The Trouble with Boycotts: Can Fossil Fuel Divest Campaigns Be Prohibited?

• Author: Inara Scott
• Date: 01 October 2020
• DOI: http://doi.org/10.1111/ablj.12168
• Published date: 01 October 2020

American Business Law Journal

Volume 57, Issue 3, 537–591, Fall 2020

The Trouble with Boycotts: Can

Fossil Fuel Divest Campaigns Be

Prohibited?

Inara Scott*

Organizations like 350.org, Insure Our Future, and DivestInvest are leading

campaigns to urge boycott and divestment from fossil fuels as a means to

address climate change. Increasingly, they are finding success, from individ-

ual consumers to massive pension and sovereign wealth funds. However, as

organized group boycotts, divest campaigns may be vulnerable to prosecution

under antitrust law. This article explores the likelihood of success in such a

case, considering the history of the legal treatment of organized boycotts, the

scope and purpose of antitrust law, and the possible application of the First

Amendment to the divestment context. The article finds that fossil fuel boy-

cotts straddle a number of contradictory characteristics, making application

of existing theories inadequate. In particular, existing precedent protects

political boycotts, but not those with primarily economic objectives, and fails

to definitively address whether a noncompetitive actor may undertake con-

certed action under antitrust law. In the context of climate change, where the

political is economic, and political goals may seek significant economic

changes (such as undermining an entire industry), existing theories may lead

to a result that threatens both free expression and the health of the planet.

The essential flexibility of the Sherman Act, however, provides room for pro-

tection of political activity, even where the ultimate objective is economic in

nature.

*Gomo Family Professor, Oregon State University College of Business. The author wishes

to thank Michael Pappas and the participants in the Online Workshop for Environmental

Scholarship for their extremely helpful feedback and advice. All mistakes, of course, are

my own.

©2020 The Author

American Business Law Journal ©2020 Academy of Legal Studies in Business

537

INTRODUCTION

In 2018, the fossil fuel divestment movement marked a number of

impressive milestones.

1

The European Investment Bank, the lending

arm of the European Union and the largest multilateral financial institu-

tion in the world,

2

committed to phasing out fossil fuel lending by 2021.

3

The climate action organization 350.org reported in September 2019

that $11 trillion in funds had been committed to divestment from fossil

fuels.

4

Norway’s sovereign wealth fund committed to withdrawing sup-

port for fossil fuel exploration,

5

and the University of California system

announced that both its endowment and its pension funds would elimi-

nate fossil fuel investments.

6

The term “divestment” is generally used to refer to disassociation of

pension funds from enterprises for noneconomic reasons, particularly

1

Bill McKibben, At Last, Divestment Is Hitting the Fossil Fuel Industry Where It Hurts,THE

GUARDIAN (Dec. 16, 2018, 12:37 EST), https://www.theguardian.com/commentisfree/2018/

dec/16/divestment-fossil-fuel-industry-trillions-dollars-investments-carbon.

2

EIB at a Glance,EUROPEAN INVESTMENT BANK, https://www.eib.org/en/about/index.htm

(last visited Apr. 11, 2020).

3

Dave Keating, EU to End All Fossil Fuel Lending in Two Years,FORB ES (Nov. 15, 2019, 1:50

AM EST), https://www.forbes.com/sites/davekeating/2019/11/15/eu-to-end-all-fossil-fuel-

lending-in-two-years/#58b8cfe05164.

4

Monica Tyler-Davies, A New Fossil Free Milestone: $11 Trillion Has Been Committed to Divest

from Fossil Fuels, 350.ORG (Sept. 8, 2019), https://350.org/11-trillion-divested/.

5

Rob Davies, Norway’s $1Tn Wealth Fund to Divest from Oil and Gas Exploration,THE GUARD-

IAN (Mar. 8, 2019, 11:03 EST), https://www.theguardian.com/world/2019/mar/08/norways-

1tn-wealth-fund-to-divest-from-oil-and-gas-exploration.

6

The Importance of Corporate Climate Engagement,CALPERS & CALSTRS, https://www.calpers.

ca.gov/docs/corporate-engagement-climate-change.pdf; Andy Kroll, University of California

System to Divest from Fossil Fuels,R

OLLING STONE (Sept. 17, 2019, 6:07 PM), https://www.

rollingstone.com/politics/politics-news/university-of-california-system-divestment-fossil-fuels-

886203/. Divestment also occurs in private charitable funds and in higher education gener-

ally. Divestment Statement,R

OCKEFELLER BROTHERS FUND:PHILANTHROPY FOR AN

INTERDEPENDENT WORLD, https://www.rbf.org/sites/defa ult/files/rbf-dives tment_statement-

2017-oct.pdf (last visited Apr. 11, 2020); Liam Knox, Saving the Planet Hasn’t Persuaded

Colleges to Divest from Fossil Fuels. Will Saving Mone y Do the Trick?,C

HRONICLE OF HIGHER

EDUC. (Aug. 30, 2019), https://ww w.chronicle.com/article/S aving-the-Planet-Hasn- t/

247057.

538 Vol. 57 / American Business Law Journal

concerns that the enterprises cause social injury.

7

While fossil fuel divest-

ment efforts originally focused on this narrow goal, the new “divest

movement,” as I refer to it here, more broadly includes a variety of activ-

ities intended to persuade investment funds, insurers, corporations, and

individuals to stop doing business with fossil fuel companies.

8

A variety

of divestment campaigns, targeting everyone from individuals to philan-

thropic charities to large commercial organizations actively seek to draw

investment away from fossil fuels, using a variety of means.

9

For exam-

ple, climate activists recently began focusing efforts on convincing banks

and lenders not to work with fossil fuel companies.

10

As long-time cli-

mate activist Bill McKibben has noted, the power of banks and lending

institutions are such that they may actually have the power both to

impact the entrenched fossil fuel industry and to work at the speed

7

See Laura E. Deeks, Discourse and Duty: University Endowments, Fiduciary Law, and the Cultural

Politics of Fossil Fuel Divestment,47E

NVTL. L. 335, 353 (2017) (defining divestment and con-

sidering thresholds for divestment in Harvard and Stanford endowment funds); Benjamin

J. Richardson, Universities Unloading on Fossil Fuels: The Legality of Divesting,10C

ARBON &

CLIMATE L. REV. 62, 62 (2016) (defining divestment as “selling shares or other financial

stakes in a company, or refusing to acquire new shares, primarily because of noneconomic

reasons”); Emma Howard, A Beginner’s Guide to Fossil Fuel Divestment,T

HE GUARDIAN (June

23, 2015, 2:00 PM), https://www.theguardian.com/environment/2015/jun/23/a-beginners-

guide-to-fossil-fuel-divestment. In this context, higher education has been a particular tar-

get of the fossil fuel divestment movement. See Richardson, supra.

8

See infra notes 53–55 and accompanying text (describing common goals of divest

campaigns).

9

See infra Part I.B.

10

Robinson Meyer, Investment Bankers Are Now Waging the War on Coal,THE ATLANTIC (Dec.

17, 2019), https://www.theatlantic.com/science/archive/2019/12/goldman-sachs-fighting-

climate-change-un/603760/. The newly unveiled “Stop the Money Pipeline” campaign

directly targets financial institutions supporting fossil fuel companies and extraction pro-

jects. Wall Street Is Financing Climate Destruction,S

TOP THE MONEY PIPELINE, https://www.

stopthemoneypipeline.com/ (last visited Apr. 11, 2020); Zack Colman, Climate Groups Turn

Up the Heat on Big Banks, Insurers,P

OLITICO (Jan. 13, 2020, 12:46 PM), https://www.politico.

com/news/2020/01/13/climate-groups-protest-098251. Climate action has also focused on

encouraging financial investment in green projects, like renewable energy. See From Evolu-

tion to Revolution: 10 Years of Green Bonds,W

ORLD BANK (Nov. 27, 2018), https://www.

worldbank.org/en/news/feature/2018/11/27/from-evolution-to-revolution-10-years-of-green-

bonds (describing the development of green bonds); Matthew Heimer, How a Big Bank

Fueled the Green Energy Boom,F

ORTUNE (Aug. 20, 2018, 3:30 AM), https://fortune.com/2018/

08/20/bank-of-america-wind-solar-energy/ (“Most environmental advocates agree that a

renewable revolution can’t happen without a big private-sector push.”).

2020 / Trouble with Boycotts 539