1. What is fossil fuel divestment?
The fossil fuel divestment movement calls on students to ask their university administrations to immediately freeze any new investments in the top 200 fossil fuel companies, and to divest their endowment from the these companies within 5 years.
2. How will fossil fuel divestment address climate change?
The divestment movement aims to create space for national policies that address climate change. In order to combat climate change, we need significant national policies aimed at cutting emissions. Currently, the fossil fuel industry has enormous influence on U.S. politics through political campaign contributions and the funding of lobbyists. In 2012, the fossil fuel industry spent more than $140 million on lobbyists, making it the fourth largest industry-lobbying group.[i] Also in 2012, fossil fuel companies contributed almost $15 million to Political Action Committees (PACs), and climate change deniers in the Senate took an average of $699,000 from the fossil fuel industry.[ii]
To make space for national policies that address climate change, we need to lessen the political influence of the fossil fuel industry. The divestment campaign aims to do this by targeting the industry’s reputation and making it a less enticing source of campaign funds. Divestment aims to change the way the public, governments, and investors view fossil fuel companies in order to create a political climate where large-scale action on climate change is feasible.
3. Can divestment really build a movement?
Although the divestment movement is less than a year old, more than 26,000 students and alumni have signed petitions calling on their colleges and universities to divest from fossil fuels. Students have launched divestment campaigns on more than 300 campuses across the U.S.—from Berkeley to NYU and from Tulane to the University of Alaska. Six schools have already committed to divest from fossil fuels, including one state school. The movement has expanded beyond U.S. borders to Canada, the United Kingdom, the Netherlands, Australia and Bangladesh.[iii]
The divestment movement is so large that the President of the United States mentioned it in his address on climate change on June 25th, 2013. In his speech, Obama said, “Push your own communities to adopt smarter practices. Invest. Divest.”[iv] He recognized divestment as a tactic with the potential to have a significant impact on national policy.
Major media outlets that have covered divestment include: The New York Times, Rolling Stone, The Guardian, The Economist, Forbes, TIME Magazine, The Wall Street Journal, National Public Radio, The Washington Post, The Minneapolis Star Tribune, The Los Angeles Times, The Denver Post, The Houston Chronicle, The Chicago Sun-Times, The Boston Globe, ABC News, NBC News, CBS News, and more.
4. Why divest?
There are many reasons why we are calling on Carleton to divest its endowment from fossil fuel companies. Here are two of the them:
1. Investments in fossil fuel companies are unethical. If fossil fuel companies are generating a profit for Carleton, it means that they are burning carbon reserves that scientists agree should not be burned. The only way that Carleton can receive positive returns on its investments in fossil fuel companies is if atmospheric concentrations of CO2 are steadily rising.
2. In the long run, investments in fossil fuel companies are unwise. International agreements have designated 2oC as the safe level of global warming.[v] In order to avoid warming the planet by more than 2oC, it is estimated that 80% of the world’s proven fossil fuel reserves must stay underground.[vi] This means that if international agreements to limit the extent of warming hold, fossil fuel companies will need to forfeit profits on the majority of their underground reserves and will lose substantial value, making them an unwise investment.
5. Is divestment from fossil fuel companies financially risky?
While there is an element of risk with any investment, studies have shown that the additional risk incurred to divest from fossil fuel companies is negligible. According to a study conducted by the Aperio Group, complete divestment from the fossil fuel industry increases risk by only 0.0034%.[vii] Out of 20 studies published in academic literature comparing sustainable indexes to traditional indexes, 10 studies found that sustainable investment had a positive impact on returns and only 3 found a negative impact; the remaining 7 found negligible impacts.[viii]
Other studies have found that environmentally sustainable investment portfolios outperform traditional portfolios that include fossil fuel companies. A study by S& P Capital IQ found that if colleges had divested from fossil fuel companies 10 years ago, they would have earned an additional $119 million per $1 billion invested.[ix]
5. Shouldn’t Carleton focus its efforts on putting up more windmills and making its facilities more sustainable?
We applaud the effort of schools like Carleton that have launched major sustainability initiatives and have committed to reducing their carbon footprint by signing the President’s Climate Commitment. However, because university campuses comprise a very small fraction of the nation’s buildings, these actions alone will not stop climate change, nor do they have the potential to change the national conversation on climate change in a way that will allow congress to pass policies to address it. A singular focus on reducing institutional carbon footprints does not reflect the reality that national policies are essential for a successful response to climate change. Although personal and institutional responsibility is critical to a functional society, we need to work toward broad, system-wide changes that will incorporate the true cost of carbon emissions into the price of fossil fuels.
6. What about shareholder activism? By divesting from fossil fuel companies, aren’t we giving up our say in how they operate?
The top 200 fossil fuel companies combined are worth $7.42 trillion.[x] Collectively, U.S. college and university endowments are worth $406 billion and account for less than 0.1% of direct fossil fuel investments worldwide.[xi] Even if colleges and universities could surmount this limitation and put pressure on fossil fuel companies through shareholder activism, a shareholder resolution asking fossil fuel companies to keep their known fossil fuel reserves underground would not be practical because it would be against the personal and financial interest of each shareholder. Fossil fuel companies would be far less profitable if they agreed to keep 80% of the world’s carbon in the ground, so shareholders would be working against their own profits. Divestment removes this conflict of interest and allows for advocacy consistent with what science tells us is necessary to mitigate climate change.
[i] Center for Responsive Politics. (2013). Lobbying: Oil & Gas Industry Profile, 2012. http://www.opensecrets.org/lobby/indusclient.php?id=E01&year=2012
[ii] Andrew Breiner. (2013). New Infographic: The Anti-Science Climate Denier Caucus. ThinkProgress. http://thinkprogress.org/climate/2013/07/11/2289051/new-infographic-the-anti-science-climate-denier-caucus/
[iv] The White House. (2013). Remarks by the President on Climate Change. http://www.whitehouse.gov/the-press-office/2013/06/25/remarks-president-climate-change
[v] Copenhagen Accord. United Nations Framework Convention on Climate Change. December 18 2009. http://unfccc.int/resource/docs/2009/cop15/eng/l07.pdf
[vi] Bill McKibben. (2012). Global Warming’s Terrifying New Math. http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719
[vii] Aperio Group. (2012). Do the Investment Math: Building a Carbon-Free Portfolio. http://www.aperiogroup.com/system/files/documents/building_a_carbon_free_portfolio.pdf
[viii] The Asset Management Working Group of the United Nations Environment Programme Finance Initiative. (2007). Demystifying Responsible Investment Performance: A Review of Key Academic and Broker Research on ESG Factors. http://www.unepfi.org/fileadmin/documents/Demystifying_Responsible_Investment_Performance_01.pdf
[ix] Associated Press. (2013). College Fossil Fuel Divestment Movement Builds. http://news.yahoo.com/college-fossil-fuel-divestment-movement-builds-173849305.html
[x] Carbon Tracker Initiative. (2012). Unburnable Carbon: Are the World’s Financial Markets Carrying a Carbon Bubble? http://www.carbontracker.org/wp-content/uploads/downloads/2012/08/Unburnable-Carbon-Full1.pdf
[xi] Robert J. Shapiro & Nam D. Pham. (2011). Who Owns America’s Oil and Natural Gas Companies. Sonecon. http://www.api.org/statistics/earnings/upload/shapiro-pham-study_10_24_11.pdf