United States / Divestment on College Campuses

Divestment: Efficacy and Impact

The fossil fuel divestment movement emerged at Swarthmore College in 2012. In three short years, divestment has evolved from a small campaign among student activists into a mainstream movement with commitments from universities to churches to the $860 million Rockefeller Brothers Fund. Currently, over $50 billion has been divested from fossil fuels. The movement urges organizations, universities, and local governments to sell their stocks or bonds that are invested in the fossil fuel industry, with the overarching aim of stigmatizing fossil fuel companies’ disregard for the environment, and holding them responsible for their harmful effects on society. The fossil fuel divestment movement did not emerge because it is the most efficient way of stopping climate change. Rather, it was born because many have lost hope that world governments will succeed in implementing a more directly effective top-down climate change regulation. Divestment is financially wise and moral. While it may not be the quickest way to decrease greenhouse gases, if it becomes as widespread as it aims to be, it has the potential to break through the current political gridlock surrounding climate change.

The current and forthcoming climate crisis has been politicized despite the fact that the scientific community has formed a consensus about the immediacy of the threat since 1985. Climate change policy has been characterized by stagnation and partisanship in Congress and attempts to fund environmental programs are frequently tabled for national security issues. Ironically, the US military has considered climate change a national security threat for years, and has been working to reduce its massive carbon footprint by using alternative fuels. In its 2014 Climate Change Adaptation Roadmap released in October, the Pentagon declared, “Climate change will affect the Department of Defense’s ability to defend the nation and poses immediate risks to U.S. national security.” Similarly, according to a report by the United Nations, failure to reduce emissions threatens society with food shortages, refugee crises, flooding of major cities and entire island nations, and a climate so drastically altered it might become dangerous for people to work or play outside during the hottest times of the year. All of these crises have the potential to cause violent conflict. Despite the fact that even the Pentagon deems climate change a pressing threat to national security, Congress has been unable to pass any effective legislation that would prevent these catastrophes.

Supporters of divestment agree that the movement will be largely ineffective in a financial sense; that is, fossil fuel companies have such large profit margins that divestment is unlikely to have a dramatic impact on their pocketbooks. Rather, the divestment movement aims to make a moral statement and stigmatize making money off of the destruction of our planet. The divestment movement aims to shape public discourse by condemning the fossil fuel industry and reigniting public debate on climate change and energy security. Supporters often make comparisons to the successful South African divestment movement of the 1980’s and the tobacco divestment movement of the 1990’s. In the 1980’s, students around the United States protested South African Apartheid by urging their institutions to divest from companies with ties to the South African regime. Many feel that the boycott had a significant impact on the South African government, and pressured it to dismantle the apartheid system by building awareness about the immorality of apartheid. In the 1990’s, universities such as Harvard and CUNY divested from the tobacco industry in order to build awareness about the dangers of smoking and hold the industry accountable for educating users about the risks.   While divestment aims to denounce fossil fuels, it also is unlikely to cause organizations that choose to divest to lose money. In the past years, fossil fuel stocks have performed slightly lower than the market average.  Between 1988 and 2013 in the United States, the annual returns were 10.68% for carbon free stocks and 10.63% for the average stock index that included fossil fuel industries.

Much of the logic behind divestment is grounded in in the fact that world governments have agreed not to burn all of the known reserves that the fossil fuel industry possesses. In 2009, world leaders met at Copenhagen and agreed to limit the emission of greenhouse gases to levels necessary to prevent the earth’s temperature from rising more than 2° Celsius.  Currently, the fossil fuel industry has five times as much carbon in their reserves than will allow us to stay within the 2°C limit Fossil fuel companies are also spending as much as a $1 trillion per year on capital expenditures, most of which goes towards further fossil fuel exploration and the development of new reserves. The predicted revenue from carbon stocks and bonds take into account the expected revenue from burning these reserves, of which the world governments aim to burn no more than 20%. The industry’s plan for expansion and the governments’ plans for greenhouse gas reductions are completely incompatible. In response to this obvious contradiction, shareholders forced ExxonMobil to comment on how impending climate regulations might impact their profitability. The company responded by saying world climate policies are “highly unlikely” to actually prevent them from continuing to produce and sell fossil fuels. That is, fossil fuel industry representatives doubt that the market for fossil fuels will decrease in the next twenty years.

In the past three years, 181 institutions and local governments and 656 individuals representing over $50 billion in assets have pledged to divest from fossil fuels. Colleges and universities such as Hampshire College, Stanford University, College of the Atlantic, and Pitzer College have divested from a specific groups of fossil fuel companies. For example, Stanford chose to divest only from coal, which is the most environmentally harmful fossil fuel and is currently losing value in the stock market. By divesting, one is betting that we will succeed in not surpassing the 2°C limit, and therefore that the price of fossil fuel stocks will plummet in the future. Profiting from a harmful industry that is exempt from proper regulations is immoral. While it may not be the most direct, effective method to fight climate change, fossil fuel divestment has the potential to play a pivotal role in holding the fossil fuel industry accountable for the damage it wreaks on society and our planet.