TO DIVEST OR NOT DIVEST?

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The Pros and Cons of Fossil Fuel Divestment

Talking Points

MAY 13th FORUM: DIVEST OR NOT DIVEST?

On May 13th, 2013, the Jamaica Plain Forum, Boston Area Sustainable Investment Consortion, and several other community organizations held a community forum in Boston to discuss issues of the “moral and practical considerations of Fossil Fuel Divestment strategies.”

Video of the May 13th Forum

 

The forum brought together those with expertise in finance, community organizing, social justice, and policy to address questions surrounding the basic nature of fossil fuel divestment as well as its implications for our investments and our world. The well-attended debate ultimately highlighted the differences among a plethora of thought on divestment, even from a like-minded group. Here, Chuck Collins from the Institute for Policy Studies’ Inequality Program gives some talking points as to the positive opportunities in Fossil Fuel divestment.

 

WE DID THE MATH

We’ve done the math –and realize that we must compel the 200 largest fossil fuel corporations to keep 80% of their carbon assets “in the ground.” Extracting and burning these reserves of oil, coal and gas would raise the earth’s temperature over 2 degrees centigrade, unleashing climate catastrophe. See: [Rolling Stone, Global Warming's Terrifying New Math]

 

DEEP SHIFT

The next 20 years will be unlike the last 50 years. We are entering a stage of discontinuity thanks to ecological and economic change. We are in a transition to a new economy – based on an entirely different set of assumptions about energy – and the future source of livelihoods. We need to shift capital investment away from the dinosaur economy – toward the life sustaining new economy. See: Nine Action Clusters and New Economic Institute

 

WE HAVE A SHARED RESPONSIBILITY TO FIND NEW CLEAN ENERGY TO POWER OUR LIVES

We must each take responsibility for the seeking happiness not through consumption but through genuine progress and reducing our individual carbon usage. See: What's my carbon footprint and Genuine Progress

 

FOSSIL FUEL INDUSTRY HAS DISPROPORTIONATE RESPONSIBILITY: THEY ARE ROGUE ACTORS

The Fossil Fuel industry uses their considerable financial and political power to rig the rules to block regulation, block sane energy policy, extract taxpayer subsidies, thwart renewables, and limit consumer choice. They are writing rules and fundamentally distorting democracy. The industry is institutionally caught in a short-term system, where their economic interests are aligned with destroying the planet. See: Oil Change International

 

FOSSIL FUEL PROFITABILITY IS BASED ON RULE RIGGING

The profitability of the fossil fuel sector is based on their ability to politically rig the system and shift the real costs associated with their industry onto society. The externalities that they shift include: environmental pollution, worker health and safety, cost of military deployment in oil regions, health impacts, global climate change, and political corruption. If fossil fuel companies had to absorb the true costs of these externalities, the industry would be transformed –and likely focus first on energy conservation before further extraction. Their dependence on political rules makes them a risky and volatile sector as investments. When their political clout diminishes, as we hope it will, they will become less profitable. See: The Price of Oil

 

CHANGE MUST COME FROM OUTSIDE THE INDUSTRY

The Fossil Fuel industry will only reform when we change the rules that shape their marketplace and operations. These can be accomplished through regulation and taxation. Instituting a robust carbon tax, phased in over several years and with offsets to address its regressivity, would signal huge market shifts.

 

WE MUST RAISE THE COST OF CARBON EXTRACTION & BURNING

If we succeed in averting climate catastrophe, it will be because we have succeeded in raising the cost of fossil fuels and forcing the industry to internalize its real costs to society and the environment. This may lower the profitability of the sector – and lower returns for investors. Our cities, congregations, and universities should not be in a position where we are rooting for the Fossil Fuel industry to win – boosting our investment returns yet in the long-term destroying the planet.

 

THERE IS AN EDGY MOVEMENT EMERGING TO AVERT CLIMATE CATASTROPHE.

Thankfully, there is a radical edge emerging in movement to avert climate catastrophe. The “inside” strategy of working with the fossil fuel industry to reform itself is not moving fast enough. The new “outside strategy” activists are calling out “Big Green” – the historic environmental groups who have comprised themselves into irrelevance. They are calling out Wall Street. They are upping the ante in terms of direct action, civil disobedience along with traditional organizing and electoral politics. The call for divestment is part of this movement. See: 350.org

 

ABOLITIONIST CAUSE

For participants, this is an “abolitionist” cause: divestment is not simply an economic strategy, but also a moral and political one. If slavery is wrong, is it wrong to make a profit from it? If Apartheid is wrong, is it wrong to make a profit from it? “If it is wrong to wreck the planet, then it is wrong to profit from it.” See “The New Abolitionists,”

 

ADDRESSING ANTI-DIVESTMENT ARGUMENTS

1. “By Owning Fossil Fuel Stocks, we can maintain leverage and engage with the industry to reform itself.”

POINT: Institutions that want to actively engage in Shareholder activism – introducing social issue resolutions –should retain the $2,000 of stock that enables them to introduce resolutions, as Greenpeace and the Institute for Policy Studies do. Ownership is only one source of leverage. We should engage as full stakeholders – citizens, employees, consumers, communities, and moral actors.

 

2. “Divestment would cause unacceptable losses in financial return.” “Divestment will be so costly and negatively impact return of our institutions – and will increase risk –hurting our core missions.”

POINT: IPS’s modest endowment, managed by Northstar Asset Management, has been Fossil Free Fuel since 2008 and has out-performed the S&P 500 every year. Our funds not only exclude fossil fuel but proactively invest in renewable energy.

Over the last 20 years, the fossil fuel energy sector, has been among the most profitable of all sectors. For a variety of reasons, including those described above, this will not remain true. But even with this profitability, Northstar Asset’s analysis of these last two decades found that the worst case actual cost of eliminating the “energy sector from a portfolio translates to a real cost to the investor of about 0.3% per year” – or thirty cents on every hundred dollars. They found this minimal cost may be mitigated. See attached memo that will soon to be posted at www.northstarasset.com

The role of Socially Responsible Investment professionals is not to advise social movements on strategy and tactics. The job of the SRI community is to create the investment vehicles that mitigate the minimal costs of excluding fossil fuel investments – and move investment funds to the new economy of renewable resources and durable enterprises.

 

3. “Divestment is meaningless and distracting.”

POINT: There is no good reason why we should remain invested in the fossil fuel industries, not when we can continue to powerfully advocate with corporations and maintain sufficient returns. We can and should find ways to shift our investment capital to the institutions and enterprises of the new economy. The moral question now is rather: Should we remain invested in the fossil fuel sector. The answer is no.

 

WE CAN AND SHOULD DIVEST FROM FOSSIL FUELS AND INVEST IN THE NEW ECONOMY. Thanks for listening!