A comparative analysis of the
Apartheid and Fossil Fuel
Divestment Campaigns
Chelsie Hunt
Truzaar Dordi
Olaf Weber
September 25, 2015
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What is Divestment
Divestment is a form of Socially Responsible Investing
Socially motivated action to realign capital with an
investor’s moral or ethical ideologies (Kaempfer et al., 1987)
Intention to coerce transformative change (Ansar et al., 2013)
Most famously applied against the South African Apartheid
and recently against the fossil fuel industry
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The Goals of Divestment
(i) Political Action
Coerce political leaders to disassociate from pervasive injustices
(ii) Financial Action
Limit new and existing channels of financial capital
(iii) Reputational Action
Undermine reputation among stakeholders
(iv) Fiduciary Approach
“Do good” by building financial resilience against perceived risks
(v) Business Approach
“Do well” by encouraging responsible investments and operations
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Divestment as a form of SRI
SRI
Divestment
Adoption of NonFinancial Criteria
in Investment
Decisions
Approach to
Raise
Awareness
through Social
Campaigns
Exclusionary
Screening
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Research Question
What are the main similarities and differences
between the Apartheid divestment and
Fossil Fuel divestment campaigns?
Hypothesis
Both campaigns work to raise awareness of a perceived injustice
however, differ in their strategy and anticipated outcome.
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Method
Content Analysis
Compare and contrast existing literature,
reviewing how the two divestment campaigns differ,
in the context of socially responsible investing
Sources of Literature
Academic literature; industry reports; organization websites;
published news reports, commentaries, op-ed’s, and criticisms;
public data portals
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Apartheid Divestment
1970s-1990s
Raise Awareness
Human rights violations in the form of institutionalized racial
segregation and discrimination against the non-white community
Strategy
Overthrow an unjust government and end the Apartheid reign
Perceived Outcome
Divestment perceived to accelerate the collapse of the Apartheid
regime by targeting and undermining the country’s economic and
political foundation
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Fossil Fuel Divestment
2012-present
Raise Awareness
Limit the production of the fossil fuel industry worldwide to adhere to
carbon induced climate change targets
Strategy
Coerce transgressing institutions to react and act more responsibly
Intended Outcome
Divestment perceived to weaken the the industry such that business
can restructure to prevail in a manner that is more responsive and
cautious to the transgressions.
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Results
Goals
Political
Action
Apartheid Campaign
Divest from companies to coerce political outcome
“Means to” remove government
Financial
Action
Firms change core strategy
Common arguments but conflicting evidence to identifying and quantifying risks
Threat of direct social and economic strife
Business
Approach
Primarily corporate divestment
Raise public awareness and seek reputational advantages
Firms withdraw operations
Fiduciary
Approach
Engage government toward “end goal”
Established by religious groups and universities and expanded to target institutions
Legislated trade and investment sanctions
Reputational
Action
Fossil Fuel Campaign
Threat from environmental perception
Use of exclusionary screening driven by normative arguments
Strong case with no reinvestment
Weak case with reinvestment strategy
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Political Action
Apartheid Campaign
Campaign
Fossil Fuel Campaign
Coerce political collapse in a Encourage political support in
foreign nation by crippling the managing the emissions from
economy
the fossil fuel industry
(Arnold and Hammond, 1994)
Effect
Ineffective in proliferating a
competitive environment
(Brooks, 2013)
Political will is a bottleneck in
mitigating climate change
(Chabane et al., 2006)
(Brown et al., 2014)
Similarity
Divest from companies to coerce political outcome
Difference
“Means to” remove incumbent Engage government toward
government
“end goal” of corporate strategy
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Financial Action
Apartheid Campaign
Campaign
Legislative investment
campaigns to divest from
financial intermediaries
(John, 2000)
Effect
Weakened stability could
spur flight of funds
(John, 2000)
Fossil Fuel Campaign
Augment cost of capital for
disfavoured firms to dissuade
existing and new developments
(Renneboog et al., 2008)
Key campaigns do not target
against sources of financing
(Sorkin, 2014)
Similarity
Targeted divestment practices against transgressing actions
Difference
Legislated trade and
investment sanctions
Primarily corporate divestment
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Reputational Action
Apartheid Campaign
Campaign
Raise public awareness and
scrutinization to encourage
disassociation
Fossil Fuel Campaign
Raise public awareness and
reprimand the injustice
(Grady-Benson and Sarathy, 2015)
(Grossman & Sharpe, 1986)
Effect
Weakened reputation impact
investors, consumers, and
institutions
(Smith, 1987; John, 2000)
Marginal direct effect when
firms are screened on their core
business type
(Knoll, 2002)
Similarity
Raise public awareness and seek reputational advantages
Difference
Firms withdraw operations
Firms change core strategy
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Fiduciary Approach
Apartheid Campaign
Campaign
Conflict between increased
costs or improved foresight
(Dobris, 1986; Gosiger, 1986; White, 1989)
Effect
Conflict over stock returns
and SAF performance
(Eccles, 2010; Rudd, 1979; Grossman and
Sharpe 1986)
Fossil Fuel Campaign
Dispute against significant
transitional risk induced cost
(Grady-Benson and Sarathy, 2015)
Fossil free portfolios may be
competitive, amidst contention
(Ritchie and Dowlatabadi, 2015)
Similarity
Common arguments but conflicting evidence of quantified risks
Difference
Threat of direct social and
economic strife
Threat from environmental
perception
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Business Approach
Campaign
Apartheid Campaign
Fossil Fuel Campaign
Human rights violations are
indisputable yet reinvestment
strategies were limited
Diverge away from business as
usual activities in favour of
responsible governance
(Lansing and Kuruvilla, 1988)
Effect
Worsened situation for black
community post-Apartheid
(Carter and May, 2001; Ozler, 2007)
(Brooks, 2013)
Unconvincing case a leading
cause of many rejections.
(Grady-Benson and Sarathy, 2015)
Similarity
Use of exclusionary screening driven by normative arguments
Difference
Strong case for abolishment
Weak case for abolishment with
with few reinvestment options reinvestment strategy
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Conclusions
Similarity
Both campaigns are used as a means to raise awareness
Difference
The intended strategies and outcomes
The Apartheid campaign targets overthrowing the government
The fossil fuel campaign targets managing transgressing firms
Next Steps
Expand our understanding of the fossil fuel divestment
(i) What is the effectiveness of divestment on firm governance?
(ii) Are fossil free portfolios competitive to conventional portfolios?
(iii) How can the fossil fuel campaign be more effective?
(iv) Do firms respond to divestment commitments?
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