Wednesday, December 05, 2012

Divestment 1: Intro to the Fossil Fuel Divestment Movement

Over the past year or so, various efforts from coalitions of NGOs and student groups have emerged calling on college and university endowments (and other institutional investors) to divest from fossil fuel companies.

I’m planning on writing a series of short posts on these efforts and the many interesting questions, challenges, and conversations they raise.

This first post is just an overview (the NYT also just ran this article summarizing this emerging movement):

There are two major related, but distinct efforts:
·      Coal Divestment: launched in 2011, supported by a coalition of 11 groups.1
o   Calls on college endowments to divest from coal with a focus on 15 specific companies.
o   Active campaigns on approximately 20-25 campuses. 
o   See the Coal Divestment Toolkit (pdf) for details.
·      Fossil Fuel Divestment: launched in 2012, supported by a coalition of 7 groups.2
o   Calls for college endowments (and others) 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.”
o   Focus on the top 200 coal and oil and gas companies, as measured by their reserves
o   Based on the premise that to avoid an increase of global average temperatures of more than 2°C, humanity cannot release more than 565 gigatons of carbon dioxide before 2050, which is about 20% of the carbon potential in known fossil fuel reserves (2,795 gigatons) — rendering 80% of known reserves “unburnable”
o   Currently, these reserves are treated as assets for the entities that control them.  If 80% are unburnable, the valuations of fossil fuel companies are currently misrepresented. This poses potential risks to individual investors, as well as systemic risk to the financial markets as a whole.
o   These numbers are stem from this report (pdf) from the Carbon Tracker Initiative (and are also the basis of Bill McKibben’s Rolling Stone article last summer and’s just-completed “Do the Math” tour)
o   For more details see’s Fossil Free website:

Key considerations:
·      There is an estimated $400 billion under management at college and university endowments.
·      The net impact of divestment on stock prices and companies’ capitalization is unclear; only a portion of investments are in public markets, and only a portion of those are in fossil fuel companies.
·      These efforts recognize that highly profitable fossil fuel companies are not likely to stop extracting fossil fuels as a result of this effort, but contend that drawing attention to this issue will highlight the moral implications as well as financial, social and environmental risks of fossil fuel investment. 
·      There is evidence that proposed alternatives (such as socially responsible investment funds, fossil fuel free funds, and on campus revolving loan funds to support energy efficiency and renewable energy projects) can generate competitive returns.

So far two small colleges have gotten on board the divestment train: Unity College in ME and Hampshire College in MA. The students at Harvard passed a referendum with 72% in support of divestment.

So, there you have the basics of the fossil fuel divestment movements that are sweeping the nation. Subsequent posts will look at questions like: 

  • What impact will divestment have? Will it affect the financial health of fossil fuel companies? Will it influence their investments in extraction vs. alternative energy sources? 
  • Is the real leverage of divestment in the financial impact, or the awareness impact of shining the spotlight on the risks of fossil fuel dependence? (Does that matter?) 
  • What impact might these efforts have on the policies of the investment funds that serve endowments? What about on the energy analysts at the big banks? 
  • How does natural gas as a potential transition fuel factor into all of this? 
  • What’s the end game of divestment? 
  • What could fossil fuel companies do to deter divestment? Shut their doors? Shift a certain percentage of R&D from exploration into renewables? 
  • What impacts might divestment have on endowment performance? What are the alternatives and how does their performance compare? 
  • What should Trustees be considering in light of these demands? 
  • And more… 

I’m intending this series to be a true exploration of very complex issues, probably with more questions than answers, and likely with my own opinions and thoughts shifting and evolving through the process.

I hope it will spark some generative dialogue, and I hope you will share your thoughts, opinions, resources, and questions liberally.  And, please let me know if I’ve gotten any of the facts wrong about these efforts, and I will make the necessary corrections.

Stay tuned… and Stay going.

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