The Psychological Appeal of Fossil Fuel Divestment

27 August 2019  |  BY Ben Newell, UNSW, Jeremy Moss, UNSW  |  Just Transitions
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Divestment from the fossil-fuel industry is on the rise. Worldwide it is estimated that approximately $3.4 trillion has been divested by 584 different institutions. These institutions have divested from companies involved in exploration, extraction, and production of fossil fuels. Is divestment the “right” thing to do? Is it an “easy way out” of our climate crisis?

Should institutions divest? Moral Considerations

Many argue that institutions ought to divest because it is the best way for them to reduce their emissions, or that it is inconsistent with the values of, say, a university to own shares in fossil fuel companies. But the main moral reasons to divest are that institutions ought not to be complicit in causing harm and, that by divesting they contribute to stigmatizing fossil fuel companies.

By divesting, institutions are able to contribute to creating the conditions where it is perceived as no longer acceptable to invest in fossil fuel companies.

These are all strong moral reasons to divest. But there are also powerful psychological reasons why divestment is an effective action to take to combat climate change.

The psychological inconvenience of climate change

Climate change is, famously, an inconvenient truth. A change to our world that we are responsible for causing and that we have the responsibility for fixing.

And yet our willingness to take the necessary action, to change our lifestyles, to make sacrifices now to benefit our own and future generations remains at a low ebb.

Such a reaction is perhaps not surprising. We appear to be ‘hard-wired’ to prefer immediate smaller gains over larger later ones. We prefer certainty over risk; are averse to ambiguous outcomes, don’t like losses and are resistant to changing the status quo.

Moreover, we are swayed by perceived ‘norms’: if everyone else is doing it then why should I change? How can I as an individual have an impact on a global scale?  (the ‘drop in the bucket’ excuse).

Any successful call to action has a tough time overcoming these psychological barriers (“dragons of inaction” Gifford, 2011) that impede appropriate levels of mitigating behaviour.

Could the fossil-fuel divestment movement silence the dragons?

Psychological Appeal of Divestment

The successful campaigns against the carbon price in Australia preyed on a simple psychological fact that immediate losses loom larger than gains – especially when those gains are uncertain and in the future. The carbon “tax” was presented, by those who opposed it, as an immediate hit to the individual’s hip pocket.

Advocating for institutional divestment does not incur an immediate, tangible, personal loss. It does not even necessarily incur a loss for the institution – it can lead to better returns. While there might be some effort and time spent in supporting a campaign, the individual takes no financial hit – loss aversion is avoided.

Institutional divestment has a much larger potential impact than individual actions. A person can choose to stop driving, flying, eating meat, using plastic bags, etc.  – but other than potentially influencing those around her, such actions have limited impact. The drop in the bucket response is no longer a good excuse.

Contrast this limited influence with the momentum achieved when large, highly respected institutions make a stand (i.e. universities).

Moreover, having institutions divest allows the burdens of divesting to be better distributed such that they don’t fall disproportionally on individuals. This is important as the psychological and the moral can align.

The immediacy of divestment action plays in to the present bias we so often show:  the focus on the here and now at the expense of the uncertain future. Even if divestment is largely symbolic it happens “now” (as soon as the institution makes the switch) and its effects are immediate (the institution is no longer contributing to or profiting from the fossil industry).

The ‘causal chain’ is also clear(er). One barrier to action discussed in the psychological literature is limited cognition about the problem of climate change. With divestment, the connection between the action taken – stopping fossil fuel companies from being in business – and the potential impact – stopping emissions from entering our atmosphere is (at least on the surface) very easy to grasp. The mental model one needs to build to work out that a fossil fuel company with no money can no longer cause emissions, does not require a great deal of mental effort.

Individuals and Institutions

Some might worry that asking institutions to divest when we don’t do it ourselves is just a case of passing the buck, of asking others to do what we are not prepared to do ourselves. But this is not the case with institutional divestment. It is not unreasonable that the burdens of mitigating climate change ought to be borne by groups or institutions in society that can afford to do so and which have alternatives. The duties of individuals and institutions are different.

This is not to say that divesting is the only action required of us or that it is a silver bullet for climate action. But the position that we find ourselves in now is that our responses to climate change do not match the urgency of the problem. So if divesting is both morally as well as psychologically compelling, it is no bad thing that it is part of our response to climate change.



Gifford, R. (2011). The dragons of inaction: Psychological barriers that limit climate change mitigation and adaptation. American Psychologist, 66(4), 290-302.