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New financial index aims to ease fossil fuel divestment

Author and activist Bill McKibben has worked with anti-climate change group to encourage fossil fuel divestment at hundreds of college campuses around the country.
Author and activist Bill McKibben has worked with anti-climate change group to encourage fossil fuel divestment at hundreds of college campuses around the country.

Going fossil free just got easier in the financial world: the world’s biggest fund manager and a leading financial index group are teaming up to create a public index specifically excluding fossil fuel related investments.

The London-based FTSE (fun fact: you pronounce it “footsie”) index and BlackRock Investments have teamed up for the project. 

To understand why this matters, let's remember what an index is: it’s basically a tool to help measure the performance of a collection of investments. There are hundreds of indexes out there.

Some environmentally minded indexes focus on renewable energy investments. And some private groups reportedly have made their own indices for fossil-fuel-free investing. This benchmark, this index, will be available widely throughout the financial industry.

A company like BP, which is part of the FTSE 100, isn’t going to be on the list. Strong investments in sectors far from fossil fuels, like Apple, or pharmaceutical firms, will.

The project was spurred by the Natural Resources Defense Council, which sent out a request for proposals a year ago. NRDC’s Sarah Gillman said that “sending a clear message to the investment community that we needed to divest…was really important” to the environmental advocates. Not to make a profit: NRDC will not benefit financially from this product. Instead, says Gillman, we were looking for a “product that had legs, that would last over time.”

In tandem with this new index, the investment group BlackRock says it’s developed a strategy for its clients who wish to divest from fossil fuels. “FTSE is delighted to work with BlackRock and NRDC on this ground-breaking index series,” said the group’s CEO, Mark Makepeace, in a release. “We are increasingly seeing demand from our clients for indices that reflect their overall business culture and values.”

The Financial Times has hailed the move as “a sign that a global campaign against fossil fuels is entering the financial mainstream.” The companies involved, and the NRDC, hope the announcement will spur more discussion among larger managers of larger pots of money, about how to separate that money from investments in oil and other fossil fuel extraction. 

Certainly there’s a difference in the conversation from a year ago, when Bill McKibben's Rolling Stone article became a flash point for the climate divestment movement. Activists were getting arrested outside the White House over Keystone XL, and meeting on college campuses for McKibben’s “Do The Math” campaign. A lot of energy; students lobbied with urgency; not much action, on the part of financial decision-makers. 

This announcement comes just a few weeks after Pitzer College, one of the Claremont Colleges, became the largest university endowment to divest from fossil fuel investments. One of the top leaders of the anti-apartheid movement of the 1980s, Archbishop Desmond Tutu, offered the opinion in The Guardian that the kind of tactics that brought down the racist South African government could end a global reliance on fossil fuels. And now the Norwegian government is considering selling off its fossil fuel interests. 

These announcements aren’t coordinated (though NRDC and Pitzer share at least one benefactor: Robert Redford). But it seems as though moves towards climate divestment are accelerating. At least if you believe Kevin Bourne, an FTSE managing director, who told the FT:

“This is one of the fastest-moving debates I think I’ve seen in my 30 years in markets,” he said.

Is this officially a groundswell? Is the tide rising? Offer your climatological metaphor and opinion in the comments, below.