Health sys­tems urged to di­vest fos­sil-fuel stocks as UK doc­tors act

Modern Healthcare - - NEWS - By Bob Her­man

A March editorial in BMJ, the Bri­tish Med­i­cal As­so­ci­a­tion’s jour­nal, said that the science of global warm­ing is un­de­ni­able and that cli­mate change is “the great­est threat to hu­man health of the 21st cen­tury.”

The au­thors, who are physi­cians and pub­lic health ad­vo­cates, urged health­care or­ga­ni­za­tions to sell their in­vest­ment hold­ings in com­pa­nies in­volved in the ex­trac­tion and pro­duc­tion of coal, oil and gas “com­pletely and as quickly as pos­si­ble.”

“Those who pro­fess to care for the health of peo­ple per­haps have the great­est re­spon­si­bil­ity to act,” the BMJ au­thors wrote.

In June, the Bri­tish Med­i­cal As­so­ci­a­tion heeded that call and voted to trans­fer all its in­vest­ments in fos­sil-fuel pro­duc­ers to re­new­able-en­ergy com­pa­nies. No other ma­jor health­care or­ga­ni­za­tion in the world is known to have taken such an ac­tion.

“The vote rep­re­sents a clear sen­ti­ment from the med­i­cal com­mu­nity that so­ci­ety needs to wean it­self from its de­pen­dence on fos­sil fuel,” said Dr. David McCoy, a pri­mary-care physi­cian in Lon­don who co-au­thored the BMJ editorial.

Sev­eral U.S. col­leges and uni­ver­si­ties have also an­nounced their in­tent to shift their en­ergy in­vest­ment strate­gies away from the large fos­sil-fuel com­pa­nies. That in turn is putting pres­sure on univer­sity-af­fil­i­ated hos­pi­tals and aca­demic med­i­cal cen­ters. In ad­di­tion, sev­eral re­li­gious or­ga­ni­za­tions and churches have pledged to re­move fos­sil fu­els from in­vest­ment port­fo­lios. But faith-based health­care or­ga­ni­za­tions have not taken a po­si­tion.

Some ob­servers pre­dict more health­care or­ga­ni­za­tions will move to align their in­vest­ment prac­tices with their mis­sion of im­prov­ing the health of their com­mu­ni­ties. “Over the next three to four months, we will start to see the first hos­pi­tals at least freeze or di­vest” as­sets from fos­sil-fuel com­pa­nies, said Gary Cohen, pres­i­dent of not-for-profit Health Care With­out Harm, which works with hos­pi­tals on en­vi­ron­men­tal is­sues. “Be­cause of health­care’s mis­sion, they should not be in­vest­ing in tech­nol­ogy that ac­tu­ally con­trib­utes to the big­gest pub­lic health cri­sis of our time.”

Cohen said his group is in dis­cus­sions with sev­eral providers on the is­sue, but he could not dis­close which or­ga­ni­za­tions are con­sid­er­ing di­vest­ing.

Rep­re­sen­ta­tives of the Amer­i­can Hos­pi­tal As­so­ci­a­tion, Amer­i­can Med­i­cal As­so­ci­a­tion and Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion all said their or­ga­ni­za­tions do not track or have a po­si­tion on fos­sil-fuel com­pany di­vest­ment.

“Those who pro­fess to care for the health of peo­ple per­haps have the great­est re­spon­si­bil­ity to act.” DR. DAVID MCCOY CO-AU­THOR OF BMJ EDITORIAL

The Catholic Health As­so­ci­a­tion said it “sup­ports so­cially re­spon­si­ble in­vest­ing,” but takes its lead from the In­ter­faith Cen­ter on Cor­po­rate Re­spon­si­bil­ity, which has said di­vest­ment is only one ap­proach to so­cial and en­vi­ron­men­tal in­vest­ing.

One con­cern for hos­pi­tals in con­sid­er­ing di­vest­ing from fos­sil-fuel pro­duc­ers is that such a move might draw un­com­fort­able at­ten­tion to the fact that hos­pi­tals are among the heav­i­est users of car­bon fu­els in their com­mu­ni­ties, and many op­er­ate their own power plants.

“In terms of get­ting off fos­sil fu­els al­to­gether, that would take a huge in­vest­ment,” said Dan Doyle, chair­man of Grumman/Butkus As­so­ciates, an engi­neer­ing firm in Evanston, Ill., that works with providers on en­ergy au­dits. “And the fea­si­bil­ity of do­ing that, es­pe­cially in some of the ur­ban cam­puses, is not re­ally re­al­is­tic.”

Whether it’s the right thing to do for pa­tients and the planet, dump­ing the stocks of com­pa­nies such as BP, ExxonMo­bil Corp., Pe­abody En­ergy Corp. and Royal Dutch Shell would hardly be an easy de­ci­sion fi­nan­cially for health­care providers. En­ergy stocks have been con­sis­tently solid per­form­ers. And in­vest­ment in­come has helped hos­pi­tal sys­tems weather slump­ing pa­tient vol­umes and re­im­burse­ment cuts.

But there is some prece­dent. If dis­in­vest­ing in fos­sil-fuel com­pa­nies gains mo­men­tum, it would be sim­i­lar to the move­ment for health­care providers and other in­sti­tu­tional in­vestors to pull out of to­bacco stocks. The med­i­cal pro­fes­sion first had a pub­lic im­pact on to­bacco use 50 years ago when

U.S. Sur­geon Gen­eral Dr. Luther Terry warned that smok­ing caused lung can­cer. Beth Is­rael Dea­coness Med­i­cal Cen­ter in Bos­ton and Yale-New Haven (Conn.) Hos­pi­tal were among the first health­care or­ga­ni­za­tions in the early 1990s to di­vest from to­bacco, say­ing it didn’t fit with their val­ues. Sev­eral other hos­pi­tals, in­clud­ing many in Maine, later fol­lowed suit.

The same ar­gu­ment is be­ing made to­day for fos­sil fu­els. Strong bod­ies of ev­i­dence, in­clud­ing the lat­est Na­tional Cli­mate As­sess­ment, show the ex­trac­tion and burn­ing of fos­sil fu­els have led to ex­treme shifts in tem­per­a­ture and weather pat­terns, which has ex­ac­er­bated pub­lic health prob­lems such as heat stress, vec­tor-borne dis­eases and wa­ter short­ages. Pol­lu­tion from fos­sil fu­els has led to higher in­ci­dence of chronic health con­di­tions such as asthma and chronic ob­struc­tive pul­monary dis­ease.

In May, Stan­ford Univer­sity said it will di­vest all en­dow­ment funds from coal com­pa­nies. But the school’s af­fil­i­ated health­care providers—Stan­ford Hos­pi­tal & Clin­ics and Lu­cile Packard Chil­dren’s Hos­pi­tal— are le­gal cor­po­ra­tions sep­a­rate from Stan­ford. Hos­pi­tal officials there didn’t re­spond to re­quests for com­ment on whether the univer­sity’s pol­icy will ap­ply to them.

At the Univer­sity of Wis­con­sin at Madi­son, ad­vo­cates have urged the school, its foun­da­tion and its af­fil­i­ated health­care sys­tem to adopt a di­vest­ment pol­icy al­ready ap­proved by Dane County, where the univer­sity is lo­cated. UW Health, an en­tity that is in­de­pen­dent from

Pol­lu­tion from fos­sil fu­els has led to higher in­ci­dences of chronic health con­di­tions such as asthma and chronic ob­struc­tive pul­monary dis­ease.

UW-Madi­son, de­clined to com­ment. But David Walsh, board chair of the UW Hos­pi­tal and Clin­ics Au­thor­ity, said the hos­pi­tal is “open and trans­par­ent” to all sug­ges­tions, but fos­sil-fuel di­vest­ment hasn’t be­come a pri­or­ity for the or­ga­ni­za­tion yet.

Dr. Bruce Bar­rett, a fam­ily physi­cian in the UW School of Medicine and Pub­lic Health, said di­vest­ment would be a morally and fi­nan­cially sound strat­egy for the univer­sity, foun­da­tion and health sys­tem. “I would be sur­prised if (di­vest­ment) doesn’t be­come a big deal be­cause of the huge coben­e­fits in terms of hu­man health,” he said.

Many hos­pi­tals al­ready are lead­ers in re­duc­ing their car­bon foot­print by mak­ing their fa­cil­i­ties greener. Sys­tems in­clud­ing Ren­ton, Wash.-based Prov­i­dence Health & Ser­vices, Kaiser Per­ma­nente and Gun­der­sen Health Sys­tem in La Crosse, Wis., have em­pha­sized re­new­able en­ergy and en­ergy ef­fi­ciency in their strate­gic plan­ning. Many within the in­dus­try be­lieve that goes in tan­dem with the di­vest­ment move­ment.

“If hos­pi­tals be­come lead­ers in re­new­able en­ergy, that will cre­ate great mo­men­tum,” said Health Care With­out Harm’s Cohen. “They are a huge part of the econ­omy, and they can drive the tran­si­tion to­ward a low-car­bon fu­ture.”

That fu­ture has be­gun to weigh more on the minds of faith­based share­hold­ers, said Su­sana McDer­mott, a spokes­woman for the In­ter­faith Cen­ter on Cor­po­rate Re­spon­si­bil­ity. ICCR mem­bers—in­clud­ing As­cen­sion Health, based in St. Louis; Ad­vo­cate Health Care, based in Down­ers Grove, Ill.; and Catholic Health Ini­tia­tives, based in En­gle­wood, Colo., among sev­eral oth­ers—eval­u­ate a va­ri­ety of in­vest­ment strate­gies.

These in­clude fil­ter­ing out spe­cific stocks—a step shy of full di­vest­ment—or ask­ing com­pa­nies to meet spe­cific de­mands. “Clearly, in light of new cli­mate data, fos­sil-fuel com­pa­nies need to do more, and faster, to find and fund green en­ergy so­lu­tions, and for this rea­son our com­pany ‘asks’ are in­creas­ingly tougher,” she said.

Tom McDon­agh, chief in­vest­ment of­fi­cer for Prov­i­dence Health & Ser­vices, said in­vest­ment de­ci­sions must be thor­oughly eval­u­ated on a case-by-case ba­sis. He said new strate­gies on en­ergy com­pa­nies at Prov­i­dence, a Ro­man Catholicbased sys­tem that doesn’t in­vest in to­bacco com­pa­nies, would re­quire ex­ten­sive anal­y­sis with in­vest­ment man­agers, board mem­bers and other ex­ec­u­tives. But McDon­agh was non­com­mit­tal about the fos­sil-fuel di­vest­ment is­sue. “We try and bal­ance all our in­vest­ment se­lec­tions with our core val­ues as an or­ga­ni­za­tion and the mis­sion of the or­ga­ni­za­tion,” he said.

The fos­sil-fuel in­dus­try, mean­while, down­plays the di­vest­ment move­ment. “The oil and nat­u­ral gas in­dus­try is one of the few bright spots in our eco­nomic re­cov­ery … and these in­vest­ments have out­per­formed most other in­vest­ments,” said Zachary Cikanek, a spokesman for the Amer­i­can Pe­tro­leum In­sti­tute.

Sell­ing stocks would be a mis­guided idea for hos­pi­tals, said Ja­son Hayes, as­so­ciate direc­tor of the Amer­i­can Coal Coun­cil. “The di­vest­ment move­ment is ul­ti­mately self­de­feat­ing as a hos­pi­tal’s ef­fort to di­vest only means (com­pa­nies) are go­ing out to find another pur­chaser for their stock,” he said. And if hos­pi­tals switched fully to re­new­ableen­ergy sources such as wind or so­lar power, Hayes warned pa­tients would be at risk if the wind stopped blow­ing or clouds blocked the sun. Coal, he said, pro­vides hos­pi­tals “es­sen­tial en­ergy to keep their pa­tients alive.”

In­deed, di­vest­ing en­ergy stocks could mean at least short­term fi­nan­cial pain, as highly prof­itable en­ergy com­pa­nies have con­trib­uted to healthy stock re­turns. Ste­wart Glick­man, an en­ergy eq­uity an­a­lyst with Stan­dard & Poor’s, said that stocks of the largest en­ergy com­pa­nies this year were up sig­nif­i­cantly more than the S&P 1500, which in­cludes al­most the en­tire mar­ket.

But while he is bullish on en­ergy stocks in the short term, Glick­man said over the past five years fos­sil-fuel com­pa­nies have ac­tu­ally traded be­hind the boom­ing mar­ket. The fiveyear com­pound an­nual growth rate for en­ergy stocks was 13.3%, lag­ging the 15.2% rate for all stocks.

Data on how much hos­pi­tals have in­vested in the en­ergy in­dus­try or other sec­tors are sparse, said Bill Jarvis, man­ag­ing direc­tor at the Com­mon­fund In­sti­tute, which works with not-for-prof­its on in­vest­ment ed­u­ca­tion and re­search. En­ergy stocks con­ceiv­ably could con­sti­tute 1% to 2% of a health sys­tem’s in­vest­ment as­sets, and per­haps more de­pend­ing on the mix of eq­ui­ties, he said.

Ac­cord­ing to Prov­i­dence’s 2013 fi­nan­cial state­ments, for ex­am­ple, the sys­tem held about $35 mil­lion in do­mes­tic en­ergy se­cu­ri­ties, which made up less than 1% of its to­tal cash and in­vest­ments. That to­tal did not in­clude any en­ergy hold­ings within mu­tual funds.

Re­gard­less of how much health­care or­ga­ni­za­tions have in­vested, shed­ding en­ergy stocks would send a strong lead­er­ship mes­sage that the U.S. needs to re­duce car­bon pro­duc­tion and mit­i­gate cli­mate change as quickly as pos­si­ble. “By di­vest­ing from fos­sil fu­els and by mak­ing a loud noise about such a de­ci­sion,” BMJ au­thor McCoy said, “health­care or­ga­ni­za­tions can help send a sig­nal to politi­cians and the wider com­mu­nity about the need to rapidly in­vest in and scale up other sources of en­ergy, while also re­duc­ing over­all en­ergy con­sump­tion.”

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