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August 13, 2015

Maybe we’re biased, but anti-divest writers made pro-divest writers look pretty pedestrian in NYT last week

The New York Times recently published an opinion series on divestment featuring commentary from an array of stakeholders in support of and in opposition to divestment. While those in support offered many of the usual arguments, the two opponents of the policy, including a renowned Harvard professor focused on climate change and a researcher from the National Association of Scholars, highlighted how divestment is not only an ineffective strategy but can actually be detrimental to universities, students and even the growth of renewables.

According to Harvard professor Robert Stavins, divestment has essentially no effect on the value of targeted energy companies — a point that many others have highlighted in the past. And while students are right to be concerned about climate change, divestment is not a credible or effective way to address the issue.  From his remarks:

“Divestment doesn’t affect the ability of fossil fuel companies to raise capital: For each institution that divests, there are other investors that take its place. As long as the world still continues to rely on fossil fuels, and consumes them at current rates, the companies that supply them will have a ready market for their products.”

While Stavins advocates for action on climate, he also expresses concern about the “moral strategy” of the pro-divestment crowd. “Pitching divestment as a moral crusade will play into and exacerbate the ideological divide and political polarization” on how to reduce carbon emissions and address climate change, Stavins says. In fact, as he stated in 2013 in support of Harvard’s decision not to divest, removing holdings from fossil fuel companies does nothing to address real efforts to limit carbon emissions:

Divestment of fossil fuel stocks would hurt, not help efforts to address global climate change.  First, natural gas is the crucial transition fuel to address climate change.  A major reason for the drop in U.S. CO2 emissions is the increased use of natural gas to generate electricity…Second, even if divestment were to reduce the financial resources of coal, oil, and gas companies (which it would not do), this would only serve to reduce research and development at those same companies of carbon capture and storage (CCS) technologies, as well as other potential technological breakthroughs; and could reduce the development of some renewable sources of energy (which the fossil fuel companies are carrying out as part of their financially rational diversification strategies).” (emphasis added)

 Rachelle Peterson, Research Associate for the National Association of Scholars, also took to the pages of The New York Times to argue that divestment does nothing to promote renewable energy development – an opinion well in line with Stavins and others in the academic work. According to Peterson:

“Those who advocate for divestment say shareholder advocacy has failed to change the fossil fuel industry’s behavior, so schools should sell their stocks. The first part of that statement is true: Shell and Exxon are not going to quit drilling because some shareholders tell them to stop. But if the aim is to persuade the industry to convert to renewables, divestment is a worse strategy. Capital markets aren’t punishing fossil fuel companies — they have plenty of investors — and corporations have no incentive to heed ex-investors.” (emphasis added)

So if there is so little to be gained by divesting, why would anyone choose that course of action?  According to Peterson, the desire to divest is driven largely by emotion over action, an ineffective strategy:

“Divestment is one of those campaigns that stir up people who want to feel like they are doing something, when, in truth, they are doing nothing…Divestment sidelines real debates about energy and climate policy by condensing them into polarized yea-or-nay decisions about finances. One divestment organizer deems the movement important specifically for its ability to ‘politicize’ and ‘radicalize’ students.” (emphasis added)

Stavins and Peterson are not alone in their opinions. As a group of more than 40 professors from a variety of distinguished universities stated in an open letter this year, noting that at best divestment represents “a distraction from the hard work required to produce sustainable climate solutions” and at worst “stands to cost institutions hundreds of millions of dollars” that could otherwise be put to use to support school programs and academics. Two students, one from American University and one from Georgetown University, also recently asserted that divestment is a bad deal, stating “despite the good intentions of our fellow students, these efforts could actually limit access to educational resources by increasing student costs and undermining the primary mission of our schools – to educate.”

As Stavins, Peterson, and countless others have highlighted, divestment may be good at capturing headlines but if fails to make tangible changes.  As these two experts and many others have stated, there are better options for students and universities alike.