This blog post explores the historical context of oil wealth, the impact of divestment movements, and the current financial entanglements of major banks with the fossil fuel industry, highlighting the potential for collective action to drive change.
In 1870, John D. Rockefeller founded the Standard Oil Company, which would eventually make him America’s first billionaire, controlling two percent of the entire U.S. economy at one point. Fast forward to 1940, the Rockefeller Brothers Fund was established with a mission to promote social change for a more just and sustainable world. Ironically, in 2014, this fund announced its decision to divest from fossil fuels, the very industry that had generated its wealth. This raises a critical question: what if individuals collectively moved their money away from fossil fuels?
According to the Thinking Ahead Institute, approximately $48 trillion is held in global pension funds, with about 10% potentially invested in oil and gas projects—amounting to roughly $5 trillion. The loss of such significant financial support would undoubtedly impact the oil and gas industry.
The concept of divestment is not new. In the 1980s, economic divestment played a crucial role in dismantling apartheid in South Africa. A documentary series by Connie Field, titled "Have You Heard from Johannesburg?", chronicles this movement. In the early 1970s, Polaroid's technology was used by the apartheid government to photograph black citizens, who were not recognized as citizens and were required to carry identity passbooks. When employees discovered this unethical practice, it sparked a protest movement that led to Polaroid withdrawing from South Africa in 1977.
This withdrawal marked the beginning of a larger divestment movement, as shareholders, including universities and faith organizations, began to pull their investments from companies operating in South Africa. Barclays, a major bank at the time, saw a significant decline in student accounts due to this movement, which ultimately pressured the bank to reconsider its position.
South Africa, rich in minerals but lacking oil, faced an oil embargo in 1973. Despite illegal oil imports, the embargo cost the economy $20 billion between 1979 and 1985, directly impacting the country’s reliance on foreign loans. The divestment movement aimed to cut off funding to the apartheid regime, leading to a series of withdrawals by major corporations, including Coca-Cola and General Motors, by the late 1980s. By the time Nelson Mandela was released in 1990, over 300 companies had exited South Africa, contributing significantly to the end of apartheid.
Despite the lessons learned from the apartheid divestment movement, major banks today are heavily invested in fossil fuels. Barclays and JP Morgan Chase are among the top financiers of fossil fuel expansion, with Barclays investing over $235 billion and JP Morgan Chase over $430 billion from 2016 to 2023. A report titled "Banking on Climate Chaos" reveals that since the Paris Agreement in 2015, banks have invested nearly $7 trillion into fossil fuel projects, with over $3 trillion specifically directed towards companies with expansion plans.
The report highlights that a significant portion of this financing matures after 2030, raising concerns about stranded assets and the banks' climate commitments. No major oil and gas company has adopted a credible plan to transition away from fossil fuels, and many have abandoned previous climate pledges to capitalize on higher returns in the sector. Research indicates that the oil and gas industry has already invested in more production than can be burned if global temperature rise is to be limited to 1.5 degrees Celsius.
While this blog does not offer financial advice, individuals can take steps to ensure their money is not supporting fossil fuel projects. Websites like bank.green allow users to check their bank's investment activities. If unsatisfied, individuals can consider switching banks, a process made easier in some regions by guarantees that facilitate account transfers.
Additionally, individuals should investigate their pension funds to see if they are invested in fossil fuels. Ethical pension advisors can help guide investments that align with personal values and contribute to a sustainable future.
In a capitalist system, money holds power. While one person's bank account may seem insignificant, collective action can lead to substantial change. By voting with their feet, individuals can influence the financial landscape and push for a transition away from fossil fuels. The divestment movement of the past serves as a powerful reminder that systems can change when people unite for a common cause.
Engagement in this issue is crucial, and readers are encouraged to share their thoughts and experiences in the comments. Together, we can work towards a more sustainable future.
