Recent news that the heirs to the Rockefeller oil fortune are to divest some of their interests in fossil fuels in favour of clean technology indicates a significant change has taken place in the investment market lately.
That the benefactors of the legendary Standard Oil company should turn their back on fossil fuels by reportedly announcing plans to divest significant sums in coal and tar sands, sent a significant ripple across the investment pond.
In a statement, the Rockefeller Brothers Fund announced it has begun a two-step process to divest from investments in fossil fuels. The Fund’s immediate focus will be on limiting its exposure to coal and tar sands, two of the most intensive sources of carbon emissions, with the goal to reduce its investments to less than 1% of the total portfolio by the end of 2014, it said.
What has changed? There was perhaps no coincidence that the decision was announced just ahead of the recent UN summit on climate change which concluded with world leaders reaffirming the need to take urgent action to limit global temperature rise to less than two degrees Celsius, and acknowledging that the world was not yet on a pathway to reach that goal.
Many speakers made it clear that taking action to reduce emissions could be achieved without damaging prospects for economic development and efforts to fight poverty. As United Nations Secretary-General Ban Ki-moon observed: “I asked for bold announcements from governments, business, finance and civil society in five key areas. The Summit delivered. This Summit was not about talk. History is made by action. And now we have seen that the world is ready to act.”
Government leaders also committed to reach an ambitious and universal climate agreement in Paris in 2015 while several European countries announced that they would pursue the target of 40% greenhouse gas reductions over 1990 levels.
Coupled with the Rockefeller decision, former US vice-president, Al Gore, reportedly presented a collective five-year commitment outlining $50 billion of fossil divestment at the UN, as part of the Global Divest-Invest initiative. Some 650 individuals and 180 institutions have now joined the coalition.
Gore argued that such investments now clearly have an uncertain future. And he’s not alone. Commenting on the Rockefeller decision Stephen Heintz, president of the Rockefeller Brothers Fund, reportedly said: “John D Rockefeller, the founder of Standard Oil, moved America out of whale oil and into petroleum. We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”
And while Rockefeller’s decision may at first glance seem like a social responsibility-driven decision, the likelihood is that it also makes considerable economic sense too.
By way of illustration, the World Bank Group in collaboration with The Carbon Trust have quantified the economic opportunities that small-medium businesses (SME) can seize in the clean tech sectors in developing countries.
Over the next 10 years, an estimated $6.4 trillion will be invested in developing countries and of this total market, some $1.6 trillion will be accessible to SMEs, according to the report.
The new report: ‘Building competitive green industries: The climate and clean technology opportunity for developing countries’ identifies China, Latin America and Sub-Saharan Africa as the top three markets in the developing world for clean technology SMEs, with an expected market size of $415 billion, $349 billion, and $235 billion respectively. Among the most promising opportunities is the small hydropower sector, the report concludes. Coincidentally, these leading markets are also the best prospects for hydropower development too. It might be a leap too far to suggest that John D. Rockefeller would invest in hydropower, but it certainly seems a far more likely an event than his ancestors moving their investments out of oil.
To download the full World Bank report, visit here.