“It’s wrong to profit from wrecking the planet.”
That’s what thousands of young people are saying across the U.S. who are demanding their colleges and universities strip fossil fuel investments from their endowment portfolios.
They are arguing with passion — and a considerable amount of organizing savvy — that the still untapped 2795 gigatons of fossil fuel reserves energy companies own must be left in the ground. Why? Because burning it will cook the planet — raising temperatures 6 degrees Centigrade or more, three times what scientists have determined is the level needed to avert runaway climate chaos.
It’s a message that is profoundly counterintuitive to capitalist culture.
What? Leave resources unexploited, potential profits untapped? The corporate instinct screams in protest. It’s why even when energy companies try to be “green,” they undermine their own efforts. Consider Duke Energy, which holds membership in the U.S. Climate Action Partnership,while at the same time being the third largest emitter of CO2 in the U.S. — and in 11th place globally.
Fossil Fuel Divestment Campaign Heats Up
But the kids aren’t having it, maybe because they know that they will be paying the terrible costs of burning those fossil fuels while those who burned them will be peacefully laid to rest. They are putting the issue of intergenerational equity squarely on the table.
So they’ve lit the spark on a fossil-fuel divestment campaign that is spreading like a California wildfire on campuses across the country — and moving off campus, as well. They want their schools to divest from Duke and the other 200 publicly-traded companies that own most of the globe’s oil, coal and gas reserves. And they want them to invest in clean, renewable energy and efficiency, not only in the market, but also on campus.
The Go Fossil Free campaign was launched last Fall by the “Do The Math” tour by Bill McKibben of 350.org and others and currently counts some 300 campus groups. And it’s just started spreading to Canada.
Victories and Setbacks
The campaign reaped some early victories: three small colleges — including top-rated Amherst College — agreed to divest. And, in a sign of what is becoming an off-campus front in the campaign, Seattle Mayor Mike McGinn pledged the city would purge its portfolio of fossil fuel stocks.
There has been pushback, as one can imagine at a time when fossil fuel stocks are performing well in the market. So far, no college with a $1 billion portfolio or greater has divested. Harvard at first huffily dismissed a student resolution (approved by a 72 percent margin) asking the university to divest its $30.7 billion endowment of fossil fuel holdings and to reinvest in socially responsible funds. Swarthmore College also demurred.
But the students were not deterred; lately their resolve has been showing results. Harvard has agreed to establish a social choice fund for donations from alums and to start talks with students about divestment. Swarthmore has also agreed to examine its portfolio from a social responsibility standpoint.
Jamie Henn, Communications Director of 350.org wrote to CSRwire in an email,
“We’ve actually been pleasantly surprised by how open many administrations have been to discussing fossil fuel divestment with their students. That said, it’s not surprising to see some resistance to the idea: divestment is a serious step for a university to take, which is precisely why it’s so powerful.”
Doing the Math on Divestment
Schools are concerned that their endowments will take a financial hit from investment, thereby shortchanging support for scholarships and other campus needs. But campaign supporters disagree. Henn thinks administrations that are actively opposing divestment probably haven’t conducted a thorough and fair analysis of what it would mean for their endowments.
“When you do the math, it becomes increasingly clear that divestment doesn’t necessitate financial losses, in fact, it opens the door for more creative thinking about how to maximize returns while promoting other social and educational priorities. For example, investing in a green-revolving loan fund that helps retrofit campus buildings to become more energy efficient is likely a far safer bet than investing in a coal company,” Henn wrote to CSRwire.
Research bears Henn out. Investment management firm The Aperio Group, did a study on the risk divestment posed to portfolios and found a “theoretical return penalty” of 0.0034 percent – i.e., “virtually irrelevant.”
Portfolios Risk Losses If They Don’t Divest
Evidence is mounting of the risk to portfolios of not divesting from fossil fuels. A recent market analysis from HSBC warned major oil and gas were companies were at risk of losing up to 60 percent of their value if emissions reduction targets were adhered to – when those emissions targets, the report acknowledged, were necessary to keep atmospheric CO2 below 450ppm, a level that “deliver[s] a 50 percent chance of limiting global temperature increase to 2C.”
According to Carbon Tracker:
The banking firm uses the IEA’s ‘unburnable carbon’ scenario to draw this conclusion…Applying this model finds that 17% of Statoil’s reserves would become unburnable, while 6% of BP’s reserves are at risk, 5% of Total’s and 2% of Shell’s reserves.
Where HSBC see an even bigger risk to the market capitalisation of the sector is based on the assumption that because the price of oil would fall, demand would follow suit, leading to the prediction that 40-60% of their market cap is at risk. The analysts argue that the oil market is still failing to think about a low carbon future – ‘because of its long-term nature, we doubt the market is pricing in the risk of a loss of value from this issue’.
Deutsche Bank and Standard and Poors have also published reports warning investors of risk exposure to portfolios due to climate change – and the opportunities inherent in tackling it. CSRwire recently reported that mainstream investors are increasingly convinced that sustainability offers significant returns.
Colleges Could See Substantial Benefits
And colleges may reap substantially better returns than they can get from dirty energy holding by investing in on-campus efficiency projects, as noted by Jamie Henn above. The Responsible Endowments Coalition did a study showing that “green revolving funds” that re-invest the savings from such projects can earn a median ROI of 28 percent.
Indications are that divestment may reap a reputational return in increased college enrollments as a result of social investing – fossil fuel divesting – moves.
The message is resonating.
Responsible Endowments Coalition’s Executive Director Dan Apfel told CSRwire that investment consultants and advisors who manage large institutions are seeing an uptick in inquiries about divesting from fossil fuels.
It doesn’t have to happen all at once, Apfel says.
Divestment could take weeks – or months. The important thing is to make investing in fossil fuels repugnant, much as investing in apartheid South Africa was in the 1970s and ‘80s.
This article was originally published on CSRwire
Francesca Rheannon is an award-winning journalist and managing editor for CSRwire’s blog, Talkback.