Invest for the future, divest from companies that fuel the climate crisis

FinancingtheFuture-GlobalDivestInvestConerenceCapeTownSept2019

Article in the Daily Maverick, 13 June 2019.

South African NGOs and foundations (and unions, schools, universities and faith bodies) can multiply their impact with one simple decision — divesting from companies that are socially irresponsible. And that means — among other things — not investing in corporations that contribute to global heating.

NGOs for education need to ask whether they are betraying their beneficiaries by accepting funds that come in part from companies that are systematically destroying the world in which young people will have to live, says the author. (Image source: Matt Howard/Unsplash) Less

Every South African NGO, union or foundation either has invested or endowed funds or receives funding from donors that have invested funds. Which means that every single SA NGO and foundation can greatly multiply its impact by ensuring that its funds are responsibly invested, or by asking its funders to re-examine their own investments.

Our financial systems evolved in an entirely different era. They are now extremely ill-fitted to the raft of systemic challenges facing global society. Climate and ecological breakdown, multiplying already grotesque inequality, are, as the World Economic Forum has identified, the greatest and most likely risks facing global society.

NGOs that do not recognise how their finances are linked to environmental and social destruction might as well close up shop — as the sources of their income are too often creating and compounding the very problems they aim to solve.

Let’s consider some examples.

NGOs that are fighting for gender equality and for the rights of people living with HIV/Aids may remember the continuing impact of extractivism and mining on the social and political fabric of South Africa. We are both one of the world’s most historically resource-intensive economies and living with a gender-rights crisis, in good part because of the social havoc wrought by these industries.

So gender justice advocates shouldn’t take money from unreformed mining companies.

NGOs for education need to ask whether they are betraying their beneficiaries by accepting funds that come in part from companies that are systematically destroying the world in which young people will have to live.

NGOs fighting corruption should be clear on the huge role that SA fossil fuel (coal, gas and oil) corporations play in fostering corruption. It’s no coincidence that the likes of the Guptas gravitate towards the brutal and unscrupulous coal industry.

The most fundamental infrastructure for any economy is a stable climate, clean air, clean water, and healthy well-fed, well-educated people in safe communities. But many of the industries and companies that are supposedly the backbone of our economy systematically undermine this basic infrastructure.

Eskom and Sasol and other coal-intensive companies, for example, are engaged in mass human rights violations, aided and abetted by government and an asset management industry blinkered by short-term incentives.

Consider, for example, Sasol, in which most investing South Africans have shares. For annual revenues of about R25-billion, Sasol is willing to impose climate damages on society that, conservatively calculated, start at R45-billion — every year. Every Sasol shareholder who does not challenge this status quo effectively winks to an open scandal. The damage calculation excludes non-climate externalities. The government effectively declines to hold Sasol to account (while officials pocket dividends via their pensions: The Public Investment Corporation and Allan Gray are Sasol’s two biggest shareholders).

Climate change has already cost the economy 10% of GDP. Air pollution costs the equivalent of 6% of GDP annually. Corruption and crime cost at least 1.5% and 19% of GDP. All are deeply linked to what has been called extractivism. Our economy is not built on mining; it is stunted by mining. Yet our leaders insist again and again that economic value must be dug out of the ground. It’s a model that serves only elites.

When our union movement resists the renewable energy transition, it is selling its members in the fossil fuel industrial complex short by effectively insisting they can never do better than to hold dangerous, dirty, underpaid jobs that threaten their health and make them complicit in the often corrupt operations of their paymasters.

It’s no coincidence that the concept of ethical investment is practically unknown in South Africa. But it shouldn’t be — the global disinvestment campaign against companies doing business in apartheid South Africa helped dislodge our racist former government.

Few South Africans seem to know that we are far more vulnerable to the climate crisis than many developed countries. The UK has warmed just 1°C — and the UK Parliament has already, even amid Brexit paralysis, declared a climate emergency. South Africa has warmed 2°C, faces six degrees of warming in the interior in the next few decades — and our politicians are still celebrating oil, gas and coal as if the climate crisis didn’t exist.

If our media worked better and our politicians were less parochial, you would know that the UN Intergovernmental Panel on Climate Change assessed in 2018 that avoiding the worst climate breakdown demands cutting global carbon emissions by 50% — in just the next 12 years.

It’s a report that should have become an instant national conversation. It didn’t, so you need to talk about it at your next board meeting.

Divestment is a rapidly growing global movement to move capital out of the unstable, extractive, fossil-fuel economy that threatens us with climate breakdown into the regenerative economy: A potential new era of social and economic stability based on wind and solar energy, a circular economy, sustainable agriculture and large-scale ecological restoration.

Globally, hundreds of foundations, universities, pension funds, cities such as New York and London, even a whole country, Ireland, have opted to divest. They know this transformation depends on capital owners who will no longer tolerate the socially destructive behaviour of companies such as Sasol.

Many foundations, philanthropies, churches, schools and universities in South Africa have endowed funds and investments. You need to start demanding that these investments be managed responsibly, particularly with respect to climate and inequality. Investors must partially divest from irresponsible companies, engage robustly on all material environmental, social and governance issues and set timelines for further divestment where necessary.

Investors can move faster than governments and catalyse the urgent transition to renewable, universally accessible energy by shifting capital out of the problems and into the solutions today.

Apologists for fossil fuels insist they are still vital for economic development. This is tantamount to selling you a skedonk for a fortune and not telling you that you could go round the corner to buy a Ferrari at the same price because many of our developmental deadlocks could, in fact, be unlocked with a sincere effort to reform our economy.

This is the visionary “Green New Deal” that is now being discussed in the US and Europe: essentially, creating a new era of high-quality employment and social well-being on the back of retooling our manufactured and environmental infrastructure to resolve social and ecological stresses.

South African CSOs need to stop investing in ways that undermine their own missions. As Fossil Free SA, we advocate for divestment. But limited or staged divestment can work hand-in-hand with dialogue and constructive shareholder engagement. The key thing is for all investors to move from passive acceptance to active intolerance of corporate abuses (on all issues, not just climate). Divestment helped end slavery and apartheid, and it can help make our society future-fit.

If you are a leader within any kind of organisation, start this conversation now with your colleagues and peers. It’s time your funding worked as hard for your beneficiaries as you do.

There’s little to fear. Fossil Free SA, for example, is part-funded by a foundation that divested from fossil fuels years ago and has seen its returns greatly enhanced.

Later this year, this conversation will be much advanced in South Africa by the international conference, Financing the Future: The Global Climate Divest-Invest Summit, from 10–11 September 2019 in Cape Town.  It will help with tools and resources to align capital with climate goals and challenge the global community to leave fossil fuels in the ground. It will outline how environmentally sound development benefits communities in multiple dimensions — and point to the many opportunities created when we align our investments with our values. DM

David Le Page is co-ordinator of Fossil Free SA, and is one of the convenors of the international conference, Financing the Future: The Global Climate Divest-Invest Summit, from 10–11 September 2019 in Cape Town.

Business Day: ‘Signs are the climate is right for divesting from the fossil fuel industry’

Published in Business Day on 19 July 2017, for Fossil Free South Africa

It’s time to tell your financial services provider and company pension fund trustees you no longer want to be invested in destroying your future

It’s difficult to directly link extreme weather events such as the Cape storm and Knysna fires to climate change. The causality of such events is always complex.

But an increase in extreme weather events like these are very much what has been predicted by scientists studying climate change. Climate change “loads the dice” in favour of such events, which in Knysna caused seven deaths, left 4,000 people homeless and forced the evacuation of another 10,000.

Human-induced climate change is largely caused by the global warming effect of carbon dioxide emissions, most of which come from burning oil, gas and coal: fossil fuels.

SA is more vulnerable to climate change than many countries, with its average temperatures having increased by at least 1.5 times more than the observed global average (0.65°C) over the past 50 years. In the face of this emergency, you would think SA would be taking a leadership role in combating climate change. But it does not.

The Climate Action Tracker groups countries into four categories according to the gaps between stated collective commitments to the ambition established at the Paris climate talks — to hold average global warming “well below” 2°C — and their actual individual commitments.

SA’s nationally determined contribution is in the lowest category: inadequate. If the whole world behaves as poorly as SA, the global temperature increase will exceed 4°C in this century and global civilisation will, by most scientific assessments, most likely end, crushed by multiple stresses — drought, heat stress, extreme weather, ocean acidification, biodiversity loss — on infrastructure, food production and human health.

Economists gloss over this terrifying scenario with the dry language of massive “damage to GDP”, but that doesn’t capture what Robert Pindyck of the Massachusetts Institute of Technology describes as “the possibility of a catastrophic climate outcome”.

Most people in SA believe that because they do not live close to sea level or are desert-bound nomads, they will be immune to the worst effects of climate change. They may be, for a while, if they can close their ears to the cries of people outside the gates as they pile their children into an oversized 4×4.

Being a developing country is no excuse for SA’s lack of ambition. As Eskom makes itself an abuser by holding the renewable energy programme hostage, 48 developing countries have committed to 100% renewable targets; and all those with climate commitments ranked as “sufficient” are developing countries.

China, India and Brazil are far more ambitious than SA, where people persist in the delusion that fossil fuels are needed for development. There are relatively few stable jobs in the coal industry, many are dirty and dangerous, and a small levy on renewable energy could ease a “just transition”. Using fossil fuels for development is rather like burning down the house to stay warm. Their promotion in government policy is now a matter of state capture, not the rational pursuit of the best interests of all the people.

Eskom should be dedicated to getting low-cost clean energy to all, but it is now run as a source of subsidy for greedy coal interests at great direct and indirect cost to citizens. UK consumer energy prices are falling as fossil fuels are phased out; SA’s continue to mount.

Most of SA’s contribution to escalating climate change comes from Eskom, Sasol, and the rest of the coal industry: companies such as Anglo Coal, Exxaro, BHP Billiton and Xstrata, cynically funded by big banks that purport to be concerned over climate change. Globally, companies such as Shell, BP and Exxon Mobil still work to block the development of cleaner energy. Even economics textbooks now state proper climate policies are blocked by the natural resource industries.

For a secure future, people should stop investing in these companies, and invest where possible in cleaner energy.

Critics argue that divestment transfers ownership to less scrupulous investors, but it also helps to avert fossil fuel energy development, raise the cost of capital and end social consent to the fossil fuel corporate sector.

Around the world, hundreds of institutions now worth more than $5-trillion, led by universities but including cities such as Paris, Melbourne, Oslo and Copenhagen and a country, Ireland – are stopping their investments in fossil fuels.

In May, Fossil Free SA convened a workshop for financial services professionals in Cape Town on divestment, part sponsored by Futuregrowth Asset Management. It was aimed at building understanding of climate and carbon risk — and the divest-reinvest movement – among financial services professionals and to catalyse the creation of divested funds and instruments (jury still out). Representatives of 15 financial services companies attended.

Tracey Davies of the Centre for Environmental Rights spoke on the implications of the landmark high court finding that the minister of environmental affairs should have considered the climate change effects of the proposed Thabametsi power station before authorising it.

Paul Chandler of the UN-supported Principles for Responsible Investment outlined the proposals of the G-20-appointed task force on climate-related financial disclosure, which produced recommendations that all significant corporate emitters should be reporting on their exposure to climate and carbon risk.

There are few reasons to fear that divested funds will lose value. During the divestment workshop, Sam Gill of ET Index Research in London described how to “cut carbon, beat the market”. ETI’s analysis shows that a JSE SWIX index-based portfolio would have performed substantially better over the past four years if strongly divested.

Some argue that this was a transitory arbitrage opportunity, but there are good reasons to doubt the future of fossil-fuel companies. The share of the sector in the S&P500, for example, has declined from 25% to 6.9% since 1980. Globally, according to MSCI research, investors would have been better off without fossil fuels in their portfolios since 2007.

SA’s philanthropists, too, should give serious thought to how they invest: there’s little point in funding education or health when it is done with investments that effectively steal from the future in which our children must live and work.

South African philanthropies probably command endowments well in excess of R15bn, according to research by GastrowBloch Philanthropies. Yet they have, with the exception of the Desmond and Leah Tutu Legacy Foundation, made little progress towards aligning investments with values.

There’s more to the evils — and immense costs — of fossil fuels than climate change. But besides resource wars and economic instability, University of Cape Town research indicates that more than 27,000 South Africans are killed yearly by air pollution every year. And the industry is extremely corrupt: in SA, deeply linked to those overseeing a “silent coup”.

The academic authors of the Betrayal of the Promise report argue that “Eskom and Transnet, in turn, are the primary vehicles for managing state capture, large-scale looting of state resources and … a continuous source of self-enrichment and funding for the power elite and their patronage network”.

No one who loves SA should be invested in fossil fuels.

Fund managers say there is not yet any visible local demand for divested funds and this is true. But divestment is the right thing to do and, given the accelerating renewable energy revolution and regulation of greenhouse gases, the smart thing to do. Sing it to the heavens, before they overheat.

It’s time to tell your financial services provider and company pension fund trustees you no longer want to be invested in destroying your future.

• Le Page is the co-ordinator of Fossil Free SA.

Business Day: ‘The value of an endlessly expanding GDP is doubtful’

Published in Business Day, 24 April 2014

THE speed at which a country’s gross domestic product (GDP) is growing has for the past 60-70 years come to be considered the most important measure of whether a country is succeeding or failing. But what if our most cherished notions about what makes a nation successful are wrong? What if economists who lead the obsession with this metric are, in fact, charlatans?

There have been some very prominent critics of our obsession with GDP growth.

In 1968, Robert Kennedy noted that GDP includes the costs of air pollution, road accidents, managing crime, militarism and environmental destruction, but does not include the “decency of our factories and the safety of our streets alike … the beauty of our poetry, or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials”. He concluded that GDP “measures everything, in short, except that which makes life worthwhile”.

Former French president Nicolas Sarkozy pointed out in 2009 how GDP figures have come to be widely misused: “GDP statistics … are increasingly thought of as a measure of societal wellbeing, which they are not.” Continue reading Business Day: ‘The value of an endlessly expanding GDP is doubtful’

‘Denialists’ disdain for science is a vital human rights issue’

ClimateChangeDisinformationPipelinePublished in Business Day, 14 January 2014

The public debate about climate change is an aberration because we do not have debates in newspapers about the validity of medical science, physics, aeronautics, geology or genetics. So what is different about climate science?

Two things, perhaps: its conclusions demand that most of us make significant adjustments to our lifestyles, and it threatens major vested interests: the fossil fuel industry that supplies the world’s coal, gas and oil.

But, like the tobacco industry before it, the fossil fuel industry has funded a vast campaign of lies and disinformation to undermine public trust in science. To understand the so-called climate debate, one must understand this context, rarely if ever acknowledged in South Africa. A debate fuelled mostly by propaganda is not a real debate.

As Jeremy Grantham, a leading US fund manager, observes: “We have the energy industry — the only other vested interest as powerful as that of the financial world — egging people on to be confused about the issues. They do it very successfully, with foundations with misleading names, think-tanks like the Cato Institute and the Hudson Institute, whose job in life appears to be propagandise anything and everything that is useful for energy interests.”

Continue reading ‘Denialists’ disdain for science is a vital human rights issue’

‘New alerts highlight need for urgent climate change action’

Climate negotiators huddle during the closing hours of the COP17 UN climate conference in Durban, 2011. Pic: David Le Page
Climate negotiators huddle during the closing hours of the COP17 UN climate conference in Durban, 2011. Pic: David Le Page

Published in Business Day, 19 September 2013

PERHAPS, one day, an article on climate change will be written that tells us that things are getting better. Sadly, this is not that article and that day, if it ever comes, is a long way in the future. Though climate change has largely disappeared from the public agenda in South Africa since the 17th session of the Conference of the Parties (COP-17) to the United Nations Framework Convention on Climate Change in Durban in December 2011, the problem itself remains stubbornly immune to fluctuations in media attention.

Two recent climate-change updates from the World Bank and International Energy Agency have restated the scale and dangers of the problem. The reports should make anyone younger than 50 worry about the future, because, on present emissions trends, significant effects are predicted in just the next 30 years. Some of the worst effects will hit sub-Saharan Africa.

There are a few points to bear in mind when either contemplating or skipping in dread past the predictions. First, global carbon emissions are still growing and show no sign of slowing down. Continue reading ‘New alerts highlight need for urgent climate change action’

‘SA must build economic democracy’

Published in the Mail & Guardian, 21 June 2013

This is not Constantia.Twenty years after this country chose to end relentless violence and injustice by introducing political democracy, our rightwing government is ready to roll out the troops and subdue mineworkers by force of arms. But the only lasting remedy for the discontent on the mines is to make South Africa an economic democracy.

Currently, South Africa is being crushed by economic totalitarianism. Few of us realise this, and few of us know that there are alternatives, many of them up and running in other countries.

Economic democracy is about ensuring that everyone in society, not just the elites, has a meaningful share in the wealth of the country, and a voice in deciding how that wealth is shared. It’s a term that has emerged from nearly two centuries of worker mobilisation in Europe, the United States and Latin America.

It’s particularly necessary in South Africa because of our history of colonialism and apartheid. To paraphrase Walter Rodney, most South Africans are not underdeveloped, they have been underdeveloped. This means that real development will be impossible so long as the institutions responsible for underdevelopment persist. Continue reading ‘SA must build economic democracy’

Fix inequality with a maximum wage

'Toilets, washbasins and geysers last maintained by apartheid.' Protester in Durban, December 2011. Pic copyright David Le Page.
‘Toilets, washbasins and geysers last maintained by apartheid.’ Protester in Durban, December 2011. ©David Le Page.

Published 18 November 2012 by the Sunday Times (in print, but not online)

Since the tragic massacre at Marikana, there’s been increasing discussion of the problem of South Africa’s terrifying inequality. But commentators and government representatives get rather shy when it comes to talking about real solutions. They take refuge in calls for ‘solidarity’, ‘symbolic steps’, ‘dialogue’ and, as ever, ‘poverty reduction’.

These calls are at best timid and ignorant of the real nature of inequality, and at worst, evasive.

Eight thousand kilometres from Nkandla, the Uruguayan president, Jose Mujica, eschews his official residence for his wife’s shabby old farmhouse, and gives a large portion of his salary to the poor. That’s real solidarity.

But since we’re not yet seeing that kind of solidarity here, let’s talk frankly about two things: Firstly, the ways in which the very existence of excessive wealth actually creates poverty, and secondly, what some real solutions might look like.
Continue reading Fix inequality with a maximum wage