Lately there has been a great deal of chatter in the environmental community about divestment. But what exactly does this mean? To understand the divestment movement, the first thing grasp is that every college, university, and most places of worship, unions, cities, states, and large workplaces have endowments or pension funds. Endowments consist of stocks, bonds, mutual funds and other investments tools to generate income. The National Association of College and University Business Officers estimates that America’s colleges and universities have about $400 billion in endowment assets, and much of the assets are from investments in fossil fuel companies.1
Although many fossil fuel stocks have been profitable in recent years, proponents of divestment argue that because neither producers nor consumers pay to emit climate-warming global warming effects are borne by insurers, taxpayers and victims of these extreme events. Just consider that the economic costs of Hurricane Sandy and the summer of 2012 drought eclipsed $100 billion, an amount equal to the combined annual profits of only three of the big oil companies, Exxon, Chevron, and Royal Dutch Shell.3
The Fossil Free Campaign calls for institutions to “immediately freeze any new investment in fossil fuel companies, and divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years.”4 They argue that the only way to make any significant progress in the flight against climate change is to directly attack the fossil fuel industry’s bottom line.
Divestment at Colleges and Universities
During his Do the Math Tour, activist Bill McKibben told audiences that universities which continue to finance their students’ education through investments in the fossil fuel industry are “guarantee[ing] they won’t have much of a planet on which to make use of their degree.”5 So far three schools have divested their endowments from the 200 fossil fuel companies identified by the environmental group 350.org: Unity College in Maine, Hampshire College in Massachusetts, and Sterling College in Vermont. Students at 256 other institutions throughout the United States are also pressuring Boards of Trustees to divest,6 with particularly strong groups at Harvard,7 Middlebury,8 Brown,9 UC Berkeley,10 the University of Vermont, Bowdoin, the University of New Hampshire, Tufts, Vassar, and Swarthmore.11 Students at these universities and others argue that America’s universities have a duty to shape public debate on energy policy and climate change.
Although there has been some success with these campaigns many administrators and Boards of Trustees have been skeptical. For example, at Bowdoin and Middlebury, the administrations have expressed concern that divestment might lead to reduced financial aid, and that it would be more effective to spend more money supporting sustainability projects on campus. Nonetheless, both of these educational institutions are taking the matter very seriously in light of their student body’s support for divestment.13
Tufts student Senate.
Divestment Off-Campus
Recently the divestment movement has graduated from universities to progressive municipal governments. So far Seattle and San Francisco’s city employee pension funds are both looking at divesting from fossil fuel companies.16 When San Francisco City Supervisor John Avalos introduced a resolution calling for his city’s $16 billion retirement fund to divest from fossil fuel companies he told reporters: “San Francisco has aggressive goals to address climate change… It’s important that we apply these same values when we decide how to invest our funds, so we can limit our financial contributions to fossil fuels and instead promote renewable alternatives.”17
Previous Divestment Cases
Recent divestment campaigns have targeted a host of issues, such as sweatshop labor, firearms, and use of landmines. Undoubtedly, the best known example of divestment occurred in the 1970s and ’80s in response to the apartheid regime of South Africa. Retirement funds, mutual funds, and investment institutions across the U.S. sold off the stocks of companies that did business in South Africa.18
Interestingly, most economists agree that public divestment campaigns had no real impact on public market valuations. “Despite the prominence and publicity of the boycott and the multitude of divesting companies, the financial markets’ valuations of targeted companies or even the South African financial markets themselves were not easily visibly affected.”19 Instead, the divestment campaign likely had a different, non-financial impact. Divestment greatly increased public visibility surrounding the injustices of South Africa’s apartheid government. It is almost certain that worldwide popular opposition in the 1980s contributed to the decline of apartheid, and divestment was an important contributing factor.
The Future for Fossil Fuel Divestment
The evidence from South Africa suggests that although divestment might not be the most effective from a financial standpoint, it can have an impact by shaping public discourse. If universities across the country divested from fossil fuels, the gesture could help to reignite public debate on climate change and energy security.
Such a campaign might have a result similar to that achieved by the tobacco divestment movement.20 In that campaign, “tobacco companies came to be seen as bad actors…The idea that tobacco companies are bad actors does contribute to a decline in smoking. It’s not just that smoking is going to kill you — it’s also that smoking is giving money to bad people.”21 It is not likely that divestment will put the fossil fuel industry out of business. However, divestment from select fossil fuel producers would send a powerful message to the energy industry and the nation. It would signal that America’s universities take the climate change challenge seriously.
