There is a robust debate
happening in university halls, around religious congregations, and at
individual kitchen tables nationwide. The driving question: Should we
divest from the fossil fuel industry?
Whether you are a college student, a trustee of a
religious or educational institution, or an individual with a retirement
fund, this is a relevant question for you.
Earlier this year, several community organizations in Boston, including the Institute for Policy Studies’ Jamaica Plain Forum,
held a community forum in Boston to discuss the moral and practical
issues of divesting from fossil fuel companies as a strategy to combat
climate change.
The forum, viewable here, 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. Some of the questions we debated were: Is divestment
meaningful? Can we exert leverage over energy companies by retaining the
leverage of ownership? Would divestment reduce the investment returns
required to sustain our institutions and income needs?
Our view is that our current economy, based on insatiable extraction and consumption, is simply unsustainable
– for the planet as well as for us. Powerful fossil fuel corporations
exercise an undue influence on environmental and economic policy,
thwarting our ability to adopt sane and far-sighted energy policies.
Here's what we found:
1. We Did the Climate Change Math: Now We Must Act
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. [Read: Rolling Stone, Bill McKibben, “Global Warming's Terrifying New Math”]
2. Time to Choose Sides: We Must Raise the Cost of Extracting and Burning Carbon
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 will 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. It isn’t right that the value of a sector doesn’t
reflect its impact on the earth and society. In the long-term,
destroying the planet doesn’t help us boost our investment returns.
3. We Are All Responsible for Carbon
Pollution, But the Fossil Fuel Industry Has a Disproportionate
Responsibility for Climate Change
While each of us should take personal responsibility
for reducing our individual carbon usage, the fossil fuel industry has
disproportionate responsibility for climate change. Many of us would
like to have lower carbon lifestyles, but we’re systemically blocked
from doing so via the lobbying power of the fossil fuel industry. 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 government policies and fundamentally
distorting our democracy. The industry is institutionally caught in a
short-term system, where their economic interests are aligned with
destroying the planet. If we had a carbon tax, innovation and
development would be pushed towards energy efficiency. [See: Oil Change
International's Dirty Energy Money index.]
4. Fossil Fuel Profitability is Based on Rigging Our Political Systems
The profitability of the fossil fuel sector is based
on their ability to politically influence and 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-producing regions,
negative 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 would
probably likely focus first on energy conservation and sustainable
energy sourcing 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: Oil Change International]
5. Investment Returns in Fossil Fuels Will Inevitably Decline
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. As
policy makers start pushing back, they will eliminate government
subsidies for fossil fuel, as President Obama has proposed. They will
pass laws requiring fossil fuel producers to be more responsible for
their negative environmental and social impacts. There is also growing
evidence that the assets of fossil fuel industries are greatly
over-valued. And, if we are successful, many fossil fuel companies will
have “stranded assets,” reserves that will not be tapped. When the real
value of carbon holdings is adjusted downward, billions in shareholder
wealth will evaporate. [See: Carbon Tracker]
6. Divesting from Fossil Fuels Will Not Negatively Impact Return
Investors are understandably concerned that their
investments will earn less money if they eliminate profitable fossil
fuel corporations. It may not be prudent to sell off securities with
large capital gains all at once; individuals and investors should get
professional advice on the best divestment strategy. Some institutions
have long-term relationships with trusted investment advisors who have
helped their investments grown. It is not ungrateful or unprofessional
to direct these advisors to gradually divest from dirty energy and
reinvest in socially responsible alternatives. Beware, however, of
advisors who tell you it can’t be done or predict huge losses overtime.
It is conventional investment wisdom that if you
narrow the breadth of your investments—and fossil fuel securities are
approximately 10 percent of the public equities market—that you increase
risk. But there is plenty of expertise in the “socially responsible
investment” field as to how to divest and design an investment portfolio
that will still earn comparable returns. Industry professionals are
working now to design “fossil fuel free” investment portfolios and
mutual funds.
7. The Fossil Fuel Sector Will Not Reform Itself
The fossil fuel industry will only reform when we
change the rules that shape their marketplace and operations. This 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. Many thoughtful people
believe we should stay invested in fossil fuel corporations to have
leverage with them and engage with them. This has not worked.
8. Support the Movement and an 'Outside Strategy'
Selling stocks in fossil fuel companies may not drive
down stock prices or even devalue the industry since other buyers will
purchase those stocks. Regardless, the goal of the dirty energy
divestment fight is to change public dialogue and society’s lifestyle,
not stock prices. A traditional approach has been inside: engaging with
the company and using our ownership stake to press the company to
reform. This hasn’t worked. To send a strong message, we need to sever
our ties to this sector and make these companies moral pariahs, similar
to how the public treated tobacco companies.
Thankfully, there is a radical edge emerging 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 the historic environmental groups who have compromised themselves into irrelevance.
They are calling out Wall Street—those interested in only their own
private gain at the expense of society and the earth. 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]
9. Engaged Shareholder: You Can Still Work the "Inside Strategy" If You Want
Some institutional investors argue that they can
change the behavior of the fossil fuel industry by retaining ownership
of corporate shares and being engaged investors. Institutions or
individuals 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, however. We should engage as full stakeholders—citizens,
employees, consumers, communities, and moral actors.
10. The Moral Question Is Why Should Any Institution or Individual Stay Invested: This Is an Abolitionist Cause
Divestment is not primarily 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 Boston Phoenix, Wen Stephenson, “The New Abolitionists”]
11. We Can Divest from Fossil Fuels and Invest in the New Economy
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 and towards the sustainable and just new economy. Compared to
the limited, risky, corrupt and unethical fossil fuel sector, there is a
wide range of socially responsible investment opportunities with
comparable returns for individuals, religious institutions, and other
institutions. [See: New Economy Working Group]
Conclusion: We Should Divest from Fossil Fuels and Invest in the New Economy
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 socially and
environmentally attuned institutions and enterprises of the new economy.
Written with assistance from Jonah Reider.
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License
Chuck Collins is a senior scholar at the Institute for Policy Studies where he directs the Program on Inequality and the Common Good (www.inequality.org), and the author of the new book, 99 to 1: How Wealth Inequality Is Wrecking the World and What We Can Do about It. Chuck is also a co-founder of Wealth for the Common Good,
a network of business leaders, high-income households and partners
working together to promote shared prosperity and fair taxation.He is
co-author of The Moral Measure of the Economy and with Bill Gates Sr. of
Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes
No comments:
Post a Comment