The Effectiveness of Fossil Fuel Divestment: A Historical Analysis


By: Anna Hardie

On October 27 2022, University of Toronto announced its commitment to divest from all direct and indirect fossil fuel investments by 2030. Since 2017, ten Canadian universities have committed to divesting from fossil fuels with 40% of these divestment announcements made in just this past year. The increased momentum in calling for academic institutions to divest from fossil fuels creates a new future for climate change policy. 

Fossil fuel divestment is the act of selling off direct and indirect fossil fuel stocks. Historically, divestment movements have been influential by aiming to catalyze systemic ideological change in how environmental and social issues are addressed by institutions. Take for instance, the South Africa anti-apartheid movement in the 1980s. In the 1970s, student activists, academic institutions, and religious groups increased pressure on institutions to halt business with South Africa in protest of racist apartheid laws. After almost two decades of protesting, governments around the world passed economic sanctions on South Africa. Gay W. Seidman, a prominent anti-apartheid activist, explains that in the 1960s and ‘70s it was still a radical idea for decision makers to incorporate ESG factors into economic decisions. He states that anti-apartheid divestment campaigns normalized the idea that governments and corporations have environmental and social responsibility. Similarly, the current divestment movement is helping form a new normal for connections to the fossil fuel industry.

Another example is the anti-cigarette divest movement. The movement started in the 1970s and helped lead to significant regulatory change around cigarette consumption from the mid to late ‘90s. Research published by the US National Library of Medicine show that in 1993, cigarette companies such as Philip Morris feared that divestment movements would increase public stigmatization of cigarettes and lower investments. Top executives at Philip Morris were reported to closely monitor divestment campaigns which indicates that the movement was effective in raising concerns amongst large investors and institutions. By 1996, President Clinton approved the proposal made by the American Lung Association that nicotine is an addictive drug. Similarly in Canada, the federal government created the Tobacco Act in 1997 making it illegal for anyone under the age of 18 to buy tobacco. Cigarette regulations also helped propel more divestment from the tobacco industry, such as by large-scale pension funds.  History shows that divestment campaigns are effective in bringing long-run policy change. 

It’s important to step back and see this historical evidence. Yet too much of the debate on the effectiveness of divestment is focused on the economic perspective. Overall, there are mixed findings on the economic effectiveness of divestment. A common argument against fossil fuel divestment is that withdrawing financing from a high carbon emitting industry simply results in the exchange of stock ownership. Therefore, some economists argue that divestment fails to change a company’s behaviour. In a worse scenario, divestment is argued to lead to fossil fuel companies being owned by less environmentally conscious investors. Yet, ultimately the goal is to transition to a green, non-carbon-emitting economy. Continuing to support and profit from the fossil fuel industry does not help this transition. 

We may be in the midst of seeing history repeat itself. Fossil fuel divestment campaigns can help trigger rigorous climate change regulations. The University of Toronto has promised to withdraw $4 billion dollars in endowment from fossil fuel investment by the end of 2030. In 2019, the University of California announced it would divest $83 billion of its endowment and pension investments in fossil fuels. And it’s not just universities—banks are also starting to divest from fossil fuels. For instance, European banks such as UBS, Credit Suisse, and Deutsche Bank have decreased their fossil fuel financing by over 50% between 2016 and 2020. As citizens, it’s important to show support and attend divestment protests because they are one of the most effective campaigns to enforce governmental accountability. 

Anna Hardie is a first-year student in the Master of Public Policy program. She graduated from Mount Allison University in 2021 with a Bachelor of Arts in Economics and English Literature. Her policy interests include environmental and health policy. Anna is working towards pursuing a career in consulting for the public sector and is currently a Client Liaison at the Public Good Initiative.


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