Fossil Fuel Divestment Strategies

[We’re pleased to welcome authors Dr. Chelsie Hunt and Dr. Olaf Weber of the University of Waterloo. They recently published an article in Organization & Environment entitled “Fossil fuel divestment strategies: Financial and carbon-related consequences,” which is currently free to read for a limited time. Below, they reflect on the inspirations, challenges, and related papers to their research:]

O&E_72ppiRGB_powerpoint

The research on this paper has been motivated by the discussion about whether fossil fuel divestment decreases financial returns. This question is discussed controversially in academia and practice. Since the Canadian financial market is very fossil fuel heavy, it was interesting to understand both, financial and carbon related consequences of different fossil fuel divestment strategies.

Another influence is the intensive public discussion about how to mitigate climate change. As divestment is proposed as one way to address the problem, we wanted to understand the effect of this type of socially responsible investment that has been promoted by the NGO 350.org. However, divestment moved from being a niche political activity of NGO to the center of institutional investing with a number of big institutional investors announcing divestment from fossil fuels.

A challenging part of this research is the quality of climate related corporate data. Though many firms disclose their carbon related data, there are still gaps and the risk of biases because often those with higher carbon performance publish their data. However, I think we used an innovative approach that correlated both financial and carbon related performance to analyze whether divestment really has an effect on the decarbonization of financial portfolios.

The results might influence investors with regard to divestment decisions and also contributes to finance research by adding non-financial risks to the equation. Maybe they also influence younger scholar to conduct research in this field though it is still often seen as a niche in general corporate and financial performance research.

Finally, we would like to mention three other papers in the field that have been extremely interesting. First, it is a paper that discusses why financial implications of climate risks are not discussed in conventional financial journals (Diaz-Rainey, Robertson, & Wilson, 2017). Second, there are two more papers that discuss the consequences of fossil fuel divestment that suggesting no negative financial effects from fossil fuel divestment (Henriques & Sadorsky, 2017; Trinks, Scholtens, Mulder, & Dam, 2018)

References
Diaz-Rainey, I., Robertson, B., & Wilson, C. (2017). Stranded research? Leading finance journals are silent on climate change. Climatic Change, 143(1), 243-260. doi:10.1007/s10584-017-1985-1

Henriques, I., & Sadorsky, P. (2017). Investor implications of divesting from fossil fuels. Global Finance Journal. doi:https://doi.org/10.1016/j.gfj.2017.10.004

Trinks, A., Scholtens, B., Mulder, M., & Dam, L. (2018). Fossil Fuel Divestment and Portfolio Performance. Ecological Economics, 146, 740-748. doi:https://doi.org/10.1016/j.ecolecon.2017.11.036

 

Stay up-to-date with the latest research from OAE and sign up for email alerts today through the homepage!

Get a Better Understanding of Climate Change Issues Through Simulation

(cc)

(cc)

Global warming and climate change have become hot-button issues in the past few decades. Many disagree on the long-term effects and what needs to be done to correct it, if anything at all. In their article published in Simulation and Gaming, “WORLD CLIMATE: A Role-Play Simulation of Climate Negotiations,” collaborators John Sterman, Travis Franck, Thomas Fiddaman, Andrew Jones, Stephanie McCauley, Philip Rice, Elizabeth Sawin, Lori Siegel and Juliette N. Rooney-Varga suggest that communication issues are to blame and offer up a unique solution in the form of online simulation and role playing programs.

The abstract:

Global negotiations to reduce greenhouse gas (GHG) emissions have so far failed to produce an agreement. Even if negotiations succeeded, however, a binding treaty could not be ratified or implemented in many nations due to inadequate public support for emissions reductions. The scientific consensus on the reality and risks of anthropogenic climate change has never been stronger, yet public S&G_2013_C1.inddsupport for action in many nations remains weak. Policymakers, educators, the media, civic and business leaders, and citizens need tools to understand the dynamics and geopolitical implications of climate change. The WORLD CLIMATE simulation provides an interactive role-play experience through which participants explore these issues using a scientifically sound climate policy simulation model. Participants playing the roles of negotiators from major nations and stakeholders negotiate proposals to reduce GHG emissions. Participants then receive immediate feedback on the implications of their proposals for atmospheric GHG concentrations, global mean surface temperature, sea level rise, and other impacts through the C-ROADS (Climate Rapid Overview and Decision Support) policy simulation model used by negotiators and policymakers. The role-play enables participants to explore the dynamics of the climate and impacts
of proposed policies using a model consistent with the best available peer-reviewed science. WORLD CLIMATE has been used successfully with students, teachers, business executives, and political leaders around the world. Here, we describe protocols for the role-play and the resources available to run it, including C-ROADS and all needed materials, all freely available at climateinteractive.org. We also present evaluations of the impact of WORLD CLIMATE with diverse groups.

Read “WORLD CLIMATE: A Role-Play Simulation of Climate Negotiations” in Simulation and Gaming for free by clicking here.

Don’t miss out on other articles like this! Click here to sign up for e-alerts from Simulation and Gaming.