September 10, 2018

More #FakeDivestment Numbers Expected: Get the Facts You Need

Don’t be fooled. New numbers set be rolled out today by divestment leader Bill McKibben and fellow divest activists are all hype, no substance.  

We have seen this game played before by activists – claims of trillions divested, with facts telling a far different story. Today is a repeat of days before, with the the Divest-Invest State of the Movement press conference holding their annual event (stunt) to highlight how the movement has, in their view, “exploded into a global social movement.” Unfortunately for them, the numbers seek to differ.

For starters, universities and pensions alike have continued to say no to costly, ineffective divestment policies (check out the recent post Divestment’s Final Exam: 2018, to read all the details). In summary, the past year has seen rejections from Cambridge University, Swarthmore College (for the FOURTH time no less), Grinnell College, reiterations of rejections from Middlebury and NYU, and an announcement from the San Francisco Employees Retirement System (SFERS) opting out of full divestment due to its fiduciary duty. Oh and let’s not forget news from a government-appointed Commission recommending Norway’s trillion-dollar sovereign wealth fund continue to invest in oil and gas companies, rejecting the prior advice of eager activist groups. Even Ireland’s recent announcement about divestment still has many questions left to be decided.

All this leaves the question: What exactly is this pro-divestment event going to herald?

According to the press conference announcement, organizers will be launching the next addition of the State of the Divestment Movement report by Arabella Advisors. If this sounds familiar, it’s because it is.  Every year or so, this report comes out heralding a new figure that woefully exaggerates the divestment tally. In 2016, the group claimed $5.2 trillion in divestment pledges have been made across the globe, up from its $2.6 trillion in 2015 and a marked increase from its 2014 study, which pegged that figure at $50 billion.  Our bet is that this year they will announce $10 trillion – a nice round number even if inaccurate — but let’s focus on a few key reasons these figures are all fluff:

• These estimates in no way represent the amount of assets divested from fossil fuels, but rather an aggregation of the total value of combined assets of institutions that they claim to have “pledged to divest.” As many (including many unlikely sources) have stated:
  • Mother Jones stated in 2015, “that big number — $2.6 trillion—has nothing to do with the amount of money that is actually being pulled out of fossil fuel stocks.” That’s Mother Jones calling out these divestment figures as highly misleading, even at a third of what the movement is announcing today.

• • MSNBC pointed out the same year that 350.org and its allies don’t know what portion of the $2.6 trillion was actually invested in fossil fuels, don’t know whether the institutions that pledged to divest actually followed through, and have given no evidence that divestment will have any concrete effect on the targeted companies.

• • The New York Times also called Arabella’s previous $2.6 trillion figure “hardly a precise calculation,” so any increase that doubles or triples this number must be inaccurate.
  • Even The Guardian admits no one knows how many fossil fuel shares have actually been divested. The Guardian – divestment’s biggest fan in the media — stated in its write up on the report, “it is often difficult to calculate the precise proportion of fossil fuel investments in complex funds, but about $400bn of the $5.2tn total is likely to be in coal, oil and gas” – a huge (and likely still exaggerated) difference in actual impacts.  The article continued: “Fossil fuel divestment has been criticised as gesture politics, as the investments are sold on, or unrealistic due to world’s current dependence on fossil fuels. Bill Gates called fossil fuel divestment a ‘false solution’ in 2015, although the $40bn Bill and Melinda Gates Foundation has now sold off 85% of its fossil fuel investments. Saudi Arabia’s oil minister, Ali Al-Naimi, also criticised divestment as ‘misguided’ but said it could not be ignored, while Bill McNabb, chief executive of the investment giant Vanguard, said divestment had no impact on company balance sheets and threw away the opportunity to influence the company as a share owner.” (emphasis added)

• A recent report from the Political Economy Research Institute (PERI) at UMass Amherst estimates that divestment pledges “as of March 2018 amount to $36.1 billion” – far below the trillions 350 and others claim. The report continues that these pledges are not binding and that “it is critical to be clear on the distinction between the assets under management of an entity committed to divestment and the actual level of divestment by that entity.”
• Bloomberg has labelled many divestment announcements “empty gestures” – in other words, many of the “divestments” being used to support these claims have no backing.  For instance, many UK schools are considered “divested” because an investment manager called CCLA that handles many endowments has said it “does not invest in any company that is primarily focused on coal or tar sands production.”

So why would Arabella Advisors publish such misleading reports? Maybe it’s because the firm is just another part of the campaign against fossil fuels. As we reported back in 2016 when they tried to pull this stunt:

• Arabella Advisors runs the New Venture Fund, a non-profit in Washington, D.C. that finances scores of left-wing organizations, including several anti-fossil fuel groups, according to recent IRS filings. Those grantees include Friends of the Earth, Oil Change International, Sierra Club, the Natural Resources Defense Council, the anti-Keystone XL group Bold Nebraska and The Solutions Project, a vehicle created for anti-fossil fuel activists Josh Fox, Mark Ruffalo and Leonardo DiCaprio. Another group funded by the New Venture Fund is 350.org, which has received at least $170,000 in recent years from the non-profit run by Arabella Advisors.
• In fact, Arabella’s New Venture Fund and 350.org are both huge beneficiaries of funding from the pro-divestment Rockefeller Brothers Fund, having received more than $4.5 million and $1.1 million respectively. These close ties are hardly surprising when you consider that Eric Kessler, the owner of Arabella Advisors and chairman of the New Venture Fund, was once the national field director for the League of Conservation Voters.
• The cozy relationship between Arabella Advisors, anti-fossil fuel groups and these donors was not disclosed, of course, when the Rockefeller Brothers Fund helped roll-out the 2014 divestment report from Arabella Advisors, which claimed that $50 billion was divested.  The New York Times was taken in, calling Arabella Advisors “a firm that consults with philanthropists and investors to use their resources to achieve social goals” rather than a key player in the divestment campaign against fossil fuels.
• Similarly suspect, for the roll-out of its 2015 report, 350.org and the group Divest-Invest held a press conference featuring Leonardo DiCaprio and the head of the UN climate agency to trumpet the new report’s findings that $2.6 trillion was divested.  At this press conference DiCaprio pledged to divest but, when asked by a reporter, failed to specify how much money he was pulling out of fossil fuels.  Now Leo’s own foundation is being investigated for a  role in the world’s largest embezzlement case.

Since the last report by Arabella was released by 350.org and Divest Invest in December 2016, we’ve seen numerous rejections from Cambridge University, Denver University, Mount Holyoke College, Washington University, University of Wisconsin-Madison, Kenyon College, Muhlenberg College, Smith College, Grinnell College, and Swarthmore College. Add in U.S. pension funds and the situation also remains bleak, with rejections continuing. On the west coast, pensioners continue to speak out, and the Chief Investment Officer for the California State Retirement System (CalSTRS), the second-largest pension fund in the United States, said in May he opposes divestment because “it doesn’t change cooperate behavior” and that it “hasn’t made the world a better place.” Back east, Vermont and New York State continue to resist pressure to divest, and Massachusetts has yet to gain traction.  The Department of Labor also warned against making divestment decisions based strictly on social issues, emphasizing that it can violate fiduciary responsibility while having little to no corporate impact.

Bottom Line: Don’t be fooled by another press conference: divestment is all cost for students and pensioners with no environmental gain. Today’s new fake divestment tally is more of the same empty numbers that have been debunked time and again, with actual divestment pledges a small fraction of what activists promote. Divestment is facing roadblock after roadblock and today’s new divestment claims leave much to be desired.