This article is against the divestment of fossil fuels for universities due to the loss of money involved. According to a report done by the Independent Petroleum Association of America, “Divestment brings significant portfolio costs and would force a 15.2 percent average reduction in endowment spending”. This means that to compensate for the loss on the endowment, universities that relied on this endowment money would need to rias annual tuition. This raise in tuition for private universities could be thousands of dollars according to the report “($1,043 to $3,265). For public universities that don’t rely on endowment as much the rise in tuition would only be around $123 to $385. This article poses questions for me regarding the type of people that would be able to afford a private college like Allegheny and how this might change the campus, the learning style, and the type/number of people Allegheny could accept each year. The article ends with a quote from the senior vice president for operations and public affairs at IPAA, Jess Eshelman which says: “When it comes to the impacts of divestment, whether in the form of increased tuition or cuts to instruction time and faculty, students only stand to lose”. The question is- what kinds of sacrifices are we willing to make?
Hendrik Bessembinder is a Professor of Finance at Arizona State University and well-versed in matters of financial markets, stock and bond exchange, energy and non-traditional markets. His work focuses on the growing movements calling for institutions to divest on college campuses in order to protect the planet and secure an environmentally sustainable future. Yet, these movements have failed to consider what Bessembinder has termed ‘frictional costs’ which include hidden transaction costs, ongoing monitoring and active management costs of shares. Lesser known frictional costs of divestment from endowment funds have caused prestigious universities such as University of Michigan, Columbia University, Cornell University, Vassar College and the University of British Columbia to reject broad-based fossil fuel divestment. Because endowments are long-term, investors tasked with holding these illiquid assets are expensive to sell and oftentimes these endowments are embedded withing comingled funds that include mere percentages of fossil-fuel-related assets and require the sale of the entirety of the fund in order to divest. Therefore, the total cost of divested endowments over twenty years including the frictional costs would translate to a loss of between $1.4 and $7.4 billion respectively for colleges and universities. Bessembinder also points out the weaknesses of divestment as an attractive option, such as its subjectivity when assessing which assets should be divested and its ever-changing protocols that make active management necessary. This study exploits the cracks in the divestment argument and offers a thoughtful perspective on its shortcomings.
Authors Murray and Meyer both regularly write articles for Fortune Magazine with Murray being the CEO. This co-authored piece states that divestment is not a viable approach for institutions to pursue because at best it will increase the capital expenses of fossil fuel industries, and at worst, would completely shut them down- leading to our deaths. As far as credibility, this source is nothing more than a wild opinion of someone who has everything to lose from recognizing climate change and nothing to gain, which is nonetheless, a very important opinion. This source is important for conversations about divestment because it acquaints the researcher with perspectives that are grounded fundamentally in fear. Far from logic, this article ironically serves as a representation of social obstacles that will need to be hurtled in order to successfully divest. How ready is the town of Meadville for divestment?
Toby Espinosa is a graduate student at Stanford University and is currently the vice president of food delivery service DoorDash. With a background in economics, Toby argues that divesting is not a valid tool for disrupting the shareholder price of fossil fuel industries, even if there is a major “domino effect” of institutions divesting. These claims are backed with statistics, making his claims appear to be well-researched and verifiable. This article was published in Stanford Politics, a magazine dedicated to non-partisan takes on current topics. One drawback of the article is that it was published in 2015, which makes it relevant for a time period when environmental divestment was in its infancy. Espinosa has a background in economics from Brown University.
Despite the University’s Senate passing a resolution for the school to divest, the NYU Board of Trustees decided not to, stating that the school’s endowment should not be a tool for, “simply making statements.” The Board was not “persuaded” by the argument that divesting could help advance the green energy sector and reduce reliance on fossil fuels. There were students, more than 200 faculty members, and staff that protested and campaigned for divestment. The Finance Committee of the school said that they would not stop their commitment to sustainability and emissions reduction, just not through the industries that control them, only within the boundaries of their facilities. NYU was not the only school to refuse the divestment campaign pressures. “Harvard, Cornell, Tufts, Amherst, and Brown.” Regardless, the Board’s response is one of fiduciary responsibilities.
A team of researchers from the School of Environment, Enterprise and Development (SEED) at the University of Waterloo has taken the initiative to uncover the motivations of investors as they withdraw from fossil fuel companies. Whether to avoid financial risk or make more deliberate investments, their analysis suggests that divestment has a statistically significant impact on the price of shares for fossil fuel companies by pulling data from more than twenty divestment announcements across 200 publicly traded companies. The drop in share prices corresponds to divestment when announced publicly making it a valuable tool to reduce support for companies and impact their current and future profitability. The team concludes that the market believes divestment to be integral to long-term values of fossil fuel industry, and that more recent divestment actions have a stronger impact pointing towards a snowball effect of support. Despite arguments on the opposite side, divestment can have a considerable impact on the fossil fuel industry and an indirect impact on the reputation and image of these companies which in turn can weaken investing confidence and chip away at the value of shares. Ideally, these companies are left without resources to leave investments stranded and fall out of business.
All of these articles really begin with the crux of the divestment movement. Where it stems from, why, other models of divestiture, who is in support, and then, how difficult it can be. While there are notable successes with divestment, these efforts have been in effect for over three decades now, and still, one of the largest obstacles to divestment is the way in which endowment portfolios are structured. This model represents diverse revenue streams, like hedge funds, private equity, and other alternative assets like oil and various commodities. The author argues that resistance to divestment stems from the thinking that markets and professionals have the best sense for an assets value and by setting limits on investments, loss will surely ensue. Nonetheless, the divestment from carbon and investment in green technology is happening at a fast pace. But still, managers are resistant and political action is suggested as the first step. Advocates argue they both go hand in hand and action is needed today, not tomorrow.
In this piece the author discuss why people should not divest from fossil fuels. His big points include that divesting will not stop the amount of energy being produced, it makes way for more people to invest, and it transfers the power from “anti- to neutral fossil fuel investors.” He also discusses how divesting from fossil fuel companies has been found to hurt colleges and universities. Another crucial point that the author discusses in this piece is that under the Trump Administration, investing in fossil fuel is actually more beneficial, as fossil projects that were previously blocked have gotten the go ahead. Though this article is a bit old it does a good job of laying out many of the supposed reasons why not to divest.
This article reports that if some of the large British pensions were to divest from fossil fuels, they would be losing millions of pounds per year. This claim was supported by figures that represent the numerical value of pounds gained from fossil fuel investment. From the viewpoint of this article, divestment is seemed to be impossible for the people interviewed given that “almost every business depends on fossil fuels.” 47 of Britains largest pensions were contacted and 33 of them stand by the idea that divesting would be too dangerous from a financial standpoint; while the governor of the Bank of England, fears that if they fail to divest, then money would be lost in the long run as the world moves from fossil fuels to renewable energy.
The president of McGill University has decided not to divest from fossil fuels even though the senate, faculty, and students all are in favor of divesting. In this article, the president refers to divesting as a “symbolic gesture” rather than being a concrete action plan to tackle the issue of climate change. In 2013 and 2016 the topic of divestment was voted on and denied; now for a third time, this effort has been denied. Fossil fuels make up two percent of the Universities investment portfolio which is another reason why divesting would only be symbolic. It was also acknowledged that divesting could pose a financial threat to the University given that if they chose to divest, they would have to look into all their investments to make sure that their other investments do not support fossil fuels; potentially losing more investments then anticipated. Despite the disagreements when it comes to divesting, the University is finding ways to reduce their carbon emissions as well as looking for ways to lower carbon emissions in their investment portfolio.
This article’s main focus is proving that to see divestment as the main actionable policy for curtailing climate change would be a mistake. Hulme argues that fossil fuel divestment will not bring “action” on climate change and will fail to “meet the needs of the people”. Hulme does not explicitly say that divestment is a bad thing, he just makes it clear that it is not a viable solution in many scenarios(such as in developing countries i.e. India). Hulme offers to grant divestment the status of “campaign” but dismisses it as anything that could incite change. The sources cited are reliable and the Author is credible (Professor of Climate Change at University of North Anglia).
This article, written by Stefan Andreasson, highlights the potential dangers of divesting from fossil fuels. He brings up the point that divesting would have a major impact on International Oil Companies (IOCs) which are privately owned oil and gas companies while emphasizing that this movement has not considered National Oil Companies (NOCs) which are owned by the national government. In the article, we are informed that NOCs are the companies that should be feared most given that they do not have to be as transparent as IOCs and the carbon footprint from these companies is greater. NOCs are not impacted by environmental movements and do not have to care about societal pressure as long as there are people who still demand fossil fuels. The article is concluded by alluding that divestment is not the answer. In Andreasson’s opinion, we should be looking for ways to make fossil fuel demand decrease. He suggests implementing carbon taxes as a way to not only fund renewable energy sources but also make these energy companies want to switch to the cheaper option (renewable energy).
https://www.chronicle.com/article/Fossil-Fuel-Divestment-Is-a/247088
In this article the author talks about how divesting is a waste of time, especially for colleges and universities. He insisted that instead of divesting they should focus on the proposed carbon-tax. He discusses how it is more beneficial for colleges to limit their carbon use, rather than divest, as using less energy actually hurts the fossil fuel companies more than from divestments. The author then introduces how promoting a carbon tax would be more beneficial, again because of limiting the amount of fossil fuels being used. To tie it all together he discusses the history of divestments, and how it was not necessarily divesting alone that made the changes in the past, so why would it work now. Overall this article was opposed to divestments, but did offer the alternatives of using less carbon and the possible positives of carbon taxes.
https://www.theguardian.com/environment/2015/apr/17/why-fossil-fuel-divestment-is-a-misguided-tactic
In this article the author states how he, and others find that those who are divesting from fossil fuels are misguided. He listed out three reasons why he does not believe that divestments will work: “it’s not a policy tool,’’ “it will not bring ‘action on climate change,’” and finally that “the campaign is driven by a single and simple climate change narrative.” He does discuss through how intricate of a problem climate change actually is, and offers solutions other than divestment, such as investing in alternatives to fossil fuel, investing in climate policies to help, and finally investing in climate change itself. Overall the author of this piece truly just believes that divesting is bad and useless.
This study highlights the cost that divestment would have on five of the largest colleges in the United States. Cornell claims that over a 70 year span, a divestment portfolio could have a much as 23% lower returns than a non divestment portfolio. He says that is is especially dangerous for universities to divest because they are such long term investors. He says that Columbia and Harverd could each loose over a $14 million yearly in a carbon free portfolio. He argues that using that money for good things would do more for the environmental movement. It is worth noting that this study used funding from fossil fuel lobbyists. Although I don’t agree with most of the arguments presented here, it is very well researched and is something that the people who disagree with divestment are definitely going to cite so we need to be ready with counter arguments.
This piece focuses on the idea that there are larger and more effective ways to deal with climate change than simply divesting in the fossil fuel industry. His main critique is that this is simplifying the problem when it is very complex and should not be simplified. He also claims that this will not have an effect on the stocks or power of these companies because there will always be “ther investors waiting to pick up any slack.” So even if large numbers of institutions divest, it may not have a very large market impact. Lastly, he also claims that this campaign strategy will, at best, start a conversation and raise awareness. He does not see these as very useful. According to the Guardian, Mike Hulme was a professor of climate change at the University of East Anglia and is now teaching Human Geography at Cambridge. He also has multiple publications on climate according to his website.
Saving Money Do the Trick?" https://www.chronicle.com/article/Saving-the-Planet-Hasn-t/247057. Aug 30, 2019. Web. Jan 20, 2020 <www.chronicle.com>.
This web article explains the cons to divestment even if the pressing moral high ground dictates that companies, universities, and institutions should divest anyway. As for the Middlebury College, they decided not to divest even though they originally decided to. The original decision to divest was due to the “profound threat of climate change.” The administration told the students that it wasn’t happening due to the uncertainties and the risks divesting would cause. The students decided to show the administration the pros to divesting, i.e the pros for the college’s finances. It is shown that there is an overwhelming dislike for divestment especially for those focused on the finances and politics. A great deal of the colleges mentioned have persuaded their administrations to consider more of the issue, namely the evolution of the energy sector and the relationship between fossil fuels and climate change.
Here's Why That's Wrong." https://prospect.org/education/yale-s-endowment-divest-fossil-fuels.-wrong./. Mar 8, 2019. Web. Jan 21, 2020 <www.prospect.org>.
Yale University divesting from fossil fuels would create shockwaves of change. Yale students and community members have repeatedly staged sit in at the investments office with no palpable result other than some arrests. Yale’s endowment won’t divest from fossil fuels. This article delves into the reasons why and its effects on the university's community. Most of those reasons being due to the climate not being stable and the financial climate always fluctuating. Due to these reasons and more, the Yale Corporation Committee on Investor Responsibility (CCIR) and the university's chief investment officer David Swensen believe that divestment isn’t worth it.
This piece seems to have a lot of power when it comes to the No Divestment argument. There are several articles and academics who cite this piece as providing strong evidence on why not to divest. Point 42 says that there is really no reason in divesting if you hope to hurt the company at all. There will always be investors who are willing to buy from the shares that are now available. There are also points that say previous investment campaigns were unsuccessful in accomplishing their goals. (this point is debated in a PRO section article.) He then goes to raise the question, if climate change is already a hotly debated topic, and the divestment campaigns use divestment mainly as a conversation starter, what is the point of divesting other than the moral grounds, which does not usually speak to people in the first place. Daniel Fischel is a law professor at the University of Chicago Law School. He was commissioned to do this study by the Independent Petroleum Association of America. There is a substantial portion of this piece that is not covered in this annotation.
This is an opinion piece that questions the validity of the divestment campaign. The author starts by explaining that these divestment campaigns usually fizzle out once they reach a certain road blocks. In addition, he also explains that, even though some politicians are willing to support the cause, that does not always mean that they are able to make anything happen in reality. He gives the example of New York City, which has other issues that are more pressing to the state. The city needs to get returns so that it can improve the state of its pension funds. He explains that the environmental and social investments do not have the desired effect at all. He finishes by saying that there are more effective ways in which we can control and regulate the fossil fuel industry. Jeff Eshelman is an opinion Contributor to the Hill. He has also written pieces for Energy in Depth, which is a project of the Independent Petroleum Association of America. He likes fossil fuels.
This article is a summary of many of the most common arguments that have been used against fossil fuel divestment. It starts out by saying that the actual percentage of most company’s portfolio that is wrapped up in fossil fuels is very low. Helman then makes that claim that selling shares in carbon-based companies would incentivize other buyers to purchase those stocks and end up helping fossil fuel companies. He made the case against the moral reasons to divest, saying that it would do little to change the perception of fossil fuels and would cost universities a lot of money. His ending remark is a hypothetical plan where he says that it would do more for halting climate change to buy up old coal mines with money from fossil fuel investments and then close them. This is how many of the people on the board of trustees are probably going to talk and we need to be ready to counter these kinds of arguments.
Swarthmore, a school in Pennsylvania is not divesting from fossil fuels based on “extensive preparation, analysis, and robust discussion and debate”. Swarthmore, however, fully committed to “addressing the threat of climate change” and justified this decision by investing in other means on campus to promote climate change activism. Although they are widely considered the birthplace of the divestment movement, Swarthmore abided by the school’s investment guidelines of making “the best long-term financial results, rather than to pursue other social objectives”. The college believed that it was the best financial decision for the school to not divest from fossil fuel companies. They then justified this decision by setting up a “green fund” that would allow alumni and other contributors to donate money to keep the campus as sustainable as possible. This calls in to question- is it okay to agree that climate change is real and it is horrible and then invest money in something that is a leading contributor to climate change? Is it okay ethically/environmentally to still invest but make other things on campus more sustainable/green?
Although this letter is old (2013) it highlights some of the original thinking of the Harvard president and the members of the Corporation Committee on Shareholder Responsibility. In the opening statement, the letter addresses the importance of admitting climate change while then saying the divestment of the fossil fuel industry is not “wise or warranted”. The justification for this reasoning is the protection of the endowment and the desire to not make political statements concerning climate change. Drew Faust, the president at the time, then said that the endowment is important in creating an institution of learning where students can conduct good research in nice facilities. The letter goes on to say that there are inconsistencies between a university divesting in fossil fuels while groups and individuals rely on the services that those companies bring. If people continue to use these services, then it is not right to make university divest assets. This article, while having inconsistencies of its own, did bring up good ideas about the importance and value of the endowment and called out individual impacts.
Professor of Sustainability Science & Policy at Northeastern University Jennie C. Stephens elaborates on the societal role of colleges and universities in the divestment movement. Despite the claim from institutions that their school’s investments cannot be politicized making endowments an inappropriate topic for social change, Stephens believes that there is no such thing as an apolitical investment because each one influences change in direct and/or indirect ways. To combat this, many schools have created guidelines for responsible and ethical investing whether from an environmental or social perspective. Institutions shy away at this initiative for fear of alienating important constituents and/or losing support from large, powerful companies, but the core missions of higher education are to educate responsible citizens and leaders. Stephens goes a step further to assert that institutions must embrace a third role of addressing pressing social change and become agents to this change no matter how complicated it may seem. The call to divest is resisted because it opens doors for more social activism and the potential of divesting from other ethically challenged areas such as tobacco and firearms. Fossil fuel divestment raises such questions as to the roles and responsibilities of educational institutions in society and how the gap between knowledge and action can be bridged in ongoing efforts to create a more resilient and sustainable future.
This is a report from the president of Tufts University, where he addresses why the university decided not to invest, despite large pressure from both students and professors. The school established a committee devoted to examining what divestment would look like for Tuft but determined that the cost to the endowment would be far too high. Another reason that they gave was that their endowment is managed by a mutual fund and because of this it would be too difficult for them to pull out of specific companies. They voted that it would be much more financially feasible to use funds from the endowment to pursue environmental efforts in a more meaningful and less symbolic way.