‘When was the last time you went to your pension fund manager and asked: ‘I’d like to know where you’re spending my hard-earned money?’”

These were the words of Dr Iraj Abedian on The Business of Climate panel at Daily Maverick’s Gathering: Earth Edition on 26 May. He was referring to the way in which citizens can and should be active in using the power of our voices – and our investments – to see change at the corporate and societal level.

The statement earned him enthusiastic applause from a full auditorium. It seems that many people do care that our “hard-earned money” is too often used towards unethical practices that are harming our societies. 

One of the most pervasive and nefarious of these activities is the ongoing expansion of fossil fuel companies, who continue to choose short-term profits over long-term planetary habitability, and who say they plan to transition away from fossil fuels but whose actions tell a very different story. 

These companies continue to prioritise fossil fuel exploration despite what we know about the burning of fossil fuels: that it is the single biggest contributor to the climate crisis and contributes to many other interlinking issues such as water insecurity, air pollution, land degradation and human ill-health.

They play a clever game with the public, greenwashing by pointing to genuine but short-term and localised economic benefits, while ignoring long-term and global costs that far outweigh those benefits. They are almost entirely dependent on rent-seeking, co-opting regulators and exploiting flawed democracies (like South Africa) and authoritarian regimes to pursue their dirty business model. They know that fully empowered citizens with a clear understanding of their corrupt business model will almost always stand in their way.

It offers a chance to participate in the often significantly better returns on investment offered by the renewable energy sector.

That means that most of us with investments and pensions are invested in these fossil fuel companies without even realising it. But we can “vote” against climate breakdown using our savings. This is an action known as fossil fuel divestment, and is ideally partnered with reinvestment in the sustainable energy future we want. 

Fossil fuel divestment is a global movement – modelled in part on the divestment movement that helped bring down the apartheid regime – calling for people to withdraw money from investments in fossil fuel companies.

With more than $40-trillion in endowments and portfolios joining in, it challenges the fossil fuel companies that are contributing the most to climate breakdown. These companies still have a social licence to operate and expand, despite the dire climate emergency. The divestment movement challenges this licence, and their image as respectable citizens. 

Divestment also frees up capital for reinvestment in safer, cleaner and more ethical energy options, which are not perfect – but which do offer an exponentially better collective future, especially if implemented carefully alongside other climate solutions like increased energy efficiency.

It offers a chance to participate in the often significantly better returns on investment offered by the renewable energy sector which are free of the risk of asset stranding by technological change, climate regulation and climate litigation.

Real financial impact

Many people who argue against divestment do so because they claim that divestment doesn’t really impact fossil fuel companies in any real way, and that it makes more sense to remain invested and encourage the company to change from within (via shareholder activism). But we’ve not yet heard a single convincing example of a local asset manager securing this kind of change from their fossil investee companies.

Recent research shows that publicly celebrated divestment in particular is in fact having real financial impact on fossil fuel companies, who are now even listing divestment as a real threat to their business operations.

Indeed, the fossil fuel lobby feels so threatened by divestment that Texas has sought to punish companies that do not invest in fossil fuels: in August 2022, the Republican-run state embargoed firms including Black Rock and Goldman Sachs on the grounds that they “boycott” the fossil fuel sector. (So much for respecting the free market.)

Read more in Daily Maverick: Forthcoming UCT decision could set the tone for fossil fuel divestment in South Africa

Investments free of fossil fuel exposure are also proving to give good returns – an encouraging development for those who are concerned about the potential financial losses of divestment. For example, the S&P 500’s Fossil Fuel Free Total Return Index has consistently outperformed the S&P 500 overall.

Divestment is challenging in South Africa because our economy is so carbon-intensive, and our financial markets are relatively small, while most ethical investors have limited financial clout and are forced to take positions in collective investment funds that are invested in fossil fuels. Very few funds substantially limit exposure to fossil fuels.

But some do, like the two-year-old Select BCI ESG Equity Fund and the more established Sanlam Living Planet Fund (set up by WWF), and these funds offer perfectly respectable performance.

As Fossil Free South Africa, we are running an #InvestFossilFree campaign to allow those who seek fossil-free investments to work together, consolidating public support for fossil-free investment funds by engaging with the clients and decision-makers of leading South African asset managers.

To read all about Daily Maverick’s recent The Gathering: Earth Edition, click here.

The campaign asks investors and pension fund owners to sign a joint letter to their asset manager, calling for funds that are largely free of fossil fuel exposure. 

This campaign isn’t asking asset managers to divest 100% overnight, and doesn’t seek to force divestment on those who still love Sasol – it just asks asset managers to create more fossil-free options for the many people who do want them.

Those of us who hold the privilege to save and invest have more power to wield responsibly than we might realise. We can be active contributors to a better reality and a better future for all.

And it can all start with co-signing a letter. DM

Sarah Robyn Farrell fulfils a multiplicity of roles in the climate justice space, including divestment campaigner at Fossil Free South Africa. She is a writer and musician too.

David le Page is coordinator of Fossil Free SA, which together with students persuaded UCT to divest in 2022.