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(Corrects name of UN PRI in paragraph 19 of MAY 24 story toInvestment not Investing)
* Colleges, pension plans among those divesting
* Fund firm survey shows most focused on engagement
* PR pressure seen as important factor in driving change
By Simon Jessop and Ron Bousso
LONDON, May 24 (Reuters) - For Rivka Micklewaite and fellowstudents, securing a pledge this week from Oxford University toavoid direct investments in companies producing coal or tarsands is just the beginning.
Getting that commitment involved a two-year campaign duringwhich they staged a "marriage" between the 900-year-olduniversity and "Big Oil" before breaking it up, to symbolise theneed to end investment in fossil fuels, Micklewaite said.
"The campaign is definitely going to continue," she toldReuters, adding that full divestment is her aim for the 3.8billion pounds ($6 billion) in university endowment funds.
The second-year engineering student from Balliol College isnot alone. She is part of a global campaign urging investors toditch assets in 'dirty' energy firms in favour of 'greener'rivals, and which so far has pledges to sell out totalling $50billion.
Norway's $900 billion sovereign wealth fund and the Churchof England are among recent high-profile sellers.
But some of the money managers running the more than $27trillion in assets held globally in mutual funds say divestmentas a tool to address climate change is too simplistic in mostcases. Most argue it can leave fewer investors at a company whoare committed to steering management in the desired direction.
"It's a much more sophisticated debate," said Sacha Sadan,director of corporate governance at Legal & General InvestmentManagement. "Just putting (some firms) in the naughty corner andhaving a go at them is not going to solve the problem."
"This will be the biggest issue of the next five years ... Iwouldn't say that we're 20 percent of the way there yet."
A Reuters survey of nine European fund firms managing acollective $2.7 trillion in assets revealed that most werefocused on engagement with companies rather than divesting.
That approach bore fruit during recent annual generalmeetings, where shareholders at Royal Dutch Shell andBP demanded access to information about how each companywas addressing climate change, and received company backing fortheir resolutions.
And in the United States, shareholders at Chevron and ExxonMobil are due to vote on May 27 on resolutionsaimed at reducing greenhouse gas emissions.
PR PRESSURE
Each of the fund firms surveyed acknowledged the campaign'srole in raising awareness, but most said coal and tar companieswere relatively easy targets, and it was more complex for otherenergy sources.
"What's much harder, with the integrated oil and gascompanies, from a mainstream fund perspective, is what modelscan you develop and put in place to determine who will beimpacted by the energy transition," said Matthias Beer, from thesustainable investing team at F&C Asset Management.
"That goes beyond oil and gas and mining and utilities. Ifyou go further down the value-chain of fossil fuels, then you'retalking about the automotive sector and others that are highlydependent on fossil fuels and hydrocarbons."
Oxford University joins 220 organisations, including faithgroups and university endowment and public pension funds, inbacking divestment ahead of a U.N. climate change meeting inParis in December aimed at agreeing limits to man-made globalwarming.
The U.N. talks could add weight to the campaign if a dealultimately means billions of dollars worth of oil, coal and gasresources remain 'stranded' in the ground.
For Jens Peers, chief investment officer for sustainableequities at Natixis Asset Management, the PR effect is key.
"Already, we're seeing pressure building. No one likesnegative press," said Peers.
That in turn is pushing investors to seek advice, said FionaReynolds of U.N.-backed investor engagement group the Principlesfor Responsible Investment.
"This is where the divestment campaign has been successful,even if the actual amount of money that has been divested ispretty minor," Reynolds told Reuters.
But an Oxford University study in late 2013 argued theindirect impacts of divestment campaigns on companies could bewide-reaching, with those seen as worst offenders "stigmatised".
This could result in a hit to the bottom line as investorstrimmed cash flow expectations and share valuations, it said.
TECHNOLOGY
Other potential impacts highlighted by the report includecustomers and other stakeholders deserting firms; politiciansenacting more restrictive legislation; investors pushing forboard changes and even firms being prevented by authorities frombidding for new business or having M&A deals scuttled.
"Then they will start reacting, questioning the businessmodel - that's potentially the biggest impact the divestment andstranded asset issues can have," said Natixis AM's Peers.
The Oxford study cited the examples of a campaign to forceSouth Africa to abandon apartheid and one to divest from tobaccofirms. In the case of South Africa, for example, the U.S.government enacted the 1986 Anti-Apartheid Act, it said, whilethe Bank of Boston, Chase Manhattan and Barclays were amongcompanies to stop doing business in the country.
The funds surveyed by Reuters said leading energy companieshad a crucial role to play in finding technological solutions tomitigate climate change risks, with early movers likely to berewarded in terms of access to capital and share price gains.
Simon Henry, chief financial officer at Shell, said theindustry needed to work with governments and civil society on along-term plan informed by science and economics and mindfulthat 80 percent of the energy industry and 100 percent of thetransport sector is currently reliant on fossil fuels.
Given that, a mass exodus of long-term investors such aspension funds from holding certain stock and debt assets couldend up hurting the chance of positive investor-led change.
"Fundamentally, it is a shareholder choice to buy or sell... What this may mean is the transfer away from shareholderswho might have a grown-up dialogue with us about the climatechange challenge towards people who may be less bothered aboutthat.
($1 = 0.6379 pounds) (Additional reporting by Nina Chestney in London; Editing byAlexander Smith and Pravin Char)
