Philanthropies Are Divesting From Fossil Fuels—But Does It Matter?

The movement to divest financial holdings in oil, gas, and coal companies is growing. Turning up the heat on the industry, however, won’t be easy or fast.

View of the Syncrude oil sands extraction facility near the town of Fort McMurray in Alberta Province, Canada on October 25, 2009. Greenpeace is calling for an end to oil sands mining in the region due to their greenhouse gas emissions and have recently staged sit-ins which briefly halted production at several mines. At an estimated 175 billion barrels, Alberta's oil sands are the second largest oil reserve in the world behind Saudi Arabia, but they were neglected for years, except by local companies, because of high extraction costs. Since 2000, skyrocketing crude oil prices and improved extraction methods have made exploitation more economical, and have lured several multinational oil companies to mine the sands.  
National Journal
Ben Geman
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Ben Geman
Sept. 21, 2014, 5:30 p.m.

Fifty philanthropies are going public with plans to dump their shares in petroleum and coal companies, pledges that arrive shortly before Tuesday’s big United Nations climate-change summit in New York.

Advocates say pledges from foundations that jointly control several billion dollars in assets, including the $860 million Rockefeller Brothers Fund, show momentum for the fossil-fuel divestment movement.

Those plans, and new pledges from many wealthy individuals, are tallied in a new report that represents the most detailed survey to date of the divestment plans of various universities, churches, philanthropies, cities, and other entities.

According to the report from the umbrella Divest-Invest coalition, 180 institutions and local governments and 654 individuals representing $50 billion in assets have made divestment pledges as of mid-September.

“Since January 2014, the number of commitments by campuses, churches, cities, states, hospitals, pension funds, and other institutions—both in the United States and abroad—have more than doubled, from 74 to 180,” states the report, which was written by Arabella Advisors, a company that works with foundations and individual investors.

Nearly half of the $50 billion in financial assets under management that are subject to divestment commitments are held by local governments, while colleges and universities account for 38 percent, the report states.

Philanthropies are now 8 percent. The 50 foundations announcing divestment plans Monday, including the V. Kann Rasmussen Foundation and the Educational Foundation of America, jointly control $2.4 billion in assets, according to the report, adding to foundations controlling $1.8 billion in assets that announced divestment pledges in January.

Ellen Dorsey, executive director of the Wallace Global Fund, said in an interview Saturday that the new commitments from foundations and individual investors show a turning point for the divestment movement that began just a few years ago.

“It marks the very rapid growth of the movement in a very short period of time, and its move into the mainstream, with mainstream and powerful thought leaders within the philanthropy, health, and faith communities,” said Dorsey, whose foundation provides grants to several groups involved in the divestment movement, including Bill McKibben’s She has played a key role in organizing philanthropies to divest.

The announcements are part of a slew of climate-related events ahead of Tuesday’s United Nations climate-change summit in New York City, and they arrive on the heels of a major climate-change march in Manhattan that organizers say drew more than 300,000 people.

Advocates say divestment can be an important tool against climate change, arguing that beyond the financial effect, it can sap the political influence of the industry by building a movement that openly declares the holdings in carbon-heavy industries unacceptable. Divestment activists say that the resources are better channeled into clean-energy investments.

They also want to make investments in oil and coal companies risky.

Activists argue that if the climate movement succeeds in pushing governments to implement strict controls on carbon dioxide emissions, industry capital spent on oil-sands development, expensive deepwater projects, and other fossil-fuel reserves will become “stranded assets.”

But while the scale of divestment commitments is growing, it’s still small in comparison with the scope of the fossil-fuel industry.

And the movement, which has been very active on a slew of college campuses, has faced some recent setbacks as Yale University and the University of California declined activists’ calls to dump their endowments’ holdings.

A recent report from the research and analysis company Bloomberg New Energy Finance notes that nearly 1,500 exchange-listed oil-and-gas companies are together valued at $4.65 trillion, although the coal industry’s valuation is far smaller. “Fossil fuels are investor favorites for a reason. Few sectors offer the scale, liquidity, growth, and yield of these century-old businesses vital to today’s economy,” BNEF said.

In addition, oil and gas companies have ample financial resources and access to capital markets to fund projects, and divestment critics point out that when one party dumps a stock, another buys it.

In a May New York Times op-ed, University of California (Los Angeles) finance professor Ivo Welch offered several reasons why he believes the divestment movement will be ineffective at spurring changes in corporate or national policies. Using Stanford University’s recent decision to dump holdings in coal companies as a jumping-off point, he writes: “Global public equity markets constitute about $60 trillion of market capitalization. With about $19 billion, Stanford’s endowment represents only about five-hundredths of 1 percent of the world’s capitalization. Even if Stanford divested itself fully of all its stocks, both fossil and nonfossil, it would probably take the market less than an hour to absorb the shares.”

But Dorsey said divestment advocates are well aware that they’re not positioned to deal a financial knockout blow to the massive fossil-fuel industry any time soon.

“The purpose of divestment is not to directly and immediately impact the value of the fossil-fuel industry. It is to raise the specter of the financial risks and to compel ethical action, and also to capitalize the solutions,” she said.

Fossil-fuel divestment activists model their campaign off the anti-apartheid divestment campaigns that pressured the South African government in the 1970s and 1980s, as well as the anti-tobacco movement.

Archbishop Desmond Tutu, the Nobel Prize-winning anti-apartheid leader, will join by video a Monday press conference on the new pledges. Dorsey, actor and activist Mark Ruffalo, Rockefeller Brothers Fund President Stephen Heintz, and others will take part in the rollout in New York City.

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