Divestment: An idea as good as its intention

Martha Hall Findley and Jean Charest, in their critique of post-secondary institutions divesting their endowments from fossil fuel companies, attempt to subversively mar the financial and moral merits of the campaign. Deeper analysis of their arguments reveals considerable gaps in logic and evidence.

Moral imperative is a central tenet of divestment. How can it be justified that educational institutions attempt to profit from climate change-causing fossil fuels, which undermine the prosperity their student’s futures may hold? However, as the moral aspect has been extensively covered by the faculty of UBC, we focus instead on the financial fragility of the case against divestment.

The assertion that fossil fuel producers are only fulfilling a demand, and that it is us, the consumers, who are to blame for climate change is conveniently simplistic. In 1986, tobacco growers made the same argument: they were just meeting demand for a legal product. Responsibility for the societal effects and costs rested neither on them nor the companies which manufactured their product, they argued; it rested on the smoker. Anyone familiar with tobacco lawsuits of the 80s and 90s knows the merits of such an argument are insubstantial. Parallel to examples of individual smokers who quit for the health of their families, individual actions are commendable, but it does not curtail the responsibility of the industry that meets the demand.

Ms. Findlay and Mr. Charest appear to hold an unquestioned assumption that post-secondary endowments are, and will continue to be better off when invested in fossil fuel energy companies. The argument that such investments are smart investments is dubious for short and long term outlooks.

The research firm S&P Capital IQ found that, based on the US market as tracked by the S&P 500 Index, endowments would have been better off had they divested 10 years ago. While a similar analysis has not been undertaken in Canada, if such trends hold true north of the border, the argument of financial safeguarding quickly erodes.

Long term, their financial argument is also thrown into question by the emerging concern regarding the existence of a carbon bubble. This is based on the fact that fossil fuel companies currently have more reserves than can be burned if we are to meet our commitment of holding warming to 2℃. These reserves form part of the valuation of these companies, a significant financial liability that has been highlighted by Mark Carney, governor of the Bank of England. A study published in Nature this year determined that at least 75% of oil reserves and 85% of bitumen reserves in Canada must stay in the ground if we are to achieve this goal. Despite these concerns, exploration for reserves continues undeterred.

Employment presents an enormous issue for Canadian youth, and the energy industry may indeed play a vital role in alleviating the stubborn entrenchment of double-digit unemployment rates for those entering the job market. The implied assumption that such jobs will be delivered by the fossil energy industry, however, unduly discounts the meteoric growth of renewable energy employment in Canada. According to a 2014 report by Clean Energy Canada, direct employment in renewable energy has surpassed direct employment in Alberta’s bituminous sands, and there’s no reason to expect a change in this trend. Moreover, as the Political Economy Research Institute has found that clean-energy investments generates roughly three times more jobs than an equivalent amount of money spent on carbon-based fuels, youth job security is likely far better secured through alternative energies.

While it is important to ensure university endowments are financially secure, gambling their security on fossil fuel investments runs contrary to this goal. However, as tobacco and apartheid have shown us before, they can also be instruments of social change. Given the scale of the threat posed by climate change, we can think of no more suitable opportunity to utilize the social and financial capital behind endowments.

Dustin Head Shot

Dustin Carey is an alumnus of the Master’s of Climate Change program and a founding member of Climate Students, serving as its first Operations Director. Dustin is interested in governance strategies within the context of climate change. Since graduating, he has been employed as the City of Windsor’s Environmental and Sustainability Coordinator, facilitating the development of the City’s corporate and community climate change mitigation strategy and municipal energy plan. Dustin sits on the University of Windsor’s Sustainability Advisory Committee and is part of the Governing and Accelerating Transformative Entrepreneurship research group.

 

Andres Heat Shot

Andres Fuentes is an alumnus of the Master’s of Climate Change program and a founding member of Climate Students, serving as its first Communications Director. A consultant on climate change material and six-time attendee of the United Nations Conference of Parties, Andres has been involved with climate change media since 2009. Andres writes for The Verb, an environmental newswire, with a focus on the UNFCCC process and has worked as managing editor for the Imprint.  

 

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