by Allen Best
The fossil-fuels divestment campaign clearly has legs under it. Since being launched in June 2011, the movement has drawn 400 colleges, foundations and other investors who have vowed to wash their financial hands of holdings in coal, oil and natural gas.
Stanford, for example, has filtered its $21 billion endowment of fossil fuel investments. Now, Norway’s $900 billion sovereign-wealth fund has agreed to sell $9 billion worth of shares in firms that mine coal and tar sands.
The movement was energized by Bill McKibben’s July 2012 article in Rolling Stone magazine. Called “Global Warming’s Terrifying New Math,” the story laid out the vast ownership of fossil fuels still buried in the Earth by oil and other companies and the staggering accumulation of carbon dioxide in the atmosphere if those still-buried fuels get burned.
Bottom line: Climate scientists think we can pour roughly 565 more gigatons of carbon dioxide the atmosphere if we hope to keep the Earth’s temperature increase to just 2 degrees Celsius. (It’s already increased 0.8 degrees). But if we burn all the companies’ proven oil, gas, and coal reserves, we’ll produce five times as much carbon dioxide. That could translate into a 6 degree C hike. Or, 11 degrees Fahrenheit.
Few people deny the need for change, and many of us believe it’s a desperate need. But is the divestment campaign the device to forcefully produce that change?
In May, at the Colorado Divest-Invest Conference, speakers made the case that this effort is different than those of decades past that targeted tobacco companies and South Africa’s institution of apartheid. This divestment need not cost investors money.
“In this case, the ethical and financial motives are aligned,” said Jenna Nicholas, project manager for the Wallace Global Fund’s Divest-Invest Philanthropy. She pointed to ”opportunities and responsible to scale up the clean energy economy” and described fossil fuels stocks as “risky” to portfolios.
Mark Campanale, the founder of the Carbon Tracker Initiative, had mined data that was the foundation for McKibben’s story about terrifying math. In Denver, he argued that the oil companies can reinvest their money in the new energy economy. “If we get this right, we’ll have a soft landing,” he said.
Thomas van Dyck, a founder of As You Sow, a shareholder advocacy foundation, was similarly bullish on the economic opportunities. “It’s the best economic opportunity of our generation,” he said.
Yet if the clean energy future looks so rosy, why is the divestment campaign even needed? My question is partly rooted in my personal circumstances. Since April 2009, I have had my retirement savings fully invested in such things as makers of buses, battery technology, geothermal and energy efficiency technologies. Six years later, I’ve lost ground to inflation, let alone lined my nest for the sunset years.
The Rockefeller Brothers Foundation has approached divestment cautiously. Last September, it announced plans to end fossil fuel investments. The original source of wealth was oil, of course, so the announcement had huge symbolic value. But fund managers will spend two or three years to wash their hands.
Geraldine Watson, vice president for finance and operations at the fund, explained at the Denver conference that fund managers concluded immediate divestment described an effort to “strategically and carefully” manage assets in order to preserve and growth wealth. “You can’t just turn off the switch and get out of the bad stuff immediately,” she said.
And some big investors are unlikely to turn off the switch at all. In its June 27th issue, the Economist reports that big pension funds have not joined the movement. The magazine further points to a survey conducted on behalf of the Independent Petroleum Association of America, an industry group, that found 88 percent of institutional investors were unlikely to be persuaded to divest.
The New York Times probed even deeper, citing a report conducted by a team from Oxford University. Published in late 2013, the report found only a negligible effect if every public pension fund and university endowment joined the movement. That’s because most energy company stock is held by big institutional investors, such as Fidelity, whose managers are unlikely to alter their portfolios to advance moral or social agendas.
Then, what’s the point of divestment? “It becomes much harder for stigmatized businesses to recruit good people, to influence policy and, occasionally, to raise capital,” explained Ben Caldecott, director of the Stranded Assets Programme at Oxford.
McKibben, a leader of the divestment movement, said that the campaign provides a focus. “The goal is not to bankrupt the fossil fuel industry. We can’t do that with divestment alone,” he told the Times. “But we can help politically bankrupt them. We can impair their ability to dominate our political life.”
Like the home team at a big sporting event, McKibben wants to make noise. Without being pushed, the fossil fuel companies will continue down the familiar path.
Others argue for a carbon tax. I agree, and that’s where I have invested time and a little money in advocacy efforts. With a carbon tax, we level the playing field. The tax will reflect more accurately the full cost of fossil fuels. It will spur innovation and investments in alternatives.
That’s also where I’ve invested my retirement savings, and it’s been tough for the last few years to watch those stocks struggle like a baby bird. But if I live long enough, my nest will be well lined. If I live long enough.