25 february 2013

The Case for Fossil-Fuel Divestment (Part II)

By Bill McKibben, Rolling Stone, 25 February 13

5) And in this case, they can do the right thing without great cost.

College trustees, of course, are thinking about their endowments. They worry that they'll lose money if they do divest - that if they can't park their money in Exxon et al., their yields may dwindle.

The fear is almost certainly overstated - energy stocks have outperformed the market index the last few years, but lag if you take the last 30 as a whole. Stephen Mulkey is president of Unity College in Maine, which became the first college in the nation to officially divest its fossil fuel holdings. He stood up to give the news in front of the thousands that crowded into Portland's State Theater for that stop on our roadshow, an electric moment that brought the throng to its feet. "You don't have to do it overnight," he pointed out - indeed, campaign organizers have asked only that colleges pledge to sell their shares, and then spend the next five years winding down their positions so they don't have to sell in a fire sale. "There's abundant academic literature showing that social screening such as this, given the most likely market conditions in the near future, will not result in poor performance. You're not divesting and then just forgoing those profits - you divest from BP and invest in something else. You reanalyze your portfolio." In fact, there's been one academic study of the effects of divesting, and it shows the "theoretical return penalty" at 0.0034 percent, which is the same as "almost none."

At some schools, some of the money can be re-invested in the college itself - in making the kind of green improvements that save substantial sums. Mark Orlowski, head of the Sustainable Endowments Institute, just published a report showing that the average annual return on investment for a thousand efficiency projects at campuses across the country was just under 30 percent, which makes the stock market look anemic. "College trustees often think of a new lighting system as an 'expense,' not an investment, but it's not," he says. "If you invest a million and can expect to clear $2.8 million over the next decade, that's the definition of fiduciary soundness." At colleges - and elsewhere - the potential for significant reinvestment is large: the San Francisco Board of Supervisors, for instance, is considering urging its pension fund to divest a billion dollars. That could do some serious re-greening.

It's also possible that the insights into the future supplied by aroused student activists might actually make for savvy investing advice. As hedge fund founder Tom Steyer, who has advised trustees to divest their stock, put it, "From a selfish point of view, it's very good for colleges that they know something about the future that others don't. Because investing is not about what's happened in the past - all prices are really anticipations of what's going to happen in the future. As soon as the trouble we face is really common knowledge it's going to be reflected in the price. But it's not reflected in the price yet."

Steyer's a good investor - his net worth puts him on the Fortune 400 list, meaning he's worth far more than most college endowments. What he's saying is: Colleges are lucky to have physics departments not just because physics is a good thing. In a sense, universities have insider information - they know how bad global warming is going to be, and hence can get the hell out of fossil fuel stocks before, not after, governments intervene to make them keep their reserves underground. "Once the scientific research filters into the minds of investors around the world, the price won't stand," he says. But since the average investor relies on, say, the Wall Street Journal, which has served as an unending mouthpiece for climate denial, colleges have the advantage. "The only way you gain an investing advantage over the rest of the world is when you have an edge." As for those who think they'll wait until the last minute, just before the carbon bubble bursts, "That's one of the stupidest things I've ever heard. No one ever gets out at the top. It's worth missing another couple of good years of Exxon to avoid what's coming."

In the face of logic like that, an increasing number of colleges seem determined to at least engage the debate. For instance, my employer, Vermont's Middlebury College, which always ranks in the top five liberal arts colleges in the country, has held a series of panel discussions and open debates this month and its trustees expect to make a decision in the spring. And since Middlebury was the first college in the country with an environmental studies department, its student body, faculty and ranks of alumni are filled with people who recognize the potential power of the gesture. Similar discussions are underway at Bates, Bowdoin, Bryn Mawr, Earlham, Pitzer. But it's not just small liberal arts schools. Students at the University of New Hampshire delivered a thousand signatures to the president before Christmas demanding divestment; at the neighboring University of Vermont, state legislators have begun pressing for action, at the urging of a big student campaign. At Cal, the student senate has backed divestment by a wide margin; UNC students outdid their Harvard counterparts, voting 77 percent for divestment.

So let's imagine for a moment that students and their allies are able to convince many colleges and universities to do the right thing. Especially for those who sign on fairly quickly, and with a minimum of rancor, there could be real advantages. "After we divested," said Mulkey of Unity College, "we started receiving donations online. We're seen an uptick in our inquiries from students. I think that will transform into an improvement in enrollment. That's not why we did it, but it's a fact." Powell, recalling the moment when Oberlin divested its apartheid stock, says, "I definitely feel it rallies people behind their alma mater. Whenever there's change - abolishing fraternities, going co-ed - there's always the worry the alumni won't like change. We see over and over again that these claims are false - you may take a hit for a year or two, but in the end you're changing with the world." Some alumni, says Klein, "may be resentful. But for many more, it will be exciting. Suddenly the university they came from is not just a site of nostalgia, but a place where they can have an influence on the future."

That influence could be decisive, too. Less in financial terms, though the $400 billion in American college endowments is no small sum, than in political and cultural ones. A college is where a society thinks about itself, after all; if suddenly those collections of knowledge denounce the fossil fuel industry for what it is, a rogue force outlaw against the laws of physics, it will make a difference. Fossil fuel companies care a lot about image, after all - it's what makes it easy for them to exert their political control. It's why they run those back-to-back-to-back TV ads about "clean coal," those endless commercials with the polar bears and the drilling rigs. Colleges could strip them of their social license, and if they lead, others will follow. "The speed at which this campaign has spread is causing ripples in the investment community," said Andy Behar, the CEO of As You Sow, a campaign partner that promotes environmental and social corporate responsibility through shareholder advocacy. "We anticipate more 'carbon free' investment options coming onto the market over the coming months for endowments, foundations, and other institutional investors who want to move investment dollars to build a clean energy future." Already, at least two major Christian denominations have announced they'll consider resolutions to withdraw their money. One could imagine the fossil fuel industry as the new tobacco, humbled enough that it actually has to come to the bargaining table in D.C. and a dozen other crucial capitals.

On other campuses, it will go less smoothly; in some places, doubtless, colleges will go to war with themselves, with trustees hunkered down against the increasingly strident demands of students and faculty. But even in those cases, the fight will be valuable, educating each new incoming class about the culprits behind climate change. It's hard to imagine that it's all just a short-lived fad. "Global warming is not going away in anyone's lifetime," says Powell - and from now on, each superstorm, each megadrought will become a moral challenge to the university brand, a reminder that one's education or one's salary is being paid for with the not-so-gradual extinction of the planet's possibilities. Students, I think, are determined to believe in the colleges they love - but they're also up to the fight. At Pennsylvania's Swarthmore, for instance, they've been demanding divestment for more than a year without luck. "Particularly at small liberal arts schools, students are conditioned to believe that college boards and administrators will always do what's right - that if we just dialogue with administrators enough, they'll come around," says Hannah Jones, who graduated from Swarthmore last spring. But in fact, even at a school like Swarthmore with a deep Quaker tradition, "the administration and the board are part of an institutional hierarchy designed to support the status quo," so "it's up to students, faculty, and alumni to build power and to apply pressure in a way that demands bold, swift action." And as students learn to build those campaigns, knowledge spreads quickly. Swarthmore students, for instance, are hosting a 'convergence' this week for activists from many campuses; for those who can't make the trip, has become a kind of clearinghouse for videos, manifestos, essays, updates.

It's not perhaps a militant generation - maybe that was what struck Nader, more used to the uprisings of the 1960s with their broad themes of cultural liberation. But in the wake of Occupy, many young people are drawing connections. "We want to make sure we don't just get divestment, but that we build real political power across wide coalitions," says Jones. And if you're a college administrator, you should probably fear folks who know how to use YouTube, Twitter and Facebook better than you do; "militant" sounds good, but "persistent," "organized" and "committed" are probably a deeper threat to the status quo. And you can prove it by watching the same students running divestment campaigns quickly joining the larger environmental movement: all of a sudden, they're helping run the opposition to the Keystone Pipeline, or working hard with their Appalachian allies in the fight against mountaintop removal coal mining.

The fossil fuel industry may be dominant in the larger world, but on campus, it's coming up against some of its first effective opposition. Global warming has become a key topic in every discipline from theology to psychology to accounting, from engineering and anthropology to political science. It's the greatest intellectual and moral problem in human history - which, if you think about it, is precisely the reason we have colleges and universities.

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