7 January 2021

Research carried out by academics including an environmental finance expert at the University of Edinburgh Business School provides the first clear evidence that the fossil fuel divestment movement is having an effect, successfully reducing financial flows to oil and gas companies in countries with greater divestment commitments.
Research Shows Fossil Fuel Divestment Works

However, the research also finds that divestment pressure may end up shifting investment towards 'pollution havens' abroad. At a global level, investment in the oil and gas sector continues to increase. This is in direct conflict with evidence that society already has more proven oil and gas reserves than can be used without exceeding global climate change targets.

The response to divestment pressure was greater in countries with higher levels of pro-environmental government regulation, and lower in countries which heavily subsidise fossil fuels, demonstrating an important link between social pressure and the regulatory environment.

The analysis was done by a team including Dr Francisco Ascui of the Centre for Business, Climate Change and Sustainability at the University of Edinburgh. It was based on one of the most comprehensive datasets of fossil fuel fundraising across all major capital market asset classes (equity, bonds, and syndicated loans) across 33 countries from 2000 to 2015.

The findings have just been published in the peer-reviewed Journal of Economic Geography:

Dr Francisco Ascui said:

"Our findings have wide-ranging implications. We show that the divestment movement is having an effect, but it's not yet nearly enough to put us on track to meet global climate change targets. At a global level, oil and gas finance has still grown at over 8% per year since the divestment movement started in 2008. This is despite divestment pledges reaching $14 trillion (USD) this year.

"For social activists seeking to impact fossil fuel investment, it shows that it is not enough to monitor domestic financing of the fossil fuel sector. Divestment activists also need to pay close attention to foreign investments, and their home government's environmental policies.

"For policymakers, this study suggests that governments have an important role to play, not only in direct regulation but in signalling their support for the transition to a low-carbon economy, which then amplifies what other stakeholders are able to achieve.

"For investment banks, it is time to consider whether it is socially acceptable to continue to provide finance for fossil fuel investments in pollution havens abroad."

The research was carried out by Dr Ascui of Edinburgh, along with colleagues from Queen's University Belfast, University College Dublin, and Oxford University.