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Fossil fuel divestment is really about re-investment.

2015 January 16

divestment2(cropped)

Though I had been living in Berkeley for two years prior working at Lawrence Berkeley Lab, when I enrolled in the ERG Master’s program in fall 2013, I looked for additional ways to get involved in the Berkeley community as a student, not as a scientist. Fossil Free Cal was one club that immediately caught my attention: a club rooted in climate change science but driven by student activists.

Sparked by Bill McKibben’s widely read expose on the fossil fuel industry “Global Warming’s Terrifying new Math” (which I had read a number of times), a campus-driven divestment campaign has taken root at over 300 colleges and universities across the country. These campuses are asking their institution’s endowment to divest from fossil fuels to show that our higher institutions of learning will not invest in the planet’s destruction. “If it’s wrong to wreck the climate, then it’s wrong to profit from that wreckage,” McKibben said on his latest “Do the Math” tour.

It’s been an honor to be a part of the Fossil Free Cal campaign on and off over the past couple of semesters. I’ve rallied on Sproul alongside fellow campaign members (and eco-rapped, duh), I’ve written letters, attended UC Regents meetings, and been humbled by the efforts of a number of dedicated undergraduates in carrying the campaign (both campus and national) to new heights.

There have been a lot of victories for the campaign recently, most notably that the Rockefeller Fund divested from fossil fuels! There was also an awesome expose written in the East Bay Express about UC’s potential conflicts of interest with fossil fuel companies and the divestment issue. Severin Borenstein of Haas Business School remains obstinate that fossil fuel divestment will not have any effect.

Some hailed Stanford’s divestment from coal as a big deal, though I have to remain a cautious skeptic on this one for a number of reasons. First, coal is generally a bad investment now, and many top funds are pulling their funds out of coal. Second, Stanford may not have had a very large exposure to large coal companies in its investments anyway. Lastly, they divested their direct funds while only “recommending to its external fund managers” that they divest. Those external funds may actually control much more than Stanford itself. Stanford’s administration, of course, will pat itself on the back for being a “responsible global citizen” while being glad they can now get the Fossil Free campaign off their doorstep.

Overall, there has been great progress for the campaign though, and I believe the UC will eventually divest its endowment from fossil fuels if the campaign keeps up the pressure. I see there being three primary motives for divestment.

1. Align its investment strategy with its infrastructural climate goals: The UC system is not only host to world-renowned research in this field but also to aggressive climate goals to reduce greenhouse gas emissions (climate neutral by 2025). We cannot perform this research and divest our physical infrastructure from fossil fuels while turning a blind eye to the endowment that supports the UC campuses, which is in part supported by various investments in fossil fuel companies. Naysayers are saying if we divest, then we are hypocrites because we still use fossil fuels every day. Well, actually, since the UC system has a carbon neutrality target, then the UC system would not be a hypocrite!

2. Demonstrate full moral integrity on climate change: Some may argue that divestment from fossil fuels will — without a doubt — harm investment returns for the endowment. Others warn that continued investment in fossil fuel companies exposes the UC’s portfolios to carbon risk and that, in the long run, the investments will perform poorly. While it is hard to be 100% certain about who is right (though I believe the evidence will continue to stack up in favor of divestment), what we can be certain of is that continued investment in fossil fuels is ruining our planet, deteriorating public health, and causing climate change. Given this fundamental certainty, the UC system has a moral imperative to divest.

3. Capture new reinvestment opportunities: Finally, with divestment from fossil fuels comes an opportunity to reinvest those dollars in companies, funds, and projects that grow clean energy, energy efficiency, and other sectors moving us towards sustainable development. The fossil fuel industry has long benefitted from a cheap endless supply of capital. The rapidly growing clean energy industry is only beginning to reap such benefits. By supplying new capital sources and an array of financial products to these industries, UC Berkeley could help unleash new sustainable economic activity. They would no longer just be supporting research on climate change mitigation strategies in labs around the UC campuses but also the deployment of those strategies in California communities and beyond. One example of such a financial product are green bonds. Last year, the volume of green bonds nearly tripled from $14bn in 2013 to $38bn in 2014. Michael Liebreich of BNEF noted: “They are acquainting new types of institutions with low-carbon investments and providing a new focus on clean energy commitments by the likes of utilities and development banks.” Billy Parish of Mosaic also recently wrote about the merits of the reinvestment opportunity, and his company is one of many now offering stable financial products that help grow the clean energy industry.

I truly believe this last point on re-investment is the strongest argument for divestment. When universities divest from fossil fuels, they won’t stick the cash under a mattress; they can direct their fund managers to invest it in sustainable and socially responsible ways. Giving clean energy and other green industries this new source of capital will propel the industry forward and also be a great PR piece for the university. Let me know your thoughts in the comments!

 

 

  • David Lea

    I think you make a good case, especially in your third point. My remaining doubt about divestment is that, at least right now, the UC community is still heavily dependent on fossil fuels, and will likely remain so for quite some time. So it seems odd to divest from companies whose products are so vital to our everyday lives. I’m also uncomfortable with the broad brush of divestment, which treats all fossil fuels equally, from dirty coal or tar sands to cleaner natural gas. Regardless, I think it’s a worthwhile discussion to have.

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