Energy and Environment

Fossil fuel divestment: a moral imperative?

The starting position for this article is that anthropogenic climate change is a serious risk and that individual, institutional and governmental action should be taken to try to reduce the risk. I don’t take the apocalyptic view of Extinction Rebellion and I happen to think that the particular measures that governments, almost without exception, have taken are very bad ways of dealing with the problem. If we want to reduce carbon emissions by the greatest amount for a given cost, we have to make carbon-intensive activities more expensive to consumers. That is most effectively achieved by some combination of carbon taxing and cap and trade schemes. Contrary to this approach, most governments still subsidise the consumption of fossil fuels whilst implementing a host of schemes that purport to reduce carbon emissions.

But, of course, Catholic social teaching on the environment is pretty clear that action does not begin and end with government policy initiatives. Indeed, that is just as well given how most governments perform. So, is it not right that institutions, with Christian institutions in the lead, take action by disinvesting from fossil fuel companies?

Operation Noah certainly thinks so. When St. Mary’s University recently took a decision to disinvest, it was following a huge number of other Christian institutions. Operation Noah responded by saying: “It is wonderful news that St Mary’s University has taken the significant step of divesting from fossil fuel companies in response to the climate crisis… As the UK prepares to host the UN climate talks later this year, we encourage all Catholic dioceses and religious orders to follow the Vatican recommendation to divest from fossil fuel companies and invest in solutions to the climate crisis.”

The first question one might ask is whether Catholic institutions should disinvest as a matter of principle because providing capital to fossil fuel companies is morally wrong. Secondly, we can ask whether, if investing in fossil fuel companies is not wrong as a matter of principle, disinvestment will make any difference in practice.

If you accept that there are significant risks of anthropogenic climate change, then we certainly have a moral responsibility to reduce our carbon emissions. But reducing emissions requires real sacrifices. At the individual level, it requires replacing car journeys with walking, bicycle or bus. It requires reducing the thermostat; buying renewable energy; and only heating the rooms that we are using. At an institutional level, reducing carbon emissions also involves hard choices. To take the example of a university – not just St. Mary’s, of course – reducing carbon emissions may mean poorer facilities as more capital expenditure is spent on insulation and replacing inefficient heating systems and less on classrooms and student facilities. In the case of a religious order, it may mean using some of their endowments to reduce their carbon footprints or helping others to do so.

Economics is the science of not being able to have your cake and eat it. Reducing carbon emissions involves eating some of your cake which is then not available for other things. But, despite all efforts, all families and institutions still emit carbon and consume fossil fuels. Even an institution that has reached “net zero” will almost certainly consume fossil fuels. And nearly all families do so. It is difficult to make the case that divestment is an unarguable moral imperative whilst, as consumers, we still use fossil fuels. How can we as individuals and institutions buy any fuel from a company we believe should have no capital? More specifically, it is difficult to argue that divestment is an unarguable moral imperative whilst, as consumers, we still emit any carbon. If easier decisions such as divestment are taken but the difficult choices avoided, it can do more harm than good by perpetuating the myth that reducing carbon emissions is costless and that responsibility lies elsewhere.

As a practical matter, we might believe disinvestment it can help effect change, but this is a different argument. So, what about the practical question?

The purpose of disinvestment is to reduce the supply of capital to fossil fuel companies. However, if the supply of capital is “price elastic”, divestment is likely to have limited, if any, effect: a fall in the supply of capital by one source, may raise the cost of capital marginally, but lead it to be replaced by another source – such as the Chinese government or Middle Eastern sovereign wealth funds. At the same time, the ability to influence policy is lost and replaced by the voice of those alternative investors. Furthermore, if action is successful in reducing available capital, fossil fuel companies might switch to less capital-intensive activities such as exploiting existing highly carbon-intensive reserves rather than investing in cleaner alternatives. It was the unleashing of new sources of capital to the UK electricity industry in the 1990s which led to the replacement of oil and coal generation by gas which, in turn, was probably the single biggest cause of reduction in carbon emissions in the last 30 years in the UK.

A recent academic paper has suggested that “voice” is more effective than “exit” in achieving change. This is not surprising. And, indeed, the Anglican pension fund has achieved change in at least one oil company in which it is invested by successfully campaigning for it to link executive pay with carbon reduction.

So, this issue is far from straightforward. What is clear, though, is that, if we are concerned about carbon emissions, we should do our best to reduce them, making the necessary sacrifices. St. Mary’s University is involved in a major research project with other Catholic bodies to help provide the technical support to enable Church organisations to do reduce emissions. The debate surrounding disinvestment is not clear cut – and this should be recognised by campaign groups. If you accept the case for anthropogenic global warming, however, the case for making real sacrifices is clear cut.


This article was first published on St Mary’s University’s Catholic Social Thought blog

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

1 thought on “Fossil fuel divestment: a moral imperative?”

  1. Posted 06/08/2021 at 19:11 | Permalink

    A well argued, persuasive case. It nails it by the comment that if you vote for dis-investment, then logically you should not be buying, directly or indirectly, any products which involve the use of fossil fuels. Unfortunately, we do not live in an Enlightened Age. There are also too many enterprises/institutions/individuals now with skin in the game of climate change. Nevertheless, let us push again for carbon taxes and cap and trade.

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