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September 16, 2016

Get Ready for More Unrealistic Divestment Numbers

Next week, Arabella Advisors will release the 2016 iteration of its highly-contested series reporting on the fossil fuel divestment movement.  In September 2014 and 2015, Arabella Advisors – with the support of divestment enthusiasts like 350.org, Divest-Invest, and As You Sow — released studies on the “progress” of the divestment campaign across the globe. The reports garnered significant attention, including coverage in the New York Times and Reuters, thanks to the likes of Hollywood celebrities and wealthy anti-fossil fuel foundations.

Yet the numbers were so misleading that even news outlets like Mother Jones and MSNBC debunked the reports, stating the “fossil fuel divestment movement still faces big questions about its efficacy.” So ahead of this year’s update on the divestment movement, which will no doubt claim yet again it is a “wild success,” let’s take a look back at some of its previous claims.

Fictitious Numbers

In its 2015 report, Arabella Advisors claimed that entities representing $2.6 trillion in combined assets have pledged to divest—a marked increase from its 2014 study, which pegged that figure at $50 billion.  And while 350.org frequently highlights this $2.6 trillion figure, it in no way represents the amount of assets divested from fossil fuels.  In fact, it is simply an aggregation of the total value of combined assets of institutions that it claims have “pledged to divest.”

Why is this distinction important? For starters, several of these institutions do not have any significant fossil fuel assets in the first place. In fact, in 2015 Arabella Advisors included in its tally the entire endowment of Georgetown University ($1.5 billion), Oxford University ($2.6 billion), and Syracuse University ($1.18 billion), all of which pledged to divest direct holdings from fossil fuels but didn’t have any meaningful direct fossil fuel investments to begin with.

The report also includes the University of California (UC) endowment, despite comments from UC leadership that divestment is “just symbolism without real impact” and that “blanket divestment from fossil fuels grabs headlines but doesn’t actively address climate change.” Ignoring these statements in opposition to divestment, Arabella Advisors still included UC’s entire $91 billion portfolio in its inflated calculations after the school system sold about $200 million in coal holdings because of a one-off investing decision. UC still has approximately $10 billion invested in the energy industry and, according to UC spokeswoman Dianne Klein, has no plans to sell them.  This did not stop 350.org’s Bill McKibben from tweeting “it looks like the Univ. of California is divesting its enormous portfolio from coal and tar sands oil. If true — wow.”

Since Arabella Advisors announced this fictitious $2.6 trillion claim last fall, 350.org has upped the ante and begun claiming that the correct figure is actually $3.4 trillion.  As we have previously noted, there has been no report or official breakdown to back up these numbers, so it is safe to assume its accounting is as accurate as Arabella’s.

Conflicts Upon Conflicts

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.

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.  We expect DiCaprio to be absent during the roll-out of this year’s report given the fact that his own foundation is now being investigated for a  role in the world’s largest embezzlement case.

Media Backlash

At this point, many media outlets have caught on to the fact that these numbers are a fantasy, with Bloomberg labelling many divestment announcements “empty gestures” and the New York Times noting that the $2.6 trillion figure is “hardly a precise calculation.”

As noted above, even publications that would otherwise be expected to be supportive of the divestment movement have questioned the efficacy of this campaign.  Mother Jones remarked upon the ridiculousness of Arabella’s claims stating, “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” and further called out Arabella for having “no idea how much money the institutions surveyed have invested in fossil fuels, and thus how much they pledged to divest.” Similarly, MSNBC pointed out 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.

More Empty Victories

Despite this reality, 350.org has already spent the year celebrating faux victories like the partial divestment of direct fossil fuel holdings by the University of Maryland System, which according to a student newspaper, “has no direct investments in coal, oil sands,  or any companies on the Carbon Underground 200 list” to begin with and UMass’ divestment announcement which impacts less than 1 percent of the university’s $770 million endowment but was nonetheless characterized as “a big deal” by 350.org’s Bill McKibben.

In reality, the vast majority of schools have rejected divestment since Arabella’s 2015 report.  Williams College, University of California, University of Montana, MIT, Columbia University, University of Michigan, Cornell University, The George Washington University, and University of Utah have all decided against this reckless tactic, alternately citing its obvious ineffectiveness or significant cost. These endowments total well over $132 billion.  Conversely, only three small universities have pledged to fully divest in the last year– Warren Wilson College, the ESF College Foundation, and the University of Mary Washington (UMW)–  the last of these barely had any investments in the Carbon 200 and admitted the move was “largely symbolic.”  Even if we include UMW’s entire endowment in the tally (as we know Arabella Advisors will) these combined endowments are approximately $121 million, a mere fraction of the size of the endowments refusing to divest.

Arabella will also likely be including partial divestments from the last year in its accounting, including: California Institute of Arts, Pratt Institute, University of Massachusetts, University System of Maryland Foundation, and, recently, the University of Oregon.  In each of these instances this “partial divestment” is only lip service to student activists and the universities are currently retaining the majority of their fossil fuel investments.

Much of the same is true for the churches and state pension funds that 350.org has been pushing to divest this year.  For example, just this month 350.org published a press release celebrating the Evangelical Lutheran Church of America’s (ELCA) “vote to divest,” despite the fact that ELCA did no such thing and only passed a resolution to consider divestment. 350.org also cheered the District of Columbia’s decision to divest its direct holdings in fossil fuels back in June, despite the fact that immediately prior to this decision DC increased its indirect holdings in fossil fuels- rendering the entire decision meaningless.

Bottom line: Despite claims to the contrary, the fact of the matter is that fossil fuel divestment has been repeatedly and entirely rejected by universities that seek to responsibly manage their endowments.  Inflated numbers may catch headlines, but the facts are far more telling.