Challenges in Sustainability

1.- Introduction

Climate change has exacerbated extreme weather events with destructive consequences [1]. Fossil fuel production, which increases the quantity of greenhouse gasses in the atmosphere, has been the primary driver of climate change [2, 3]. Despite this, fossil fuel companies around the world continue operating with impunity. Moreover, fossil fuel companies anticipate increasing production over the next few decades, while governments funnel billions toward the development of new reserves [4, 5, 6]. There remains a discrepancy between industry forecasts and what is required for a low carbon transition. The International Energy Agency has determined that if we are to meet global climate commitments, fossil fuel production must fall and excess reserves will face asset stranding [3]. In response, institutions have begun divesting from fossil fuels [7].

Fossil fuel divestment has amassed a sizable body of literature in past years, ranging from research that examines the financial case for fossil fuel divestment [8, 9, 10, 11], the role of divestment in sustainable transitions, [12, 13] the actors and motivations for divestment, [14, 15] and power relations and discourses of divestment [16, 17, 18]. Proponents are shown to adopt a mix of both moral and financial framing in justifying divestment [9] by arguing that it is wrong to profit from the cause of the climate crisis and that investing in fossil fuel companies is increasingly risky.

The divestment theory of change is two-fold, encompassing both direct and indirect impacts. Directly, divestment actions can increase a firm’s capital costs by generating uncertainty and risk around its core business model, thus leading to increasingly restrictive financing conditions that make it difficult for extractive projects to continue [19], even sometimes resulting in declines in share price [9]. Indirectly, divestment campaigns work to change public discourse around the legitimacy of a harmful industry by reframing norms of acceptability and serving as ‘moral entrepreneurs’ in order to politicize and stigmatize extractive activity [7]. The goals of divestment are inherently political [20], with the overarching goal of removing an industry’s social licence to operate [16]. The powerful combination of direct and indirect impacts makes divestment a tactic that could be useful in other environmental justice campaigns.

Fossil fuel divestment came about with the intention to stigmatize the fossil fuel industry using tools that were ‘‘uniquely available to activists’’ [20], and takes inspiration from previous divestment campaigns, including the anti-Apartheid campaign of the 1980s, and the campaign to divest from tobacco [21]. However, as Knuth points out, the fossil fuel divestment movement differs from past movements in that the targeted industry requires a market replacement [20]. We pose that, while divestment operates within the confines of a capitalist system, it can also be used to build a bridge to a post-growth future by divesting from extractive industries and opening opportunities to reinvest in solutions that build community wealth and promote social and environmental well-being.

Fossil fuel divestment emerged in the early 2010s as a way for non-state actors to indirectly exert pressure over the supply side of fossil fuel extraction [17]. While fossil fuel divestment emerged as a tactic within the larger climate movement, as Hestre and Hopke have argued, fossil fuel divestment has shown characteristics of becoming a fully-fledged movement of its own [22]. The divestment movement exists as a collective of campaigns seeking to achieve the same outcome: the stigmatization of the fossil fuel industry, the reinvestment of fossil assets into the clean energy transition, and an end to fossil fuel hegemony.

After a decade of campaigning, fossil fuel divestment is now mainstream, [19, 23] with trillions of assets under management committed to some form of divestment from fossil fuels. However, as the extraction and production of fossil fuels continues to increase, we must ask: what is next for divestment? Through examining existing discourse among divestment activists and scholars, this paper extends the conceptual foundation for what the future of divestment might entail. We build on Ansar et al.’s [19] three-wave framework by introducing a vision for two additional ‘waves’ of fossil fuel divestment over the next several decades. We assert that a fourth divestment wave has already begun that focuses on the managed decline of fossil fuel production, including increased attention on linking bank and insurance divestment. Wave 5 extends the discussion further, focusing on the transition towards a post-extractive, post-growth economic system that emphasizes justice and public well-being over profit. This research contributes to literature on divestment by taking inspiration from its history and introducing novel applications and targets for divestment actions. This research also presents a practical and actionable framework for activists in continued and future divestment campaigns.

Our paper has temporal boundaries, investigating the evolution of the fossil fuel divestment over the last decade and envisioning what the future of divestment might resemble by the year 2050. Our analysis is focused primarily on the role of divestment activists, who we define as grassroots organizers and civil society organizations that aim to compel financial institutions and other actors to divest from environmentally and socially harmful activities. We describe how divestment as a tactic can complement and extend the goals of existing post-extractive campaigns by exploring how activists can forge ties with other environmental justice movements. We seek to demonstrate the advantages of divestment as an activist strategy and recommend tangible opportunities for cross-pollination and partnerships between existing organizations.

2.- Divestment from Mining

A low carbon transition that expands renewable energy capacity will consequently require much more mining of critical metals, such as copper, zinc, aluminum and iron [60]. Mineral extraction represents a large and growing threat to the health of the global biosphere and the welfare of local communities. Large-scale mining concessions currently cover 18% of the Amazon rainforest, one of the most biodiverse regions on the planet; moreover, 20% of these concessions overlap with Indigenous lands and thus represent a significant threat to tribal sovereignty [72]. There are numerous anti-mining and mining-related conflicts, [73] sparked by the environmental concerns of resistant and often agrarian and Indigenous communities [74, 75, 76, 77]. These communities are often displaced due to the resulting contamination of their land, [78] or sometimes even targeted by paramilitaries and security forces hired by energy and mining firms [79]. The Environmental Justice Atlas, a global database of mining-related conflicts, has identified over 1,500 ongoing conflicts over water, land, spills, pollution, ill-health, relocations, waste, land grabs, floods and falling water levels, primarily affecting nations in the Global South [80].

Without concomitant efforts to scale down absolute energy use, it is likely that the renewable energy transition will accelerate a worldwide boom in ‘green extractivism’ where the demand for minerals required for electrification will exacerbate threats to biodiversity, the integrity of habitats, Indigenous rights, and other issues. Global net-zero ambitions will require an additional 34 million metric tonnes of copper, 50 million tonnes of zinc, 162 tonnes of aluminum, and 4.8 billion tonnes of iron [60]. The World Bank estimates that the production of key minerals such as graphite, lithium and cobalt will need to increase by 500% by 2050 to meet the demand from clean energy technologies [81]. As a result of these environmental pressures, many scholars have advocated for a systems-based [82], holistic assessment of environmental justice in energy [13, 40]. This entails consideration of procedural and distributive justice throughout the life-cycles of mining projects and along entire energy supply chains, as well as environmental impacts [82, 83, 84]. Specific focuses could include effects on water, [85, 86] vegetation and soil, [87, 88] and local health.

The global renewable energy transition is fraught with complex tensions. To move to a truly post-extractive future, the global divestment movement should evolve beyond fossil fuel emissions, and can achieve this by placing greater emphasis on planetary ecological boundaries and the commitment to free, prior, and informed consent in relations with affected communities. A proliferation of the fossil fuel divestment movement that focuses on mining should begin by identifying the worst offenders driving ecological degradation, social conflict, or violations of Indigenous rights. Such divestment campaigns are particularly important in the Canadian context, where 75% of the world’s mining companies are headquartered [89]. Prominent examples include firms such as Blackfire Exploration, a Calgary-based company with a dozen mining concessions in Mexican state of Chiapas, which has been investigated by the Royal Canadian Mounted Police for various repressive campaigns to subdue local resistance [90]. There are well-documented cases of Canadian firms such as Hudbay Minerals, Goldcorp, and Tahoe Resources evicting and violently oppressing non-consenting Indigenous communities in Guatemala [91]. In this case, NGOs from Guatemala and Quebec urged Canadian pensions to divest from companies that operated without the consent of affected communities, a strategy which should be replicated more widely in other jurisdictions [92]. To achieve these outcomes, divestment activists can build coalitions with other anti-mining groups, such as MiningWatch Canada, Yes to Life and No to Mining, and other organizations, which would benefit anti-mining campaigns by applying the financial expertise of the divestment movement while also providing alternative tools of change complementary to existing frontline efforts. Key gaps here represent an opportunity for future research to determine criteria for selecting mining divestment targets and goals. In determining targets for divestment, it will be helpful to identify positive behavior to encourage, such as engaging in integrative and circular recycling of waste by-products and of refined and spent metals. Furthermore, although financially material climate risks may not apply to mining companies [93], emerging risks due to ecological and social abuses and associated reputational costs [94] may present new financial arguments against predatory extractivism.

3.- Divestment from Consumerism

Extractive capitalism is driven by a crisis of overconsumption in the Global North, an issue which has not received sufficient public attention. In recent decades, relentless consumption growth has eclipsed all efficiency gains from technological improvements, and consumption levels are the largest predictor of an individual’s environmental impacts [95]. As global supply chains gradually become more transparent, divestment can be used as a tool to target companies that maintain linear production models and contribute to the crisis of overconsumption. To politicize the issues of sustainable procurement and post-consumer waste, divestment could be employed as a means to pressure firms to commit to robust waste reduction plans and transition towards more circular business models [96]. In a circular economy, the average lifespan of a product is extended so that it may remain within use for as long as possible, or even indefinitely [97]. Future divestment campaigns can use life cycle analyses [96] to determine which producers contribute most acutely to overconsumption by promoting practices such as seriality, planned obsolescence, and obstructions to repairability. Divestment from corporations that continue linear models of production can encourage the proliferation of alternative product development models which reduce waste and optimize resource use.

Divestment can be used to encourage open and accessible product repair practices by stigmatizing the companies that lobby against ‘the right to repair’ and anti-obsolescence legislation [97, 98]. While addressing planned obsolescence ultimately requires policy change, other issues stemming from overconsumption such as poor labour standards may benefit from a focus on supply chain sourcing, advocating for Fair Trade certified food and beverages, and locally-produced apparel [99]. Furthermore, targeting companies which rely on single-use plastics, such as Coca-Cola and Nestle, could reduce the amount of landfill waste generated by linear production. By examining the supply chain of a company, divestment activists can target companies that plan obsolescence, oppose the right to repair, have low waste diversion rates or violate labour rights. Divestment activists can specifically target companies that are not working to attain circular supply chains or closed-loop production models, and firms that fail to disclose or manage their waste, and work to establish partnerships with other anti-consumerist groups such as Deep Green Resistance, War on Want, or Extinction Rebellion.

4.- Divestment from Economic Imperialism

The international financial system employs debt and unfair trade rules to create a global extractive economy that is predicated on patterns of unequal exchange between nations in the Global North and Global South [60, 100]. Export-oriented growth policies, often imposed as loan conditionalities through structural adjustment programs, compel resource-rich nations to turn to extractive projects as a means to generate the foreign reserves to service debts owed to international creditors [58, 101]. In such ‘debt traps’, governments are required to remove barriers to growth in an effort to attract the foreign direct investment that will generate funds to pay increasingly expensive interest payments [60]. Such exploitative patterns are generated because lending institutions like the International Monetary Fund are pursuing the interests of the international financial community [101]. The resulting ‘Dutch disease’ directly impedes local development in order to generate profit for transnational firms [101]. These relationships are particularly evident today in Latin America [58, 77] as well as Africa, a continent where for every dollar of loan inflows there are 80 cents of capital flight [102, 103].

Multinational companies have also been increasingly turning to Investor-State Dispute Resolution (ISDS) lawsuits [104] whereby foreign investor interests are protected to sue a national government for both real and perceived financial damages [105, 106]. Complications arise when, for example, a government restricting mineral extraction near vulnerable ecosystems may be seen as expropriating private capital [104]. ISDS arbitration lawsuits related to mining have rapidly increased in frequency since the late 1990s [104], and are often used by transnational corporations to coerce poorer governments into allocating resource concessions [107]. Countries are often sued for sums that represent sizable portions of their annual GDP [106]. In some cases, the threat of arbitration can pressure governments to reverse environmental protections, as was generally regarded to be the case when Indonesia exempted several foreign investors from a ban on open-pit mining in protected forests [107].

The case of Vancouver-based Eco Oro Minerals suing the state of Colombia over a protected wetland is a salient example of this kind of predatory behaviour [108]. For several years, Eco Oro had planned to mine for copper and gold in Colombia’s Santurban Paramos, a high-altitude wetland which provides the drinking water for two million people. The World Bank’s private finance arm divested from Eco Oro in 2016 due to ongoing opposition from the local community, led by groups such as the Committee in Defense of the Water and Paramos of Santurban [109]. Despite the ecological and social risks posed by the project, Eco Oro has sued the state of Colombia through an ISDS mechanism in the bilateral Canada-Colombia Trade Agreement, claiming damages of $750 million USD. This arbitration is funded by Tenor Capital, a financial firm aiming to turn a profit from the compensatory payments for perceived lost profits [110]. In contexts like this, divestment activists could forge connections with local organizations such as the Committee in Defense, economic justice groups such as the Transnational Institute, and apply public pressure campaigns on Eco Oro and Tenor Capital.

The neocolonial nature of the international financial system is complex and often shrouded in secrecy. There is a need for future research to further specify these dimensions of international inequality and identify criteria for targeting certain companies for exploitative behaviours. In order to publicize and politicize these issues, divestment activists can identify firms or investor groups that are known to be debt profiteers or abusers of private arbitration processes. Divestment activists might specifically target ‘vulture funds’, or international investors that purchase sovereign debts at a discount and use litigation to coerce debt-distressed nations into paying the full face value [111]. Activists might also target companies that abuse ISDS processes by making them the target of public pressure campaigns, such as ConocoPhillips [106]. At a broader level, activists can join international calls for debt restructuring or a global ‘debt jubilee’, calling on international creditors to repudiate illegitimate or ‘odious’ debts [111, 112]. In doing so, activists can strive to create partnerships with international groups such as the Jubilee Debt Campaign, the Committee for the Abolition of Illegal Debt, or the Asian People’s Movement on Debt and Development.

5.- Divestment from Indigenous Rights Violations

The continued displacement of Indigenous communities from their land by non-Indigenous actors for resource extraction is rooted in colonial genocide [113] and has led to the erasure of ecological knowledge including traditional food and land management systems [114]. Resource extraction projects frequently result in both ecological and socioeconomic decline in Indigenous communities [115] and Indigenous resistance is often met with violence and criminalization [116]. Indigenous sovereignty remains unrecognized in many countries [115] and national and corporate land-use projects often commence without Free, Prior and Informed Consent (FPIC) [115]. Even when titles to land and resources exist, laws may lack implementation or may be contradictory to other laws, largely due to the lack of government compliance with the UN Declaration on the Rights of Indigenous Peoples [115]. Emerging ‘Land Back’ movements call on governments to honour treaty agreements [117], which is a central demand in the current resistance to Enbridge’s Line 3 Pipeline [118].

An analysis of 370 extractive sites based on or near Indigenous land found that 92% of companies had poor or non-existent relationships with Indigenous peoples, making them medium to high-risk investments [115]. Due to increased media attention focused on Indigenous-led protests, the report found that 58% of companies had medium to high-risk exposure from negative media coverage. Extraction sites based in countries with poor governance and protection for Indigenous peoples were also more likely to be high-risk investments. Adamson and Pelosi, propose that holding companies financially accountable is more effective than relying on government policy, as targeting the market value of a company will highlight associated business risks and can incentivize practices that respect Indigenous rights [115]. One example is the Canadian firm Tahoe Resources, which was accused of human rights abuses at its Guatemalan mine, including the shooting of unarmed protesters and multiple assassinations [119]. Between 2013 and 2019, six complaints against these abuses were filed by the Justice and Corporate Accountability Project which led to media attention from major publications. Investors in Tahoe Resources, including the Norwegian Government Pension Fund, divested from the company due to public opposition. As a result, Tahoe Resources’ stock plummeted from a high of $27 to $4 and the mine was suspended. Considering this example, divestment shows considerable promise as a tool to hold companies accountable for upholding FPIC [119].

As has been previously noted, future extractivism will continue to threaten Indigenous sovereignty. Indigenous peoples protect 80% of the world’s biodiversity, despite making up 5% of the global population [120], and Indigenous resistance to fossil fuel projects has prevented 1.587 billion metric tons of CO ${}_2$ from entering the atmosphere in the last decade alone [116]. Anti-extraction divestment movements will do well to align themselves with movements to divest from industries that continue to violate FPIC, and follow Indigenous leadership to confront the colonial mindsets that underlie relentless resource extraction.

Michelle Cook and Hugh MacMillian, reflecting on the highly visible global divestment campaign led by Indigenous matriarchs that emerged after Standing Rock, affirm that ‘‘divestment remains a critical intersectional strategy for the protection of the climate and the world’s Indigenous peoples and their cultures’’ [30]. Ojibway economist and activist Winona LaDuke praises the global divestment movement as a source of hope [121], and urges solidarity with Indigenous movements that resist oil pipelines, referred to as ‘black snakes’ [122]. Looking beyond fossil fuels extraction alone, LaDuke and Potawatomi scholar Robin Wall Kimmerer warn against the extractivist paradigm of ‘Windigo’ economics [121, 123], while Cook and Macmillian call for community-led, regenerative economies that resist capitalist extraction [124]. Divestment activists can partner with groups such as Survival International, Indigenous Climate Action, or the Indigenous Environmental Network to advocate for firms and governments to respect Indigenous sovereignty and meaningfully implement recommendations of the UN Declaration of the Rights of Indigenous People.

6.- Reinvestment in Communities

Divestment is not itself a solution to the climate crisis, which is rooted in the limitless accumulation of resources caused by the infinite growth paradigm. However, divestment as a tactic does invite activists to think critically about where capital is allocated. The question of reinvestment has been considered since the fossil fuel divestment movement’s inception, calling for investment in community empowerment, democratized workplaces, and ecological restoration, as well as renewable energy [125]. While reinvestment narratives often focus on relocating funds to green energy infrastructure, we argue that there is a need to broaden the scope of mainstream reinvestment alternatives to focus on post-capitalist transformation. As Knuth has noted, there is need for caution around aligning divestment demands with reinvestment in clean technology, given its potential to enable a continuation of the ‘green growth’ status quo [20].

Future offshoots of the fossil fuel divestment movement that aim for a post-growth economy should call for an expansion of reinvestment initiatives that invest directly into communities. We argue that through an increased push for positive investment screens focused on justice and sustainability, and campaigns to expand the scope of traditional notions of fiduciary duty, community reinvestment movements can become a proliferation of the original fossil fuel divestment movement.

Fossil free ‘responsible investing’ and ESG portfolios still hold investments in the extractive economy. In 2020, Parnassus, the fourth largest ESG fund under assets, held 17.26% of shares in companies including Apple, Alphabet and Amazon [126]. Apple and Amazon have both fought rights to repair laws [127] and new electronic devices require energy intensive mining [128], while Amazon has been widely criticized for poor treatment of employees [129]. Forward-looking divestment thinkers might identify these industries as clear targets for future divestment movements.

To revisit the discussion of university campuses, to where the fossil fuel divestment movement began, we note that university endowments are tied to the capitalist growth paradigm [24]. Brown et al. assert that the growth rate of most endowments has far exceeded university expenditures in recent decades, turning endowments into purely a symbol of status and prestige [130]. Future student-led divestment campaigns might confront this by turning to non-extractive community reinvestment by advocating for institutions to invest in community credit unions, community banks, or loan funds that work to reallocate capital directly into community initiatives. Some institutions have made deposits to Community Development Financial Institutions (CDFIs) through annual operating budgets [131], but some campaigns are pushing schools to invest a percentage of their endowed funds into CDFIs. This will likely require future efforts to explore the limits of fiduciary duty. In the United States, the Uniform Prudent Management of Institutional Funds Act outlines that the management of university endowments should reflect the entity’s mission, and that mission goals can be integrated into management strategy [132, 133]. As a starting point, divestment activists might consider campaigning for reforms to academic missions that prioritize the well-being of local communities.

The Socially Responsible Investing (SRI) movement has already led to changes in the application of fiduciary duty [134]. Traditionally, fiduciary duty called for maximizing profits and the consideration of noneconomic factors was discouraged [134]. Due to the SRI movement, noneconomic factors have played an increasingly important role, particularly due to the risks and uncertainties associated with environmental harm and political unrest [134]. As offshoots of the fossil fuel divestment moment proliferate, greater risks of this sort will be associated with industries that are now seen as prudent ESG investments (i.e. mining companies, technology firms), thus pushing SRI considerations in a more ambitious direction.

On a regional scale, cities and regions have begun to reinvest funds into public green development banks with clear mandates to support local communities and infrastructure and build a low carbon, non-extractive economy [55]. Establishing or investing in institutions that practice concessionary lending will be a superior way to channel funds to small community ventures [55]. One prominent example is Seed Commons, a national network of loan funds in the United States that has a mandate to ‘‘channel investment to marginalized communities that have faced the brunt of the extractive economy, deindustrialization, and systemic discrimination’’ [135]. Seed Commons practices concessionary lending in which the cost of capital is consistently less than or equal to 50% of profits [136]. Non-extractive community reinvestment can challenge growth paradigms by permitting lower returns while increasing community well-being through the redistribution of capital, and universities could be ideal candidates to begin investing endowed funds into this type of community lending institution.

7.- Conclusion and Discussion

This study builds on existing divestment literature by extending the ‘three wave’ model of Ansar et al (2013) and Strauch et al (2020), working to conceptualize fourth and fifth divestment waves which aim towards the managed decline of fossil fuel resources and resource extractivism in general. This study also builds on the broader literature of post-growth and pluriversal movements by recognizing the potential role of divestment in scaling down ecologically destructive industries and moving towards a steady state global economy. In so doing, this study contributes to the existing research on climate and energy justice, political ecology, and decolonization by advocating for divestment activists and researchers to problematize resource extraction in general, rather than focusing on greenhouse gas emissions, in a way that holistically addresses the root causes of both environmental degradation and (neo-)colonial violence. By working in solidarity with campaigns for mining justice, anti-consumerism, debt abolition, Indigenous sovereignty, and economic democracy, divestment activists can use divestment as a bridge towards alternative economies that focus on the well-being of environments and communities.

We consequently put forth a research agenda to predict the shape of future divestment campaigns and identify synergies between fossil fuel divestment and other social justice movements. Researchers can explore how the definition of fiduciary duty is evolving to encompass more non-economic factors, and how this changing definition will affect divestment decisions in the future. More research is also required to understand the linkages between the reputational costs and financial costs that firms face as a result of public anti-extractive campaigns, to better comprehend how public outrage against polluters and rights violators can be wielded to move markets. As divestment has historically focused on actions from private sector actors, future research is necessary to better comprehend how divestment can be employed in ways that support and reinforce movements for public finance, green public banking, community wealth-building, and other economic models which lie outside the realm of traditional financial markets.

The rapid success of the fossil fuel divestment movement, coupled with the accelerating pace of the low carbon transition, indicates that the managed decline of fossil fuel production is increasingly being viewed as both necessary and feasible. As fossil fuel divestment becomes more mainstream, there is increasing room for divestment to be used in a wider diversity of contexts. As an inherently political tool, divestment can be a powerful campaign in the environmental justice movement by applying pressure to large institutional investors and companies, stigmatizing polluting industries, and generating public opposition to ‘fossil hegemony’ and other forms of corporate dominance. As such, divestment should occupy a central place in the toolkit of techniques that aim towards a post-extractive, post-growth future that remains within planetary boundaries.