Last month one of the biggest pension funds in the world, the Dutch ABP, announced that they are divesting their holdings in fossil fuels. They had been threatening to do this for quite a while already in the past years, but the threat will become a reality by 2023. Coming only a month after another Dutch pension fund made a similar announcement it seems that the tide is shifting. What does this mean for our scenarios on the road towards more sustainability? A perspective through the eyes of Minkowski.
A cone of possibilities: when focus increases possible future positions narrow down
At the core of our approach to scenario thinking sits Minkowski’s ‘Cone of Possibilities’. This cone is constituted of 4 cones that are increasingly getting smaller (this thinking is well known in futures thinking): the possible, the plausible, the probable and the preferable. When the perspective on a possible future narrows down, the likeliness of events actually occurring grows. Anything that falls outside of these 4 cones is seen as impossible positions in the future.
Figure1: Futures cones: possibile, plausible, probable, preferable
Your present determines your futures outlook
APB, amongst other stakeholders, has been threatening to divest in oil & gas for a very long time. But these threats had never turned into a real problem for the industry as APB never acted on them. For the fossil fuel industry the divesting scenario was deemed to be impossible. Whereas for ABP and others it had always been a possibility (how unlikely it might have seemed at one point in time). This shows that there are always different perspectives on the future, which is why we always talk of multiple futures (with an emphasis on the plural). Your perspective on a future depends highly on where you are today and where you are coming from (see the illustration below). Sometimes these different positions in the present create futures cones that overlap with each other (the purple and blue cones), but other times it seems as if there is never common ground in the future (the pink and blue cones). For ABP and the fossil fuel industry it seemed for a very long time, that there was no common ground to begin with.
Figure 2: different cones of possibilities depending on your current position
The impact of ABP’s announcement: two effects from a futures cones perspective
ABP’s announcement made two things happen. They turned a future possibility into a future probability. In that one act they’ve narrowed the scope of possible paths to the future tremendously. And with that, they are pulling a whole range of other scenarios into the cone of possibilities for the fossil fuel industry. Even scenarios that seemed to be impossible for all. I’ll share a few of those further on.
But secondly, they have forced the fossil fuels industry to ‘reposition’ themselves in light of the future. Let’s say APB was looking at the future through the blue cone (see illustration above) and the fossil fuel industry was looking at the future through the pink cone. They both looked in the same direction but they never saw any common ground. Now, with this move they are forcing the fossil fuel industry to take a position in which there is at least a bit of overlap, namely: in the near future ABP will not be a shareholder anymore. This will have an impact on the futures direction as well. Let’s look at both these dynamics and what it could mean for the futures of fossil fuels.
New possibilities for the futures of oil & gas: from impossible to plausible
The threat of divesting has become a reality. Now, what else could become plausible as a result of that. One effect showed itself immediately: other shareholders were putting new demands on the direction of Shell, suggesting that they should break up and put their renewable energy initiatives into a new entity. These types of demands from big shareholders might surface more and more and Shell, as one of the bigger companies in this industry, has to reconsider their reaction to these types of ‘threats’.
Will employees walk away from the giant oil companies? For years the pressure on oil and gas to really work on CO2 reductions have been heard and it seemed harder and harder as an employee to defend why you’d work for such a company in social circles. Now that one of the bigger shareholders is basically saying that they don’t believe the industry is making real attempts to turn the tide, how impactful will this be for people still working there? And furthermore: what new employees will even consider working for a company that says they are transforming but are apparently not?
Will big oil and gas now fundamentally change? This still seems to be a farfetched scenario, but with the recent move it might trigger a response that does take climate change seriously. Perhaps ABP could state under what circumstances they would return as an investor. So instead of playing the threatening card they could play the opportunity card here and still influence the future direction of this industry.
New possibilities for the futures of oil & gas: changing positions to the futures
It’s not just the oil and gas industry that was forced to change position in the present as a result of this. The same goes for other investors that still hold on to their holdings in these companies. What can they do? There are three options here:
- Invest and engage: increase your holdings and put even more pressure on the ‘dirty’ company you are investing in to force them to show they are making a meaningful difference to the future of the planet.
- Divest if you can’t do option 1 to show that your ‘suggestions for fundamental change’ are real and that not acting accordingly will have a consequence.
- Make use of APB and others selling their stock and make money buying it up in an economic situation that most likely will first make more use of oil and gas than less. But this third option means you don’t take any responsibility for the future of the planet and you are only in it for economic gains. I guess there’s going to be a whole range of different scenarios for these types of investors to begin with.