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Fossil Fuel Divestment: Key Concepts and Recent Updates

Updated: May 22, 2020

From ambitious government policies to neighbourhood tree planting events, solutions to climate change (1) are numerous and diverse in nature. This article will briefly introduce the topic of divestment and comment on its role in the broader context of climate action (with specific mention of recent developments in Canada).

Simply put, divestment refers to the removal, or withdrawal, of an investment. Divestment can be carried out by individuals, larger institutions (churches, municipalities, universities etc.), and even countries. Historically, divestment has been used as a strategy to oppose certain commercial activities or political agendas, including campaigns to divest from the tobacco industry (2) and from companies doing business in apartheid-era South Africa (3). For the purposes of this article, and in the context of climate change, the term divestment pertains to the removal of investments from the fossil fuel industry.

There are many arguments for and against the efficacy of the divestment movement, and a comprehensive debate on this topic is well beyond the scope of this article. What follows below is a simplified description of this issue, and readers are encouraged to conduct further research at their interest.

Divestment, by focusing on diverting funds away from fossil fuel companies, aims to address the ‘root cause’ of climate change. For a summary of the connections between fossil fuels and climate change, click here (4). In addition to the material impact of withdrawing financial support from these companies, divestment also aims to send a symbolic message that we (humanity) need to transition away from fossil fuels as a primary source of energy. Moreover, funds divested from fossil fuel companies can theoretically be re-invested in businesses that are facilitating a transition to a more sustainable energy economy.

From a moral and climate justice perspective, divestment campaigns have also highlighted the fossil fuel industry’s involvement in human rights violations, particularly with respect to Indigenous and systematically marginalized peoples (5).

Increasingly, divestment is further being proposed as a sound financial decision. The Intergovernmental Panel on Climate Change (IPCC) notes that “mitigation policy could devalue fossil fuel assets and reduce revenues for fossil fuel exporters” (6). According to this line of thinking, should countries mobilize to achieve carbon reduction targets, fossil fuel companies will not be able to use many of the reserves already in their possession and these companies are therefore ‘overvalued’ on the stock market.

Arguments against divestment often focus on financial feasibility and the capacity for divestment to actually impact the energy industry. There are differing analyses on the implications of a ‘carbon bubble’ (a term referring to the potential overvaluation of fossil fuel companies), and it’s noted that investments in other sectors of the economy (i.e. in fossil fuel-free portfolios) will also face risks from a “low carbon future” (7). However, the Bank of Canada states that climate change poses “physical risks to Canadians and the Canadian economy” (8), and a transition to a low carbon future would mitigate these existential risks for all of humanity (and the economy).

The moral case for divestment may be more difficult to oppose in principle, but by remaining invested in fossil fuel companies, an organization could feel that they are able to influence the direction of these companies towards a more progressive realm. Whether this ideal is achievable in practice, or even the best use of time and resources (instead of, say, transferring those funds to more ethical initiatives that are already working towards sustainability), are important points for consideration. A desire to support domestic companies and workers (especially in fossil fuel-rich nations such as Canada) can also be a factor for investors, and this is still achievable by supporting an equitable transition to more sustainable and long term opportunities for those affected by a shift away from fossil fuels.

A final argument, and one that divestment advocates are accustomed to hearing, is one of inherent hypocrisy: If we (you, me, institutions, the world) still use fossil fuels daily, how can you justify divestment? There are many ways to respond to this critique, but at its core, a counter-argument typically emphasizes that one can still try to change a society while operating within it. Individual actions (reducing personal fossil fuel use etc.) are certainly important and can motivate others to follow suit, while divestment represents an opportunity for collective action where the finances of an institution can be shifted to reflect changing values and a vision for the future.

With all that background information in mind, let’s finish by examining what the divestment movement has accomplished so far. According to the website, approximately $14.4 trillion has been divested by global institutions to date (9). Notable divestment commitments include the Rockefeller Brothers Fund, the World Council of Churches, New York City, and the entire country of Ireland (9). Educational institutions account for about 15% of total funds divested, with faith-based institutions leading the way at 30% (9).

Here in Canada, Laval University made headlines (10) in 2017 as the first Canadian university to divest from fossil fuels. Recently, the University of Guelph (U of G) committed to divestment following a 7 year-long campaign by student organizers (11). This decision prompted the resignation of Martha Billes, the controlling shareholder of Canadian Tire Corp. and former U of G chancellor (12). Aside from universities, the Canadian Medical Association, acutely aware of the health effects of climate change (13), voted in 2015 to divest their holdings in fossil fuel companies (14).

The divestment movement, while not without its critics, has certainly added to the discussion of how institutions can respond to the climate crisis. Be it for moral, financial, or other reasons, many Canadian organizations and individuals have committed to divesting funds from the fossil fuel industry. It’s clear that no single action or campaign is going to solve climate change, but the manner in which we invest our time and money in the present day will ultimately shape the lived realities of the future.


1. Solutions. Shake Up The Establishment, 2020. Available from

2. Fisher L. Divestment in the tobacco industry. Cancer Causes & Control, 11(4): 381-382, 2020. Available from

3. Gethard G. Protest Divestment and the End of Apartheid. Investopedia, 2019. Available from

4. Emissions. Shake Up The Establishment, 2020. Avaialable from

5. Lenferna, A. Divest-Invest: A Moral Case for Fossil Fuel Divestment. In Climate Justice: Economics and Philosophy, ed. Henry Shue & Ravi Kanbur. Available from

6. IPCC, 2014: Climate Change 2014: Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment. Report of the Intergovernmental Panel on Climate Change [Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel and J.C. Minx (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. Available from

7. Ritchie J, Dowlatabadi H. Divest from the Carbon Bubble? Reviewing the Implications and Limitations of Fossil Fuel Divestment for Institutional Investors. Review of Economics and Finance, 1923-7529-2015-02-59-22, 2015. Available from

8. Molico M. Researching the Economic Impacts of Climate Change. Bank of Canada, 2019. Available from

9. Fossil Free: Divestment. 1000+ Divestment Commitments. Available from

10. Cox E. Laval becomes first university in Canada to divest from fossil fuels. Ricochet, 2017. Available from

11. U of G to Divest from Fossil Fuels. University of Guelph, 2020. Available from

12. Martha Billes Resigns as U of G Chancellor. University of Guelph, 2020. Available from

13. Health. Shake Up The Establishment, 2020. Available from

14. Lough S. CMA votes to divest from fossil fuels. CMAJ, 187(14): E425, 2015. Available from

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