Across the United States the growing Fossil Fuel Divestment movement has confronted universities, local governments, churches and other institutions with the demand to divest their investment portfolios from the fossil fuel industry. Such institutions are faced with a complex economic and ethical decision as to whether they should heed the advice of the divestment movement. Unsurprisingly, in response to such a seemingly radical proposal, a growing number of academics, lobbyists and organizations are resisting the fossil fuel divestment movement claiming that it is ineffective, dogmatic, unbalanced and naïve, among other accusations. However, many of those who criticize the divestment movement are yet to truly engage with the substance of the movement, and in response to their criticism it is worth examining the economics and ethics behind the fossil fuel divestment movement in detail and in doing so assess the validity of the critiques levelled against the divestment movement in order to assist critics, institutions and divestment groups in their deliberations around divestment.
In a recent research paper I attempt to do just that by elaborating on the economic and ethical case for divestment. The paper provides an analysis of divestment using the coal industry as a case study because of its prominence as a paradigmatic target industry of the divestment movement. The paper first elucidates the financial risks associated with fossil fuels in general and the North American coal industry in particular. Collating numerous financial analyses regarding the future of the coal industry in a carbon-constrained world, the conclusion arrived at is that thanks to decreasing demand, environmental regulations and action on climate change, the coal industry faces significant risks of losing great amounts of value in the near future and that therefore investments in coal are likely to underperform, such that divesting from the coal industry would be a sound financial decision.