Chevron have issued statements to shareholders saying that government action to limit global warming to 2C is highly unlikely, meaning they can exploit their current reserves and more. The mayor has set emissions targets while investing his pension in companies that explicitly count on those targets being missed.
We are now on course for a 3.7-4.8C rise by the end of the century. This is the cliff edge we should all be deeply concerned about. Last year we hit a point of no return as the West Antarctic ice-sheet began to melt.
If the mayor is serious about limiting global warming to 2C, he needs to encourage his pension fund to redirect investment away from high-carbon unconventional fuels and towards green initiatives.
We are not arguing that fossil fuel use could or should end over night. What we advocate - the LPFA selling its shares, over a managed period of five years - won’t put the lights out. Nor will it disrupt retirement plans or the world economy. It will, however, send a strong message that business as usual – where companies plan to burn more carbon than the climate can safely withstand – is no longer ethically or financially acceptable.
The capital could be better invested in London’s low-carbon goods sector, already worth £25bn. Currently it is invested in fossil fuel assets that senior financial institutions, including the World Bank, Bank of England, HSBC, Goldman Sachs, Standard and Poor’s, warn could be stranded by climate legislation and thereby crash in value, another cliff edge we should all be concerned about.
Divestment has precedent and support. Globally, 220 institutions have already committed to divest. The Church of England recently dropped £12m from tar sands oil and thermal coal.
The question is, what kind of future does the mayor want? One where fossil fuel companies continue to spend billions searching for dangerous levels of carbon? Or where that resource is redirected into clean energy and efficiency? We hope he will reconsider before the Paris summit in December.
Climate change is an issue close to many of our hearts, and one that can unite environmentalists and business, socialists and conservatives. The call for divestment doesn’t end here, and as Divest London – a committed group of volunteers across the city – we’ll make sure this is firmly on the agenda of all the London mayoral candidates.
