The Atlantic country has a huge opportunity to model getting money out of fossil fuel companies and into the hands of the people.
This summer, Ireland pledged to become the world’s first country to divest from fossil fuels. Should the divestment bill pass the Irish Senate in the fall, which it is expected to do, Ireland will sell off its nearly $380 million in investments in the fossil fuel industry.
But where will the revenue from this divested money go?
Fossil fuel divestment takes money out of the extractive fossil fuel economy. More importantly, it morally and politically denounces the very industry that contributes the most to climate change and climate injustice.
While divestment shifts capital away from industries that exacerbate inequality and harm community and ecological well-being, it’s only the first step in achieving a just, sustainable future.
Good Money After Bad?
Oftentimes, the money that’s divested from university endowments, pension funds, and other institutions is reinvested into equally harmful industries, negating the ultimate goal of social justice. Even Socially Responsible Investment (SRI) and Environmental, Social, Governance (ESG) funds, upheld by many in the financial mainstream as ways to ethically re-invest divested money, can remain invested in corporations that violate human rights and perpetuate the climate crisis.
SRI or ESG funds might use a “best-in-class” strategy, which allows an “ethical investment” fund to keep, for example, Shell in its portfolio if Shell’s performance on ESG/SRI criteria is better than Exxon’s — a sorry standard.
Moreover, SRIs and ESGs do nothing to address the reality that a few people continue to accumulate massive amounts of wealth at the expense of the many, and with little to no accountability to their investors or to the communities from which their wealth is derived. It is this concentration of wealth and lack of democracy over capital that forms the root of the social and ecological crises of today — and fossil fuel divestment is only half of the solution.
The other half, one that’s often overlooked, is reinvesting the money once used to finance extractive industries into the very communities that have suffered at the hands of these industries.
Reinvestment presents an opportunity to resist the extractivism, racism, and militarism that dominate our economy and to rebuild it towards a vision of collective well-being, led by communities who’ve been the most oppressed under the current system.
On a smaller scale, reinvestment into communities fosters job creation, local businesses, affordable housing, and climate resilience through renewable energy projects and retrofitting. It connects marginalized populations to the larger economy while at the same time transforming the larger economy to focus on the needs of the many rather than the few.
Healing from Austerity
With its recent pledge to divest, Ireland has the potential to perform this financial transformation on a country-wide scale. When it sells its fossil fuel investments in a few months, Ireland should funnel these hundreds of millions of dollars not back into the extractive economy that undergirds the climate crisis, but into the resilience and well-being of its own communities.
Since the 2008 financial recession, income inequality in Ireland has remained high, with wealth inequality soaring in the past five years.
This economic inequality in Ireland, as in many Western industrialized countries, can be attributed to a prioritization of economic growth over social equity. Following the 2008 financial crash, the Irish Ministry of Finance — urged on by the “troika” of the International Monetary Fund, the European Commission, and the European Central Bank — implemented the most severe austerity measures in the history of the country, policies that hurt low-income Irish the most.
Irish taxpayers were also forced to pay more than $60 billion in bailouts for Irish banks, much of which was used to guarantee executive salaries rather than propping up the hardest hit from losing their homes, jobs, and social welfare.
By reinvesting the capital previously held in the fossil fuel industry into the most economically disadvantaged communities, Ireland can simultaneously combat its economic inequality, enhance its social equity, and boost its climate resilience.
The Perfect Vehicle
The country already has a burgeoning social finance sector into which these divested funds can be reinvested.
The Irish Government’s Department of Finance and its Banking and Payments Federation both fund the Social Finance Foundation, an organization that finances social lending organizations, which then redistribute this capital to communities across Ireland.
Two of these social lending organizations are Clann Credo and Community Finance Ireland, both of which are modeled after Community Development Financial Institutions (CDFIs), a non-profit designation for funds that reinvest and recycle 100 percent of their profits into underserved populations, such as youth, disabled people, the elderly, and those facing homelessness.
CDFIs include a range of community development banks, credit unions, loan funds, and venture capital funds whose missions are to connect low-income, disadvantaged people to the larger economy. To do so, these organizations finance community businesses and projects — from affordable housing to farmers markets to solar fields — sparking job growth and contributing to the social and ecological resilience of these historically marginalized communities.
Unlike ESGs or SRIs, these place-based funds are directly accountable to their investors and to the communities in which they’re located. Moreover, these funds are best positioned to address the social, economic, and environmental challenges facing these underserved communities because they have face-to-face interactions with community members themselves.
Clann Credo, one of Ireland’s largest community loan funds, has provided over $115 million in loans to finance more than 900 projects in Irish communities, ranging from arts centers and museums to affordable housing for those with disabilities.
They also have a Climate Action loan fund that finances retrofitting houses, energy efficiency services, and renewable energy projects. All of these efforts work to make Ireland more climate resilient, especially for low-income Irish people who are the most vulnerable to the effects of climate change.
Investing in Justice
Reinvestment in these social finance institutions combats multiple injustices at once, all of which are exacerbated by climate change. It also transforms the economic system by driving money out of the hands of wealthy elites and exploitative corporations and into the hands of Irish people.
Ireland has already proved its commitment to climate justice with its pledge to divest from fossil fuels. Now, it can demonstrate its commitment to ensuring a just, sustainable future by reinvesting in its own communities that have faced injustice at the hands of the fossil fuel economy, thus transitioning to an economy that promotes social and ecological well-being over profit.
If a just, sustainable future is to be achieved, we need to not only divest from injustice, but also invest in justice.
