The recent announcement by the heirs to the Rockefeller oil fortune, philanthropists and other high net worth individuals that they will divest $50 billion from fossil fuel investments represents a significant behavioural shift, demonstrating that environmental sustainability is becoming increasingly important for investors when evaluating options and selecting where they will invest. Stanford, one of the world’s most well known and respected universities made a similar announcement that they would not invest any of their $18.7 billion endowment fund in coal mining companies in May this year, and the Australian National University (ANU), one of Australia’s most well known and highly ranked universities announced earlier this month that it will divest funds in seven resource and mining companies following an independent review.
On October 6, the Anglican Diocese of Perth announced that they will divest their fossil fuel investments and invest in renewables as part of their responsibility to act on climate change. During the announcement Father Evan Pederick from the Diocese stated that it was up to private enterprise and/or individuals to show the way in the absence of effective Government action. The Diocese of Perth’s action follows on from the Anglican Church in Australia’s announcement in August 2014. Several Anglican Dioceses in New Zealand have also made similar commitments, along with the cities of Dunedin and Brisbane and a number of foundations.
The divestment momentum is becoming harder and harder to ignore, however it would be naive to think that it is just about reallocating funds. Corporate social and environmental responsibility are now commonly front of mind in many organisations across a range of sectors globally. Company boards and management are now more cognisant of the reality that these responsibilities go beyond the mere reporting of performance in order to tick a regulator’s box or answer a query from a shareholder (of course this is still important). They realise that the positions they take will need to be justified as part of transactional negotiations, and that as National Governments begin to mandate environmental requirements more and more, their customers and trading partners who operate in jurisdictions under these mandates will also be subject to them. They are also aware of the reality that using social media and other platforms, individual shareholders can very quickly find others that are of a similar viewpoint to them, and form groups that give them far more of a say than they would have on their own.