It is not uncommon in fossil free activism to be told: ‘Divestment is not the way forward. If we cut the ties with these oil companies, they will just carry on as they are. We need to work with them to make them more sustainable.’ This is the essence of the shareholder activism movement: to use the influence you have as a shareholder to make a change within companies like Shell, BP, ExxonMobil. But does it really work?
The answer is a resounding No – at least, nowhere near fast enough.
Fossil fuel companies are existentially dependent on the burning of fossil fuels. Their entire business model is built around extraction and consumption of coal, oil, and gas. Small changes to voting arrangements or minor investments in renewable energy cannot and will not change this fact.
If we are to remain within 2˚C of global temperature rise (let alone the more recently agreed limit of 1.5˚C), we cannot burn more than 565 gigatonnes worth of carbon – this is our ‘carbon budget’. But the amount of fossil fuel reserves already owned by fossil fuel companies is already 5 times this – and they are constantly looking for more. This means that we cannot burn 80% of known fossil fuel reserves – we need to keep it in the ground.
But fossil fuel companies have already paid for these reserves. Their share price, their worth, is based on the value of these reserves. They can’t afford not to burn them. Their core business model depends on it. This is why simple pressure through shareholder activism cannot bring us the change we need.
Shareholder activism might help to make Shell’s decision-making procedures a bit more transparent. They might encourage BP to invest a little in solar panel technology on the side. But this is too little, too late. If we are to avoid the most catastrophic effects of climate change, we need to make major changes to the global energy industry within the next 5 years. We need an end to the fossil fuel industry, and we need it now – not incremental improvements over the next few decades.
Any attempts to make any real substantive changes are met with unbending opposition. Indeed, a recent proposal by Exxon shareholders to impose emissions targets resulted in Exxon taking legal action to block the proposal and prevent it from being voted on entirely.
Shareholder activism is not only too slow to combat the problems that we are facing – it also undermines the social message that is so important to divestment. When we campaign for divestment, we are sending the strong message that fossil fuel companies, with their extractive and exploitative practices, should not be supported by public money. This is about destroying the social license that these companies enjoy, that allows them to recruit and to lobby and to influence.
By engaging with these companies, shareholder activism legitimates them. It allows them to say ‘Look, we know we’ve been bad in the past, but we’re better now.’ It facilitates the kind of greenwashing that has made it so difficult for so long to see the extent of the climate problem.
Finally, shareholder activism accepts the status quo. It accepts that huge power will remain concentrated is a small number of hands at the top of these multinational corporations. It accepts that money can buy influence.
We cannot accept this. The campaign against the fossil fuel industry is about the environment – but it is also about inequality, and about power. When we call for an end to the fossil fuel industry, we’re calling not only for a different way of providing energy, but a different way of thinking about power and democracy. The volume of your voice should not depend on the quality of your shareholder portfolio or how big your bank account is.
This is why talking to Shell, BP and ExxonMobil is not the solution. This is why we need to cut the ties, to divest, and to fight for a fossil free era.
If you are interested in the economics of climate change and the ‘carbon budget’ issues discussed in this post, Fossil Free Maastricht are hosting a screening of the film ‘Do The Math‘ on 10 April – all are welcome to join.