Opinion: Advocating Divestment; Lead By Example

By Michael Simpson

OK, I admit it, after working in the environmental field for almost thirty-five years, with the over 10 years focused on climate adaptation research, I finally took the time to develop a plan to divest from all petrochemical related industries in my portfolio. To say the least, this action’s signal to the market is not even a drop in the bucket considering that the US oil and gas extraction sector is valued at 399 billion dollars annually. So what has motivated this move at such a late day, besides the fact I have been teaching graduate courses like Energy and Materials Sustainability and nursing an existential angst of monumental proportion? Especially in light of a very recent student-lead fossil fuel divestment initiative at my own Antioch University New England campus.

My personal transition began with an article from University of Oxford’s School of Enterprise and the Environment, recommended to me by the Director of Antioch University’s Advocacy for Social Justice and Sustainability graduate program. Based on research of past successful divestment campaigns, such as was seen in South Africa during the apartheid era, as well as such campaigns to curtail or eliminate tobacco, the trading of munitions, or using blood-diamonds, this Oxford paper analysis posited three phases of a successful advocacy initiative.

The first phase is jump started by a small group of concerned investors sending an initial wave over the bow by divesting equity holdings in targeted publically traded corporations. This has typically been followed by institutions of higher learning directing fund managers to divest the institutions’ holding over time, often after advocacy by students and faculty. Early divestment stances may be taken by a few of the more progressive universities and colleges, but with time and social networking, this list begins to grow, until one sees one or more of nationally recognized universities’ deciding to phase out their equity holding in a targeted sector. The authors hi-light that having the more prestigious institutions of higher learning taking such an action as a “tipping point,” which provides local and regional educational institutions, and even communities, to feel that they now are empowered to follow suit.

Once such a divestment initiative gains such traction, and begins to be heralded in the press and through financial networks, the largest investment and pension funds are targeted, with the ultimate goals of changing market norms and to create the political pressure to have governments change how things are done within the country itself.

Interesting enough, it seems we may be moving into phase two in regards to divestment in the fossil fuel industry. Looking at sources, which keep track of those organizations that have made a commitment to either consider, or actually move forward with, divestment from fossil fuels, the number of organizations joining this movement seems to be growing and ranging across both the private and public sectors. One example is Stamford University, which is in the process of divesting in the coal industry sector. Also there is the City of Seattle WA, which appears to be the first municipality in the country to divest its pension fund from fossil fuel. Twenty nine US cities and counties are reported to be taking similar actions. But what is impressive on these lists are the sixty plus faith-based institutions and a similar number of foundations taking direct action.

As was observed from the divestment campaign in South Africa, the actions taken in the second phase of this strategy had little financial impact on the targeted industries. The real value was media exposure to the social justice issue which catalyzed worldwide opposition to apartheid in South Africa. Oxford’s study indicates that the fossil fuel sector only comprises a mere 2% of the investment portfolio of the US higher education portfolio. Thus, higher education’s divestment of fossil fuels will have minor, if any, real impact on the financial markets. However, the goal of such divestment is to stigmatize those corporations that are larger emitters of greenhouse gases leading to negative climatic impacts, not to mention the myriad of direct impacts on human health and the environment from extraction, production and use of fossil fuels.

Investment advisers may be wary of institutions taking such action, a recent New York Times article presented three studies that looked at the impact to universities’ portfolio performance from divesting in energy stocks. A study commissioned and funded by the Independent Petroleum Association of America projected that portfolios absent of energy-sector stocks would underperform those with them by as much as .7%. However two studies, one by Northstar Asset Management and the other by the portfolio advisor Aperio Group argues that the divestment penalty was in the range of .15 % to being nonexistent.

Climate change is a social justice issue and this influences the decision to divest by universities, municipalities and faith-based organizations. The momentum that arises from this direct action can turn the tide in the investment portfolio decisions of the larger institutional investor.

So why would I bare my soul and speak about my personal financial issues and considerations? As was communicated to me by that colleague who focused my thinking on this issue, an important aspect of a successful advocacy campaign is that others should hear about actions taken by individuals in support of such divestment initiatives. Not only as academicians do we each have the ability to communicate directly with investment funds such as TIAA-CREF or Fidelity, which provide retirement account options, but we as citizens of our own institutions should also let our own institutions know that we feel that this should not just be an individual response but something that the institution’s leadership should rally behind.

Michael Simpson is the chairman of Environmental Studies Department at Antioch University New England and Co-Director, Center for Climate Preparedness and Community Resilience.

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