Environmentalism and Financial Risk – The New Battlefront
While environmental activists continue to challenge federal and state governments and agencies over their control and regulation of fossil fuels – particularly any actions they perceive as lessening restrictions on the development and use of fossil fuels – other tactics are becoming favored options – hitting the industry in the pocketbook. These tactics include:
- Persuading banks and other financial institutions to deny loan requests from oil and gas companies,
- Pressuring insurance companies to divest their holdings in oil and gas interests,
- Pressuring publicly held companies, colleges and universities to divest any interest holdings they may have in oil and gas companies.
These measures are accomplished by initiating and maintaining rigorous disinformation campaigns to put shareholder and public pressure on these companies and institutions to divest.Primary pressure is coming from non-governmental environmental organizations as well as some state commissions or agencies. The most notable state action comes from the California Department of Insurance that now requires all insurers to annually disclose their investments in carbon-based companies. A recent news release by the California Insurance Commissioner stated in part “At some point investments in coal mines, oil and gas, among others, could drop dramatically in value. I do not want to sit by and then discover in the near future that insurance companies’ books are filled with stranded assets.”
Additionally, environmental activists are rallying around the “Keep It in the Ground” movement that is working to convince investors and analysts that fossil fuels are no longer safe investments and are becoming more and more risky. The sustainability, non-profit Ceres organization released a recent report that among other things calls on insurance regulators to require insurers to disclose their fossil fuel investments.
Individual banks are also being targeted by activists for their support of specific projects deemed unacceptable due to environmental and social risks. The bottom line is that financial pressure is the newest tactic being used to move the agenda of environmental activism. Activists who are frustrated over the inability to fulfill their agendas via political and regulatory pressure are finding that public and shareholder pressure on financial institutions may, in the end, be more effective. Energy companies unable to obtain insurance and/or loans will not be able to operate.