Owning our Clean Energy Future

Shareholders voting

Almost 40 years ago a movement was born on college campuses led by student activists advocating that their university endowments completely divest from any companies operating in Apartheid South Africa. Students built shantytowns on their campus grounds and occupied university administrators’ offices in order to elevate their cause and entice the national media – you know, that old school 60’s style organizing. Today, in this same spirit, environmental activists and students at over 200 campuses are organizing campaigns to encourage their endowment managers to completely divest from all fossil fuel companies.

With today’s tools for social organization, students have new opportunities to galvanize this movement. Environmentalist Bill McKibben and his organization 350.org, alongside other advocacy groups like the Responsible Endowments Coalition, have been successful in shining a media spotlight on this issue in the past several months. They’ve created comprehensive toolkits that are distributed freely online to empower students who are interested in starting divestment campaigns on their own campuses. University endowments manage billions of dollars, and a successful fossil fuel divestment campaign would deal a serious blow to oil and coal companies. While I’m impressed by the savvy and the energy of this movement (even if it has yet to produce any real results), I still wonder if divestment is the right path to choose.

Sure, pulling money out of publicly-held fossil fuel companies will affect their stock price, but they are not going to be crippled to the point of inoperability. The real change that needs to occur is to shift the collective focus of these companies away from fossil fuel extraction and towards clean energy production in a meaningful and timely manner. I would argue that demonizing them and reducing inflows to their R&D budgets is a failed strategy. These companies and their leadership, as unfortunate as it may be, hold the keys to a clean energy future. They are more prepared than governments, nonprofits or advocacy organizations to actually build the clean energy infrastructure. If we accept this as true (and, of course, I’m inviting debate here) then we must also agree that divestment is not an appropriate strategy.

Instead, what if we took an activist approach that encouraged engagement with fossil fuel companies? Through our own individual retirement funds, and through the investment portfolios of organizations that we’re a part of (universities, government agencies, unions, etc) we collectively own all of the major fossil fuel companies given our status as shareholders. We hardly ever consider the weight and responsibility of this ownership, but it’s incumbent on us as shareholders to define a new way forward for the fossil fuel industry. This strategy of deliberately investing in companies with poor social or environmental records in order to affect change from within is called shareholder activism.

Shareholder activism has a long history of success in contributing to meaningful corporate reform around issues like global health, environmental sustainability, human rights and labor practices. There is an organized global regime of leaders and institutions dedicated to filing shareholder resolutions to improve corporate practices. CERES, for example, directs the Investor Network on Climate Risk (INCR), a network of 100 leading investors collectively managing more than $10 trillion in assets. Ceres helps INCR members “leverage their power as shareholders to secure meaningful commitments on sustainability issues companies are facing.”

The student-led fossil fuel divestment campaign is (perhaps unintentionally) working against the shareholder activist community rather than in unison with it. I applaud the energy and awareness of students who are leading this movement, but I wonder if they would be more successful by integrating their movement with other shareholder activist organizations rather than taking a divestment approach. This issue seems to be come down to a fundamentally simple question: when something is broken, do you fix it?… or trash it and build something new?

What do you think?

  • http://twitter.com/R_Steinbach Ryan Steinbach

    Love this post, Pat. I love the enthusiasm and commitment shown by university students in their stand against fossil fuels, but I also question the ultimate benefit of divestment.

    Another interesting counter-point I read recently explained that divestment could limit endowment returns which would cut into student aid. The post posed the question, what is more important – divestment from fossil fuel companies or college accessibility?

    To your point, and really to the point of this platform, I think collaboration is the only way we are going to find a solution that works for everyone. Consider if divestment did take down, or at least damaged, one of the big fossil fuel companies. These companies are some of the biggest employers in the world. How many people would lose their jobs?

    • http://www.facebook.com/profile.php?id=5716707 Patrick Davis

      Ryan, right on. I think this was actually the true spirit of the blog – I wanted to point out the complexity of the issue. Unequivocally declaring that all university endowments should divest from fossil fuel companies is likely too simplistic a solution.

      The tension between accessibility and divestment is a question of our short term and long term imperatives. Immediate affordability of higher ed is a short run necessity with lots of champions, while a clean energy future is a long(er) run necessity. As humans we tend to overemphasize short run needs/wants. We are not so good at acting in accordance with long run expectations.

      But, I would argue that strategic divestment doesn’t limit endowment returns at all, so perhaps this is a false choice. Typically people say that by its nature, divestment limits the investment universe, and therefore limits possibilities for diversity, and therefore negatively impacts returns. But, when the investment universe is deliberately limited because of the existence of material risk factors that the market does not account for, I would expect long run returns to actually outperform the market.

      Lots to think about. Here’s a good resource for even more thinking :) http://www.tellus.org/publications/files/endowmentcrisis.pdf

  • Ichiro

    Dear Pat,

    I really like your article and think you make a great point about trying a different way to go other than devoting time and energy into investing into opposite no name companies with different ethics. The main strategy for investing is actually gaining interest. While interest in your investment could mean many things (moral, ethical, sense of purpose) , sadly most people only focus on the money. It’s just too risky to sacrifice a university’s money and its asking an awful lot to have the money manager of that fund to sacrifice the main reason why they are hired, to manage the money.

    Your logic regarding the big oil companies to make a path to clean energy reform makes sense. These companies know what they are doing. They have the funds to handle an operation of that magnitude. The big question is how to make them? It’d be nice if we as shareholder could. That would seem like the answer. However that is a lot easier said than done. Once one company can turn towards this goal competition could soon follow.

    In my humble opinion, the clean energy future is exactly that the FUTURE. Today, there is no sense of urgency in us as humans.Sure the technology and brains are just about there now, however not all of the ingredients are complete. The effort and leadership in my opinion is missing. It’s just too easy right now for oil energy companies to make extraordinary amount of dollars off of us. Until we as humans force the issue of this need of clean energy, companies will continue to kick their heels up and count the profits. Unfortunately Pat, don’t believe that will happen for quite some time. Don’t mean to sound like a pessimist, but I do not see any moral ethical responsible Steve Jobs with no interest in the easy dollars coming from one BIG Oil. Can’t say I blame them..