One of the most focused endeavors of the broader fight against climate change is the movement to demand divestment from fossil fuel companies. Specifically focused on institutional investors, divestment activists have been pressuring pension funds, university endowments, and others with significant holdings in the oil and gas sector to sell those shares (or bonds). This is a multi-pronged effort to raise awareness about how these industries fuel climate change, to divert that capital to low- and zero-carbon resources, and to deter future investment in oil and gas exploration.

As part of that campaign, February 13 and 14 have been designated Global Divestment Day(s), with hundreds of events organized by activist groups. The Norwegian sovereign wealth fund — the largest in the world, built from the country's oil and gas wealth — has announced it would sell holdings in coal and mining companies that, in its estimation, represent an unacceptably high degree of climate-related investment risk. The fossil fuel companies under target are pushing back, with ad campaigns focused on the important role their products play in the global economy.

With these events as a backdrop, a new report from the American Security Project (ASP), a Washington, D.C.-based think tank, casts a critical eye on the divestment movement. The report offers a sensible reminder of what fossil fuel divestment can and cannot do.

While divestment aims at supply-side solutions (trying to starve fossil fuel companies of the capital to fund new exploration and exploitation of reserves), it is beyond the scope of the divestment movement to address the demand side of the equation. Unlike the divestment in Big Tobacco (from which the current movement draws inspiration), coal, oil, and natural gas are not discretionary goods; they are critical to the global economy. Oil companies are not lying when they say people will still need to buy oil over the next 15 to 20 years. Replacements may be available on the horizon (paging Elon Musk), but supplying them at scale remains a challenge.

The financial impact of divestment also tends to be overstated. The ASP report and similar efforts, such as the Stranded Assets Programme at Oxford University, have demonstrated that complete divestment of university endowments from these holdings would, in the long run, have a negligible financial impact on the bottom lines of fossil fuel companies. Money would still flow into company coffers.

What's more, the universities and other organizations that divest could reasonably be accused of violating their fiduciary duty by forgoing money-making investments. That calculation will likely change as renewable-energy investments grow, especially with the proliferation of green bonds, but that market is still far from making steady gains year over year.

While the ASP report puts fossil fuel divestment in its proper place, it leaves open the question of whether the movement can be taken in a direction that is more useful to goals that both activists and analysts share.

Take the example of the Norwegian divestment. Its decision was not to divest from all fossil fuels. Instead, it is taking a measured approach that tries to identify the riskiest assets — and sell only those. Call it "divestment lite" — taking the well-intentioned motives behind divestment and deploying it in a much more targeted and tailored way. It will keep some assets that may be valuable in the intermediate term, but still send a signal to the market and public at-large that changes need to be made.

The ASP report rightfully points out one of the benefits of holding stocks in the first place: shareholder activism. To better leverage their activist network, fossil fuel divesters should follow the Norwegian model, focusing on the low-hanging fruit of coal, tar sands, and oil companies that are inadequately preparing their own businesses for future climate risk. Conversely, they should test the sincerity of companies such as Shell, and explore how to best work with them when their CEO says the oil sector needs to be more constructive in the debates over climate change solutions. Shell has been responsive to shareholder accountability efforts in the past, according to Reuters.

To the extent that the fight against climate change demands changes in a wide variety of consumer behaviors, fossil fuel divestment will have a role to play, even if its most vehement supporters may exaggerate its impact in order to rally support. Identifying better strategies for divestment campaigns will be a crucial factor in ensuring their effectiveness.