Sending a Signal for Change

After working in the environmental field for almost 35 years, with more than 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 personal portfolio. I have been teaching graduate courses on energy and materials sustainability, witnessing a very recent student-lead fossil fuel divestment initiative at my own Antioch University New England campus—and nursing an existential angst of monumental proportion all the while. 

I also realize that my divestment—in terms of affecting the value of the US oil and gas extraction market ($399 billion annually)—it is not even a drop in the bucket. So why bother?

My personal transition began with conversations with my colleague Abigail Abrash Walton, director of Antioch University’s Advocacy for Social Justice and Sustainability graduate program and co-director of our Center for Climate Preparedness and Community Resilience. She shared with me a report from Oxford University’s School of Enterprise and the Environment. Based on research of past successful divestment campaigns—such as in protest of South Africa during the Apartheid era, tobacco, munitions trading, and blood diamonds—the paper posited three phases of a successful advocacy initiative. 

A small group of concerned investors jumpstart the first phase, sending an initial “wave over the bow” by divesting equity holdings in targeted, publically traded corporations. Following this, higher-education institutions direct fund managers to divest the institutions’ holding over time—often after advocacy by students and faculty. More-progressive universities and colleges may take early divestment stances, but with time and social networking, the list begins to grow, until one or more nationally recognized universities decide to phase out equity holding in a targeted sector. The authors highlight that when more-prestigious institutions take action, it creates a tipping point, and empowers local and regional educational institutions, and even communities, to follow suit. This constitutes phase two.

Once such a divestment initiative gains traction comes phase three: The media and financial networks begin to herald it, the movement targets the largest investment and pension funds, with the ultimate aim of shifting market norms and creating political pressure so that governments enact policy change.

I believe that we in the United States may be moving into phase two of the fossil fuel industry divestment movement. The number of organizations joining the movement is growing, and ranges across both private and public sectors. Stanford University, for example, is in the process of divesting from the coal industry sector, while the City of Seattle, Washington, moves to be the first municipality in the country to divest its pension fund from fossil fuel—one of 29 US cities and counties reported to be taking similar actions. What’s more, 60-plus faith-based institutions and a similar number of foundations are also taking direct action.

During the divestment campaign in South Africa, phase two had little financial impact on the targeted industries. The real value was media exposure to the social justice issue that catalyzed worldwide opposition to apartheid. Oxford’s study indicates that the fossil fuel sector comprises a mere 2 percent of the US higher-education investment portfolio; thus, higher-education divestment can have only minor, if any, real impact on the financial markets. The goal of divestment, however, is to stigmatize the fossil fuel industry, whose operations are leading to negative climatic impacts, as well as myriad impacts on human health and the environment from extraction, production, and use of fossil fuels. And in this way, widespread divestment among higher-education and other institutions can be a powerful force.

Investment advisers may be wary: A recent New York Times article presented three studies that looked at the impact to universities’ portfolio performance from divesting in energy stocks, and a study commissioned and funded by the Independent Petroleum Association of America projected that portfolios absent of fossil fuel stocks—compared to portfolios that included energy-sector stocks—would underperform by as much as 0.7 percent. However, two separate studies, one by Northstar Asset Management and the other by the portfolio advisor Aperio Group, argue that the divestment penalty would be in the range of 0.15 percent to nonexistent.

Climate change is a social justice issue, which influences universities, municipalities, and faith-based organizations in their decision to divest. And the momentum that arises from these organizations’ divestment can in turn influence the investment portfolio decisions of larger institutional investors.

As the colleague who helped focus my thinking on this issue said, hearing about individuals who support divestment initiatives by taking action themselves is an important aspect of successful advocacy campaigns. As an academician, I have the ability to communicate directly with investment funds such as TIAA-CREF or Fidelity, which provide retirement account options. And all of us, as citizens of our various institutions, should make it known that divestment should not just be an individual response to social justice, but also a movement that institutional leadership should rally behind.

Read more stories by Michael Simpson.