Divest or engage on climate? Debate rages
Back in the ’80s, when the South Africa divestment movement was rising toward its ultimate success, I remember looking up a stark fact. Exxon, one of the big targets of the campaign, was larger than South Africa, at least in total sales and economic output.
The combined size of the multnational companies doing business in South Africa dwarfed the nation that was then engaged in an apartheid system keeping majority black citizens out of power.
The goal was clear — free elections that led to Nelson Mandela’s presidency in 1994 — and the divestment movement had an obvious effect, bolstered by corporations adhering to the socalled Sullivan Principles of racial equity in all of their dealings.
Cut to the YaleHarvard football game on Saturday in New Haven, where hundreds of protesters stormed the Yale Bowl field to demand fossil fuel divestment to halt climate change. The two universities must eliminate all investments in companies that extract and produce oil and gas, the protesters exclaim.
ExxonMobil, again, is a main target.
This time around the issue, and the world, is a lot more complex. There is no direct line to climate change justice. Unlike with South Africa, or even with the Vietnam War, there are no powerful people who can reverse the unfolding evils.
Divestment, no matter how thorough and successful, simply cannot achieve its final aim. That doesn’t mean it’s wrong, it just means it’s only one of many strategies, and it means investors who hold the opposite view — buy fossil fuel shares and engage with the companies to act more responsibly — are also not wrong.
The debate between divestment and engagement comes down to a difference in philosophy.
The divest camp, sparked in 2012 by writer and activist Bill McKibben, believes only a radical approach will save the planet — any by the way, the radical changes don’t stop with energy policy.
“I don’t think that our goal here is to have what one fellow organizer called ‘solar panels on bulldozers’ where we get to keep our racist, extractive, exploitive economy but just run it on renewable resouces instead,” said Nora Heaphy, a Yale junior from New Haven and a leader of the YaleHarvard protest with Fossil Fuel Yale and the Yale Endowment Justice Coalition.
The movement would have us believe divestment is the right course because these companies do have massive power and influence over energy policy. And they have fallen short in their efforts to diversity into sustainable, renewable sources of energy.
So the only way to bend the policy curve, leaders of the movement reason, is to stop supporting any and all new fossil fuel investment — and that means responsible institutions must pull out.
“The fossil fuel industry as the largest obstacle to any kind of climate action through their lobbying and political influence. There is no way to reform the industry,” said Nora Heaphy, “In order for us to have a safe and livable future, we need companies like ExxonMobil and others to leave 80 percent of their reported reserves in the ground unburned.”
Engagement folks, including the people who control Yale, are pragmatists, pointing out that we the consumers still live lives of energy use and the alternatives are not able to meet demand — not even remotely close.
“Yale engages constructively with investment managers and companies on the climate impacts of their businesses,” Yale spokeswoman Karen Peart said in a written statement. “Since 2014, the university has followed a policy of supporting shareholder resolutions calling for company disclosures that address climate change issues.”
Oil and gas extraction represents 2 percent to 5 percent of the global economy, depending on how it’s all measured, and lo and behold, said Raymond Bovich, a senior partner at New Havenbased Aegis Wealth Partners, it’s about the same percent of a typical, balanced portfolio.
So it’s possible to extract fossil fuel stocks from portfolios, but to what end?
“Do we take the next step and get out of oil consumers? Where do we quit?” Bovich asked. “Electric producers? There are unintended consequences to each of these factors.”
One of those unintended consequences, pragmatists warn, is that the collapse of traditional energy companies would collapse the whole economy. And, as the Harvard president pointed out, if we divest today, tomorrow we will still need to turn the lights on.
There may not even be actions ExxonMobil, British Petroleum, Royal Dutch Shell and Chevron can take that would stanch the march toward global temperatures rising by 2 degrees centigrade — which many experts say is the point of no return. All the privately owned oil companies in the world represent just 10 percent of production, as nationally owned enterprises such as Aramco in Saudi Arabia control the majority of output.
But the divestment movement is not trivial and the industry can’t easily swat it away. The group 350.org announced in September that money managers holding $11 trillion in assets under management had declared their support for divestment from fossil fuels. Total global financial assets could be $100 trillion, more or less, so that number is very significant.
Also in September, the University of California system trustees declared their intent to divest from fossil fuels.
And so the battle continues. As Bovich pointed out, divestment can lead to its own success if it affects stock prices.
We’re far from climate change denial vs. people who believe in science. That’s just idiotic. The real debate is between people who on both sides understand the fate of humans hangs in the balance. How to we keep the average temperature rise under 1.5 degrees celsius, as the Paris treaty spells out?
The Interfaith Center on Corporate Responsibility, a group organized by religious leaders, produces shareholder resolutions calling for companies such as ExxonMobil and Chevron to take specific steps toward reducing greenhouse gas emissions.
“Divestment from fossil fuels and engagement are both important strategies for change,” said Josh Zinner, the ICCR executive director, in an email. “We don’t see it as an either/or. Much of the engagement that ICCR members do is with other sectors such as utilities and other heavy emitters.”
He’s right. It’s not one or the other. The goal of shutting down Exxon is misplaced but divestment can help the engagement folks have more leverage. It’s a complex world.