Although elections for positions on Boston University’s 2015 Student Government Executive Board closed this past Monday, one ballot question will likely remain in the university discourse for quite some time: “Should Boston University divest (stop investing in) the fossil fuel industry?”
This referendum on the role fossil fuels should play in our university endowment is non-binding, but it is clear that there is a significant portion of the student body who is in favor of divestment, with over 75 percent of the more than 2,500 voters responding “yes” to the ballot question. Given this strong opinion in favor of divestment, it is more than time to thoroughly consider the arguments both for and against divestment from fossil fuels. In considering these pros and cons, we must keep in mind the ultimate goal of divesting from fossil fuels — stemming the danger of global climate change.
On the one hand, it is clear that use of fossil fuels is strongly correlated with climate change, which poses a threat to the structure of our current economy and society. While this relationship between fossil fuels and climate change is well established, there is comparatively little consensus on how exactly climate change will manifest itself, with various scientists proposing scenarios ranging from not ideal to pretty bad to downright apocalyptic. Despite the clear harm that we can already see occurring — winter in Boston this year was, shall we say, out of the ordinary — and which we can likely expect to accelerate, we need to now consider whether divestment is actually a worthwhile strategy to combat climate change.
Divestment primarily serves as a political symbol, a boycott and a sign of protest which says that we do not approve of companies that produce and sell fossil fuels. Symbols are well and great, but does this particular symbol have any practical effect on moving us away from fossil fuels? In other words, if BU sells any shares in ExxonMobil it might own, is it going to move ExxonMobil any closer to rejecting fossil fuels? Probably not.
Granted, large scale selling of ExxonMobil stock could reduce the company’s share price, theoretically putting pressure on management to adopt policies that would appease divestment activists in order to restore share prices. But this argument does not hold water either, as any movement by ExxonMobil away from their mainstay of fossil fuel production could just as reasonably be interpreted by shareholders as a sign of danger, which would further decrease prices. In this way, divestment could actually create perverse incentives that would encourage energy companies to double down on fossil fuels, rendering divestment not only ineffective but counterproductive.
While the purpose of divestment from fossil fuels is to encourage the shift away from fossil fuels and toward renewable energy — an extremely laudable and vital goal — it is clear it may not be the best way to affect this change. Because shareholders serve as the owners of a corporation, large institutional shareholders like BU can hold great sway with companies, especially if many other universities also advocated for similar climate conscious policies. Perhaps change from within is a more effective method for changing the behavior of energy companies than dumping shares onto the open market. This logic would suggest that universities invest rather than divest.
Energy companies have not been a great investment lately with the steep decline in oil prices over the past nine months, but they have been in the past. In considering the pros and cons of divestment, then, we should ask why BU is in the investing business in the first place. Investing in energy companies (or any companies, for that matter) produces returns for BU’s endowment, which means more money to invest in and improve our university. Is it really worth it to sacrifice a potential source of investment returns and university improvement by adopting a divestment policy with laudable goals but with dubious effectiveness? For these reasons, we must seriously doubt the effectiveness of divestment as a political tool.
While my thoughts so far have focused on the practicality of divestment, the final argument against divestment is an ethical one. As arenas for the free exchange of ideas, universities should be extremely reluctant about adopting a definite stance on specific social issues. Electing to divest would constitute the adoption of a specific opinion that would have the effect of limiting the free speech of those within the university community who oppose the official stance. If BU were to decide to divest, it should have a compelling reason to do so.
Indeed, BU’s Board of Trustees has stated that it will divest from any industry or enterprise that causes a “degree of social harm” that is “clearly unacceptable.” The only times they have found these criteria met is its divestment from the South African apartheid regime and the Sudanese government over actions in Darfur. Unlike these patently unjust acts, fossil fuels serve a rational and beneficial purpose, fulfilling over 80 percent of the total energy needs of the United States and facilitating every aspect of our modern lives.
Although we can recognize the need to move from fossil fuels to renewable energy sources in order to stem the advance of climate change, divestment is ultimately an ineffective policy that may very well be counterproductive to this goal. This ineffectiveness, coupled with its potentially detrimental financial effects, argue strongly against divestment. Furthermore, divestment violates the ideals of free speech fundamental to a university. Should Boston University divest from the fossil fuel industry? You decide.
Good article, you brought up some good points I definitely hadn’t seen considered before (admittedly I’m pretty uninformed on the subject). I think it’s important for people to consider the divestment issue from all sides, and this piece does a good job of doing that.
This is similar to the argument against divesting from South African Apartheid.
While your main arguments against divestment have been “practical” ones, they have also been wrong. Practically speaking if you were to look at a portfolio with stocks in fossil fuels and one without, starting from 2000, the differences would be negligible. Actually, a portfolio currently invested in renewables would be receiving higher return now than if it had stayed with fossil fuels (thank the Saudis and low-oil prices over the last 8 months). Besides the economic aspects of our portfolio, the amount of BU’s endowment actually in invested in fossil fuels is not nearly large enough to have any negotiating power with any fossil fuel company. If we were to look past that fact and hypothetically say BU had an actual say at the negotiating table of a major fossil fuel company, and that we could change the entire nature of that said company is more than optimistic: it’s impossible. Exxon Mobile attempted renuables for two years after pressure from much larger investors than BU would be. They abandoned the project after they found that renuables aren’t as profitable at fossil fuels for the sole reason that everyone has an equal optortunity to access them. The only thing that makes fossil fuels profitable is the fact that it is a finite resource. Solar, wind, and geothermal energies are all naturally occurring and can be accessed by anyone with the drive to seek them out. It’s time we realised that being able to power our everyday lives should not be a privilege but a guaranteed right as a human being. And that is what Divestment seeks to accomplish.
To argue that divestment is “ineffective” because it fails to immediately bankrupt its targets is akin to calling Mahatma Gandhi and his followers “ineffective” in ending colonial rule in India because their non-violent skulls failed to break all those police truncheons.
By way of saying: The author has missed the point. As with non-violent resistance in revolutionary India, the gesture of divestment is explicitly moral and political — a demonstration of the moral superiority of one position over another. The goal of the demonstration is in heightening the visibility of the choices on offer.
To argue that divestment robs the participant of a “seat at the table” is likewise a canard. There is no effective “insider’s place” provided for a climate-conscious investor by holding equity in major fossil fuel extraction or consumption industries. These industries have shown total disinterest in finding new lines of business outside of providing and burning fossil fuels, and it is unlikely they could make such a radical transition in their core activities successfully. A “seat at the table”, even for a dedicated and vocal proponent for transitioning from fossil fuels, will never cause a fossil fuel company to seriously reconsider its actions as they relate to climate change. Preserving one’s stake in fossil fuels is effective only at providing political cover for continuing to profit from climate change.
While I appreciate the author’s concern for climate change and his understanding of the need to transition from fossil energy, his analysis is an unhelpful obfuscation of the issue.