It’s the disinvestment movement to pressure university endowments and other non-profit groups to purge their holdings of fossil fuel assets. Momentum is building so fast it looks like a whole new front to constrain the world’s oil, gas and coal companies. But how effective will it prove?
The movement largely began in the US, boldly hustled by the influential group 350.org, which in turn enlisted the help of millennials. Now they are also finding unlikely allies on Wall Street, which never likes to see a good crisis go to waste – even though it has long supported the other teams, big oil and big coal.
“If it all worked out in the real world as it worked out in my mind, six months later the sparks we’d lighted would spread into a full-blown disinvestment of the kind that helped damage South Africa’s apartheid regime during my years in college,” 350.org founder Bill Mckibben wrote about the formation of the movement in his new book, Oil and Honey.
With campaigns on some 400 campuses, students are getting arrested from Stanford in the west to Cornell and Harvard in the east. The movement is spreading Europe and backed by the likes of Desmond Tutu, who played a key role in South Africa’s fight for freedom.
Earlier this month, Stanford announced it would no longer invest in coal. With its $18.7bn endowment, Stanford is the first big US university to begin dumping a major carbon asset.
Stanford’s move is now putting renewed pressure on the granddaddy of them all, Harvard University, where trustees have been resisting student demands to cleanse its $30bn fund of its carbon-based assets.
“This is a huge victory that substantially increases pressure on colleges and other investors,” said Dan Apfel, executive director of the Responsible Endowment Coalition.
“If Stanford will so visibly divest from coal, how can Harvard legitimately claim that they cannot afford to do this financially and that divesting is inconsistent with their own use of fossil fuels?” Apfel said by email.
“In fact, it is Harvard’s continued lack of meaningful action on climate change in investments that is inconsistent with its commitment to sustainability.”
Ben Franta, a spokesman for the Harvard students, vowed to keep up the pressure: “What will it take to get Harvard to divest itself of fossil fuel profit? Pressure and sacrifice”, he said by email. “I suspect there will be more pressure and more sacrifice to come.”
The other argument
Central to the carbon disinvestment campaign is the idea that socially responsible groups should not profit from companies that directly exacerbate global warming. But a second compelling argument is that trustees are putting other peoples’ money at risk if fossil fuel companies strand their assets due to government action.
So where should the managers with conscience put their money? Wall Street has a few ideas.
The Natural Resources Defense Council has teamed up with the big investment house BlackRock and the FTSE Group to launch what they called the first global equity index series that specifically excludes fossil fuel companies.
“We are increasingly seeing demand from our clients for indices that reflect their overall business culture and values”, said Mark Makepeace, CEO of FTSE Group.
Despite the string of successes, the movement is a long way from strangling the hydrocarbon industry of new funding, because for every sale there will be a buyer, at least until the government puts a price on carbon.
Nevertheless, the divestment movement threatens to stigmatize the industry the way the tobacco war plagued the cigarette makers, who were forced to retreat on a broad front as that health campaign gained momentum, according to a study at the Smith School of Enterprise and the Environment at Oxford University:
“As with individuals, a stigma can produce negative consequences for an
organization. For example, firms heavily criticized in the media suffer from a bad image that scares away suppliers, subcontractors, potential employees,
Divestment model that makes haste
Every divesting college will divest in its own way but the model for small institutions may well the one used at Pitzer College in southern California. It has a relatively small endowment of $125m but it does have a big named backer, the Hollywood star and producer Robert Redford.
Pitzer announced in April it would sell off 99% of its carbon based assets by the end of the year. As part of the plan, the school will develop an environmentally-sensitive policy to guide future investments, aim for a 25% reduction of the college’s carbon footprint by the end of 2016 and set up a sustainability task force for its campus.
Redford, a college trustee, told a news conference he hoped its plan would be seen as “an innovative solution that other organizations can model”.
Apfel, of the Responsible Endowment Coalition, agreed Pitzer was leading the way by moving quickly to make its money work for climate solutions, rather than funding its woes.
“The old model of investing that ignores environmental and social impacts is a thing of the past,” he said.