The Divestment Movement – A Good or Bad Thing

May 24, 2015 – What started as a social media phenomenon on many university campuses has blossomed into a global movement by institutions, corporations, foundations, pension funds and even governments. It involves wiping hands clean of stocks and bonds issued by fossil fuel companies. In the last month the Anglican Church gave notice to the industry that the institution was going to divest its shares. And two days ago the majority party in California, the Democrats approved a resolution to rid state public pension funds of $500 billion in fossil fuel stocks. A spokesperson for the California Democratic Party stated, “The world is watching….divestment from South Africa helped bring down the system of apartheid and will likewise bring down our dependence on fossil fuels.” The Democrats plan legislation that will authorize California’s two largest employee pension funds representing 2.4 million retirees to rid themselves of all fossil fuel assets, going beyond a recent bill focused on $300 million in coal stock assets.

Divestment continues to be the intellectual equivalent of shunning. It is a strategy that in April made Syracuse University administrators vote to rid their $1.18 billion endowment portfolio of fossil fuel assets. They along with 22 other schools in the United States and many others around the world have committed to wiping their hands clean of fossil fuels. But are they doing the right thing?

Is divestment the best way to get fossil fuel companies to act responsibly about climate change?

Some would argue that by divesting shares in oil and coal companies, pension funds and institutions like Syracuse University lose their influence at the boardroom table. That a better strategy would be to stay engaged to attempt to win board seats or influence board members’ opinions to alter company behavior. Others argue that to remain engaged means together the fossil fuel industry and the rest of us can find solutions to an unbalanced carbon cycle. They reason that it is the unbalanced carbon cycle that is the problem, not fossil fuels themselves.

Their evidence is scientifically based – that the carbon cycle is currently out of balance because of 10 billion metric tons of carbon added annually to the atmosphere from burning fossil fuels and 1 billion tons annually added from deforestation. These collectively represent the bulk of our annual human contribution to the total planetary carbon cycle which emits and sequesters 200 billion tons of CO2 per year. This 11 billion extra tons amounts to 5.5% and is enough to tip the cycle out of balance and enhance the atmosphere’s greenhouse effect to alter global climate.

Those arguing for engagement want to influence fossil fuel companies to be part of a global solution, to take a portion of their considerable profits and invest in natural CO2 removal mechanisms to eliminate the 11 billion tons of CO2 which we currently contribute. By doing this the fossil fuel companies can still produce the energy we need for our modern industrial world. No need for us to return to a pre-industrial state as climate skeptics and naysayers would have us believe will be the consequence of reducing our global carbon footprint.

The mechanisms for carbon reduction that the fossil fuel companies would invest in are proven in science. They don’t require massive investment in new ways to capture and sequester carbon. That’s not to say these solutions come free. Money will be spent.

So what are we talking about? Natural carbon sinks including:

• aggressive reforestation
• educating farmers to employ natural carbon-sink practices such as no-till farming
• expansion and restoration of wetlands and peat bogs
• expansion and restoration of grasslands

Scientists who study the carbon cycle believe that these types of investments would eliminate up to 4 billion tons of CO2 emissions annually. That would still leave us with the remaining 7 billion tons to remove.

So the step one described above would have to be followed by a step two, getting the fossil fuel companies to add renewable energy projects back into their product mix.

There is historical precedent for this. Between 2000 and 2010 American oil and gas companies invested $9 billion in renewable projects, representing 20% of total investments in solar, wind, and biofuel technology during that decade. That interest in renewables declined when world oil prices heated up, and fossil fuel companies took the money out of renewables to further invest in finding more fossil fuels to burn. The companies either sold their renewable assets or shuttered them.

But now that the world has seen a staggering drop in oil prices in the last year-and-a-half accompanied by flat demand we suddenly see inventories of oil not being burned as fast as before. So it would seem the timing is perfect to engage in a conversation at the boardroom table for more investment in renewables. In this way the fossil fuel companies could offset reduced production from carbon-based energy sources, replacing these with increased energy sales from renewable alternatives.

Could the fossil fuel companies end up reducing the carbon cycle by the remaining 7 billion tons we need to naturally restore balance? Undoubtedly.

And where it makes sense the fossil fuel companies could also make strategic investments in carbon capture and sequestration technology (CCS). For example CCS investment using captured CO2 to enhance flow from older oil fields could be money well spent rather than having to search for much more expensive and higher risk sources offshore or in the Arctic.

You see the fossil fuel companies have become part of the problem as a consequence of what their products do to the planetary carbon cycle. If they can restore balance then they can be seen as the good guys. They can show the world they too believe in a sustainable future while maintaining and enhancing shareholder value for those who remain invested. In this engaged state the fossil fuel companies would have no reason to resist policy initiatives and legislation aimed at lowering carbon output because they would be making money doing it.

So we have a choice of weapons  – divestment or enhanced engagement.

The former is the stick being deployed described at the beginning of this posting. Does it give those wielding it further recourse for conversation? No. Does it give them future influence at the boardroom table? No.

But enhanced engagement is a carrot. It gives those at the boardroom table the opportunity to influence where dollars are spent. It is a catalyst for idea sharing that gives the fossil fuel companies a way out of the problem they are desperately trying to avoid, watching their fossil fuel assets become frozen and stranded forever.

Related articles across the web

Amazon: 1% of trees store 50% carbonThe Reasons to Divest from Fossil Fuels: Financial, Ecological and MoraVast Savannahs May Slow Climate Change by Storing CarbonIs 2015 The Year Soil Becomes Climate Change’s Hottest Topic?