What is Swarthmore Mountain Justice’s proposal?
Immediately freeze all new investments in the “Carbon Underground 200,” which includes the 200 fossil fuel companies with the largest reserves. As soon as contracts allow, divest the college’s direct holdings in the “Carbon Underground 200.” Over a period of 2-5 years, divest our commingled funds from the “Carbon Underground 200.” Reinvest at least 1% of the endowment into community and renewable energy solutions to the climate crisis.
Why is climate justice such an urgent issue?
Every year, climate change and our fossil fueled energy infrastructure causes millions of deaths, and the potential damage wrought by unchecked fossil fuel extraction is unthinkable. From refineries in communities of color to rising sea levels impacting small island nations, those least responsible for the climate crisis — the poor, people of color, and communities throughout the global south — are facing the worst impacts as a result of our fossil fuel dependency. UN scientists tell us that if we are to prevent runaway climate change we need to leave 80% of proven fossil fuel reserves in the ground. Meanwhile, however, the fossil fuel industry is using its extreme wealth to acquire more reserves, fund climate denialism, and lobby governments in order to maintain their subsidies and prevent the development of renewables. We cannot stay silent and allow Swarthmore to champion struggles for social justice in its classrooms while supporting the companies that are destroying communities with its endowment.
Has divestment had an impact?
Yes! In the three years since it began here at Swarthmore College, the international divestment movement has grown to over 500 campaigns around the world. The movement has assembled a groundbreaking coalition of universities, cities, religious institutions, and world leaders including World Bank President Jim Yong-Kim, U.N climate chief Christiana Figueres ‘79, and U.N General Secretary Ban Ki-Moon. The Rockefeller Foundation (built off the wealth of Standard Oil Company), major Swedish and Norwegian pension funds valued at over $100 billion, and Stanford University all made divestment commitments in 2014.
By divesting from the largest fossil fuel companies, these institutions are sending a clear message: fossil fuel investments are incompatible with a just and sustainable future. A study by the Oxford University Stranded Assets Programme found that “the outcome of this stigmatization process, which the fossil fuel divestment campaign has triggered, poses a far-reaching threat to fossil fuel companies and the vast energy value chain,” noting that stigmatised firms “suffer from a bad image that scares away suppliers, subcontractors, potential employees, and customers.”
Divestment has put the fossil fuel industry on the defensive, challenging their power and beginning to shift the conversation on climate. The Alberta Oil Magazine warned that “energy executives ignore the [divestment] campaign at their own peril.” The Minerals Council of Australia, a coal industry group, is even attempting to make divestment illegal, claiming that it unduly burdens them because “stigmatization makes it difficult for an industry to engage with its customers, attract employees and more importantly access capital for investment purposes.” NRG, one of the largest electricity companies in the U.S, recently pledged to cut 90% of their carbon emissions by 2050, citing the political pressure from the divestment movement as a significant influence in this decision.
Will Swarthmore alone divesting really make a difference?
It’s true, a single campus divestment campaign is not enough. This is why we are working with an international coalition of over 500 campaigns around the world all demanding fossil fuel divestment. A single voice is rarely enough to change an unjust status quo, but a concert of voices from institutions of higher learning around the country can make a huge impact, as we have seen with the campaign to divest from South African apartheid. Swarthmore has a $1.8 billion endowment, is a highly respected institution with large amounts of political capital, and is home to the first-ever fossil fuel divestment campaign. We have influence and social power disproportionate to our size, and Swarthmore divesting would set a precedent for other colleges to divest. In 1986, Swarthmore College ended its complicity in an unjust system when it divested from companies supporting South African apartheid. This nationwide campaign was hugely successful in working toward the end of South African apartheid. It is now time for the College to respond to another system of injustice.
But won’t someone else just buy the shares?
The impact of divestment movements, past and present, has little to do with the stocks themselves — rather, it seeks to stigmatize firms, which causes indirect economic consequences. In the case of fossil fuel divestment, the goal is not to hurt share prices, but to erode the fossil fuel industry’s social license to operate.
Why doesn’t Mountain Justice propose a shareholder resolution?
Shareholder resolutions are useful in cases where a company can reform its practices, principles, or procedures, but are virtually impossible when the reform undermines the economic purpose of the company in question. In other words, shareholder resolutions can pressure a fossil fuel company to “clean up its act,” but they still allow the company to continue to extract and use fossil fuels. Companies can (according the US SEC), and frequently do, throw out shareholder resolutions that are “related to the company’s ordinary business operations.” Exxon itself rejected a shareholder resolution merely asking them to study the social impacts of tar sands oil extraction!
Will divestment hurt the endowment?
No. In 2013, the Board claimed that if we divest, we will need to remove our endowment from commingled funds and into index funds. They further claim that doing so will reduce returns. Both of these assertions are false. Since then, there has been a surge in commingled funds that ‘screen out’ fossil fuel investments. Blackrock, the world’s largest asset manager, has created a fossil free index and our largest investment manager, Cambridge Associates, has even offered to help Swarthmore move to fossil free investments. As Donald Gould, the chair the Investments Committee of Pitzer College (who oversaw Pitzer’s divestment), explains, “money managers are nothing if not adaptable to client demand, and are already offering funds free of fossil-fuel companies.”
According to McGraw Hill and Standard and Poors estimates, fossil fuel shares have underperformed the market average by nearly 10 percent over last decade. Fossil fuels are also about to become far, far riskier investments. As a result of the divestment movement, mainstream financial institutions like Morgan Stanley, Bernstein, Citi, Deutsche Bank, Goldman Sachs and HSBC have begun questioning the long-term profitability of fossil fuel investments. If we’re going to avoid the worst impacts of climate change, the fossil fuel industry must write off 80% of their reserves — valued at $20 trillion. HSBC reported that if they were to write off that 80% of their reserves, fossil fuel companies would be devalued by 40-60%. Obviously, we don’t want to be invested in the fossil fuel industry when it takes that hit. More on the financial arguments for divestment.
But the carbon bubble hasn’t popped yet!
Just before the 2008 financial crisis, a Citibank executive famously said about his practice of making risky loans, “As long as the music is playing, you’ve got to get up and dance.” Citibank got slammed in the ensuing crisis. As Bevis Longstreth, who was appointed SEC commissioner by Ronald Reagan, argues, “fiduciaries have a compelling reason, on financial grounds alone, to divest these [fossil fuel] holdings before the inevitable correction occurs.”