What If All Pension Funds Would Divest From Fossil?

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Three dutch pension funds have divested from fossil, from Shell (amongst others). The reason : Shell is not greening its business fast enough. There are ethical concerns (duh!) to leave even though the performance of fossil investments is generally good. There are calls to most pension funds to dump fossil assets, but the big ones are not showing any willingness to comply with those demands. I have argued this makes total sense due to the nature of pensions, which completely rely on a fossil fuel based economy to deliver on their promise.

In the fight for climate action we have one major force against us, this is the financial/banking system. It is still financing so many fossil consuming activities that fossil fuel consumption managed to go up in recent years. Without investment and loans from banks no company could buy the fuels and use it in their activities, so the key driver of emissions is bank credit. This is the core activity of banks. They are all over the globe and do this everywhere especially if there are natural resources that can be processed.

So what would happen if all the investments in fossil fuel went somewhere else? You’d think nothing much, but this is not true. The investments in fossil fuels don’t do much. The money sits in acccounts and the fossil industry does its thing. The money is not really spend. If you think the fossil industry needs money you are wrong, it has fossil fuels, and it can pay any cost with fossil fuel credits it creates itself. It doesn’t but that’s so we don’t think of money as what it is : fossil fuel credit. But if you invest a billion in Shell you just own a billion in Shell stocks and Shell has a billion in a bank account. Nothing happens.

If a pension fund pulls out 2 billion from its fossil fuel investments things -do- start to happen. Imagine it invests in Vestas, a wind energy company. Vestas has a portfolio of projects, it is working at max capacity (I assume for the moment) it needs bigger factories and more workers to do more and make more profit. If existing shares are bought this has zero effect, except that the rating of Vestas will be good or improve, and Vestas can borrow more to expand. If it does the latter fossil fuels will be consumed to realize that expansion. Fossil fuel that would not have been consumed otherwise. Fossil fuel the fossil fuel companies did not intend to be consumed when they designed the current pension system (because that did not fall from the sky).

If the 2 billion go into -new- shares Vestas sells (which would be preferred) then Vestas will embark on an expansion of its activities over several years. It will aquire companies it now has to pay a profit margin on. It will cause the consumption of considerable amounts of fossil fuels. This will all be good consumption because the wind energy will reduce future fossil fuel consumption over a long period. It can spend on R&D, design new, better turbines, new deployment methods, new materials. This is what you hope for.

The above shows that when money from pension funds move from fossil investement to renewables investments they can mean more fossil is consumed. This can in the current market mean that fuel prices go up. Spain recently increased diesel prices because of a supply shortage. Imagine someone in Spain suddenly deployed a million diesel powered airco’s (monsterous things). Then the fuel prices would go up again. We all compete for the same fossil resources, even against machines!

The fossil companies and the banks do not want money to shift from being unused to causing fossil fuel consumption, especially when that consumption causes less fossil energy use in the future! They will lobby and argue (and have put rules in place) to keep the money ‘stored’.

If all pension fund money would be spend on building more renewable energy sources (which is the best way to allocate it) the renewable energy sector would explode and prices of renewable energy sources would drop even more (including batteries). This would in fact lower the prices of all products because all products use energy to be made.

It would be a question if the value of the pension funds actually mattered, especially once the investment in renewables was so large and the amount of energy so abundant that making more renewable energy sources would cost next to nothing, because what is cost? It is an dependency on some external resource. It is possible to imagine factories that need no external resource it has to pay for. The only cost would be ‘protection tax’ from the authorities, or the cost of the mining consession. All those costs could be payed with energy from the renewable sources produced, so exactly like an oil company can pay with oil, a solar panel company could pay with solar panels.

I have written years ago that if we would invest 4 years of pension premiums into renewable energy sources (at prices 10 years ago!) we could stop paying premiums and be sure the production capacity was available to produce food and comfort for -all- future generations. This should make you conclude that pensions are really just an instrument to quiet the minds of workers in the fossil credit economy that was designed around 1930-40, by banks wishing wealth for all and world peace. Their tool to achieve it however turned out to be poison so this is why we need to shift to new energy sources and as soon as possibile.

If all pension funds invest in renewable energy we won’t need them anymore. The amount of energy for producing wealth and restoring our atmosphere that is available to us maxes out at 2500 times the energy we need to run our world economy today. That’s right. We can have the energy to run not two world economies but two and a half thousand more. Our fossil ration is abusive and we can see that because there are many sun drenched poor countries. This is all because fossil interests are protected. If you are a pension fund and you can divest from fossil do so now. If you can invest in companies that try to expand their battery and renewable energy source production than that is what you should do.