Investment emissions: Harnessing the power of health sector influence
By Amy Collins, MD, Health Care Without Harm medical director, and Emily Mediate, Health Care Without Harm chief program officer
The health care sector is on the front line of the climate crisis, with an ethical obligation to do no harm and a pressing opportunity to take climate action to protect health and health care delivery.
Momentum is increasing across the sector to integrate the health benefits of rapidly phasing out fossil fuels through a just transition to a clean energy economy. The health care sector accounts for 8.5% of total U.S. greenhouse gas (GHG) emissions, and financial investments can comprise as much as half of a U.S. health system’s total emissions.
All industries, including health care, must halve their emissions by 2030 on their way to achieving net-zero emissions by 2050. Hospitals and health systems should consider ways to evaluate their financial investments, explore strategies to reduce investment emissions, and align their investments with the sector’s healing mission.
All health care activities generate emissions, which are classified into three scopes. Scope 1 refers to direct emissions from a facility, Scope 2 refers to indirect emissions generated from purchased sources of energy, and Scope 3 emissions, the largest source of U.S. health care emissions at 82%, are generated by activities such as waste disposal, purchased goods, employee commutes, business travel, and investments. The emissions from investments come from investing in the fossil fuel industry and other emissions-intensive industries.
Antithetically, the health sector is heavily connected to the fossil fuel industry through its investments, pensions, and retirement funds. For instance, according to a 2023 report, the pension funds of four major health systems have more than $4.6 billion in assets connected to the fossil fuel economy, and privately owned U.S. hospitals likely have greater than $10 billion of pension fund money invested in the fossil fuel industry. A 2022 analysis estimated that six Boston health systems collectively had almost $9 billion in financial investments, which were estimated to generate three and a half times as many emissions as their reported energy usage. Finally, the 10 top health insurers ranked by market share had more than $24 billion invested in fossil fuels according to a 2020 report.
For organizations that participate in commitments such as the HHS Health Sector Climate Pledge or the UNFCCC Race to Zero, it can be helpful to measure emissions to understand the organization’s full climate impact. This step, which can be achieved using tools like Practice Greenhealth’s Health Care Emissions Impact Calculator, helps organizations create an action plan to track and reduce emissions across all three scopes over time. To date, most hospitals and health systems have focused on measuring and reducing scopes 1 and 2 emissions and are uncertain about how to accurately measure Scope 3 emissions, including those from their financial investments (Scope 3, Category 15). Scope 3 emissions are the largest source of health care emissions, yet they are also the most challenging to measure and reduce. Although some health care organizations question whether they need to measure their investment emissions, many understand that measurement is a critical step toward identifying emissions hotspots and prioritizing opportunities to reduce emissions.
There is ongoing pressure for the health care sector to urgently address its fossil fuel investments, including frequent calls for divestment, often from health professionals. A few hospitals and health systems have partially divested or frozen future investments in fossil fuel holdings, showing that taking such action is achievable for health care organizations. Most recently, the University of California — which includes the six academic medical centers and four children’s hospital campuses that comprise University of California Health — sold $1 billion in fossil fuel assets from its investment portfolios and pension and invested $1 billion in clean energy projects.
The global medical community has also responded to calls for divestment with medical societies worldwide committing to divest, including the American Medical Association. In 2020, the British Medical Journal launched a divestment campaign aimed at health professionals and medical organizations. The Harvard Medical School Faculty Council passed a resolution calling on the Harvard Corporation to divest its endowment from the fossil fuel industry, with Harvard announcing in 2021 that it will move to divest its endowment. Most recently, after facing mounting pressure from health professionals, the National Academy of Medicine announced its commitment to reduce its organizational investments and divest its fossil fuel interests.
Still, health care organizations lag far behind other organizations, such as educational, faith-based, and philanthropic organizations. Divestment is complex and can be difficult to accomplish. Health care organizations represent just 1.2% of organizations worldwide that have divested from fossil fuels.
The motivations underpinning the divestment movement for health care are valid.
- Ethical imperative: Fossil fuels are the largest factor driving the climate crisis and its resultant harms to public health. The production and combustion of fossil fuels generate air pollution that significantly contributes to the global burden of disease and mortality and affects communities in unequal ways. Climate change has caused approximately 4 million deaths globally since the turn of the century, it is projected another 14.5 million people will die from its effects by 2050. A health-promoting sector should not support or profit from a health-harming industry.
- Financial risk: Most of the world’s oil, gas, and coal reserves must remain in the ground to avoid catastrophic climate change. Fossil fuel companies have at least a trillion dollars worth of reserves, but these assets may become liabilities or stranded assets in the era of the climate crisis. A financial expert recently shared, “We know the fossil fuel industry will eventually be in secular decline and the time to get out is before you see that decline happening.”
- Reputational damage: Health professionals and activists frequently call out health care organizations for the hypocrisy of addressing climate change but not touching their institutions’ investment portfolios. Hospitals and health systems may be at risk of challenges with employee engagement, retention, and recruitment since the majority of health professionals feel their prospective employers’ actions on climate could impact their decision to apply for a job.
- Health care delivery risks: Holding investments in the fossil fuel industry can also indirectly support delayed action, which is risky for public health and health care. As the climate crisis accelerates, hospitals and health systems will face increased demand for services. Additionally, extreme weather and climate-related events will impact health care access, delivery, and supply chains.
There is a strong public health case for divestment. The climate crisis is first and foremost a health crisis. During times of health crisis, people look to health care professionals and the sector for leadership and trusted guidance. By divesting, health organizations can lead by example and send a powerful message about the health risks of fossil fuels to the fossil fuel industry and the general public. There is even precedent for divestment from another health-harming industry — the health sector played a critical leadership role in divestment and public education during the tobacco control movement.
While there are compelling moral, public health, and financial arguments for full fossil fuel divestment, there are three key truths that call into question whether the all-or-nothing solution of divestment is the best path forward for the health care sector.
1. Health care organizations must envision what they’re moving toward, not just what they’re moving away from. Addressing the climate crisis requires focusing on our call to advance health and equity.
Hospitals and health systems could consider partial divestment while educating their investment teams on the importance of climate-smart investments in their local communities. Place-based investing strategies allow health systems to earn a financial return on their investments while producing a positive social, economic, or environmental impact within their service areas.
Similarly, health care organizations can work toward increased investments in clean technologies and industries, such as renewable energy. A 2021 survey of 38 health systems and children’s hospitals with $350 billion in investments found that 44% of respondents indicated they would invest in renewables in the next two years. Increasing investments in renewables and other companies providing climate solutions will accelerate the transition away from fossil fuels and toward a just, clean energy economy.
Proactive investments in this direction will improve overall community health and well-being and help health care organizations and their communities become more climate-resilient in the face of extreme weather events. Health organizations can be reimagined, not simply as decarbonized versions of themselves, but as anchor institutions within healthier, more resilient, and more equitable communities.
2. Hospitals and health systems must evaluate moving away from investments in all climate-intensive industries, not just the fossil fuel industry.
Fossil fuel divestment aims to reduce emissions by raising the cost of capital so it becomes too expensive for fossil fuel companies to do work, delegitimizing the fossil fuel industry to accelerate the transition to a clean energy economy. However, there are many other companies, including those behind industrialized agriculture and the petrochemical industry, that contribute to climate change and its adverse health impacts. It is not possible to completely reduce organizational Scope 3, Category 15 investment emissions solely by divesting from fossil fuels since many other investment holdings are associated with emissions as well.
The health care sector has a historic opportunity to leverage its clout to influence a far more significant economic and investment shift. Hospitals are the second biggest industry in the United States by employment and the third largest by revenue. The health sector is responsible for nearly 20% of the U.S. GDP. While it may be difficult for one hospital to influence all climate-intensive companies, the collective voice of the health care sector is mighty. The sector could partner with asset managers and communicate the importance of climate-responsible investments that are aligned with health organizations’ missions and emissions reduction goals and strategies, and make efforts to influence emissions-intensive industries. The sector can also advocate for policies and regulations that move the economy away from all polluting industries, most notably the fossil fuel and petrochemical industries.
Health professionals are the most trusted voices to deliver the climate and health message, and hospitals and health systems are among the largest employers in many states, giving the sector ethical, economic, and political influence. The health sector has a tremendous opportunity and moral obligation to leverage this trust and influence to fundamentally shift the investment landscape.
3. There is a lack of consensus that divestment is an impactful climate mitigation strategy, specifically for reducing absolute emissions in the short term.
When assets are divested from fossil fuel companies, they are sold to someone else. While divestment can reduce an organization’s Scope 3, category 15 emissions, since divestment requires reinvestment, those emissions are shifted to another organization or individual’s emissions balance sheet and absolute emissions may remain unchanged.
Recent research found that divesting from companies that fail to meet environmental, social, and governance (ESG) criteria does not have the desired impact on a company, making it too expensive for them to do business. Since an overwhelming number of investors would have to divest to impact a company’s bottom line, these researchers concluded that “socially conscious investors should invest and exercise their rights of control to change corporate policy.”
A Yale researcher found that divesting from climate-intensive or “brown” companies and instead investing in low-emissions companies is counterproductive to reducing GHG emissions and can ironically lead to increased emissions. As the cost of capital increases for “brown” firms after divestment, these firms tend to react by becoming more short-term oriented, getting even “browner.”
The lack of consensus about how health care organizations can best move the economy away from climate-intensive industries prompts us to explore multiple avenues for health sector investment action.
It is unequivocal — we need to transition away from a fossil fuel economy to protect public health. That said, fully divesting is not the only approach to reducing investment emissions and influencing the fossil fuel industry, and possibly not the most effective approach, as it may not give the health sector a chance to fully leverage its greatest asset — its collective political, economic, and ethical influence. The health care sector should call for climate-smart investments while communicating to both emissions-intensive industries and the financial sector the imperative of a just transition to a cleaner, healthier, more equitable economy to protect health and our future.
Investment emissions also cannot be addressed in a vacuum, especially given their complexity. Measuring and managing investment emissions must be an integral part of an organization’s broader climate action plan. Divestment from fossil fuels is not sufficient action on its own for hospitals and health systems to achieve net-zero emissions by 2050. Health care organizations must urgently commit to addressing their outsized contributions to the climate crisis and reducing emissions across all three scopes, while simultaneously ensuring community health and resilience in the face of climate change.
There are many strategies that health care organizations and the health care sector should explore to address investment emissions, and the worst path forward is to simply do nothing. The sector must leverage its moral influence, economic weight, and expertise in health to lead the transition to a more sustainable, more equitable, and healthier future with climate-smart investing.
Interested in learning more about investment emissions?
Join us for CleanMed May 21–23 in Salt Lake City
The conference will feature a session about investment emissions led by Dr. Amy Collins, Dr. Gregg Furie, the medical director of climate and sustainability at Brigham and Women’s Hospital, and Rob Roy, the chief investment officer and co-sustainability lead at AdventHealth. CleanMed will have many additional opportunities to learn how to measure and reduce health care emissions and advance sustainability and climate resilience at your organization.
Note: Although investments can be a large source of emissions for many hospitals, health systems, and other health sector organizations, some health care organizations have a small or nonexistent investment portfolio. This article is especially relevant for those health care organizations with significant investment portfolios. The Inflation Reduction Act and other incentives offer increasing opportunities for climate-smart investments across the entire sector for organizations of all types and sizes.
Acknowledgments: The authors would like to thank Dr. Gregg Furie and our colleagues at Health Care Without Harm and Practice Greenhealth for their constructive feedback, valuable suggestions, and insightful comments during the writing of this blog.
The development of this piece was supported by the Commonwealth Fund, a national, private foundation based in New York City that supports independent research on health care issues and makes grants to improve health care practice and policy. The views presented here are those of the authors and not necessarily those of the Commonwealth Fund, its directors, officers, or staff.
