July 24, 2018

We’ve Reached Peak #FakeDivestment

Public declarations of divestment have become a de facto litmus test for environmental stewardship, according to activists. The divestment movement has targeted universities, museums and nonprofits, some of which have given in to the pressure, most of which have not.

But a new op-ed published in the Washington Examiner points out the true hypocrisy of these groups by citing information obtained from the Paradise Papers – a leaked cache of over 13 million documents detailing secret offshore investments – showing that the litmus test is one that many environmental and conservation groups calling for divestment cannot pass themselves.

The Washington Examiner piece points out that the result could have wide ranging and negative repercussions:

“Some of America’s most prominent environmentalist groups are secretly investing in oil and natural gas, even as they publicly push groups to divest from fossil fuels. That’s the takeaway from an explosive new report from NBC.

These organizations aren’t merely hypocritical – they’re actively harming the environment with their lobbying. By urging others to deprive energy firms of capital, environmentalists are delaying the transition away from less environmentally friendly coal-fired power plants towards cleaner, natural-gas powered ones.

Although natural gas is far cleaner than coal, the greens have included gas in their latest effort at economic warfare: demanding divestment from all fossil fuels.”

Meanwhile, the endowments of organizations that have claimed to divest or not be involved with fossil fuels have been found to remain tied to the industry via offshore accounts. This revelation, while raising large red flags about transparency and authentic advocacy, is – more than anything – a testament to how impractical and ineffectual divestment actually is.  As the Examiner piece points out:

“In short, there’s no way to reap the full benefits of investing in the American economy without at least dabbling in energy stocks. Everyone knows it. Even environmentalist institutions whose green bona fides require them to deny it.”

And if environmental stewardship is the aim, divesting from companies that produce natural gas doesn’t make much sense.  Thanks to the widespread use of the clean burning fuel, emissions are down at levels not seen since the 90s.  From the Examiner:

“The irony is that the oil and natural gas industry itself has been responsible for a massive reduction in carbon emissions in recent decades… Natural gas produces nearly 50 percent less in carbon emissions than does coal. Thanks to the natural gas boom, overall U.S. greenhouse gas emissions are at their lowest level in 25 years.”

A deeper dive directly shows the hypocrisy on display by many of these environmentalist groups.  Take the American Museum of Natural History for example. Long the target of a pro-divestment campaign waged by scientists and activists, two years ago, the museum announced it was requesting investment managers wind down fossil fuel investments and take climate change into account when making financial decisions.

On November 2, 2016, the museum said in a letter to activists:

“(…) In 2014, the Museum began a continuing process of evaluating its investment strategies in light of sustainability considerations. At this time, the museum holds no direct investments to fossil fuels. The percentage of the Museum’s indirect holdings (through pooled investment funds) in fossil fuel companies as measured by the Carbon Underground 200, has declined from nearly 4% in 2014 to less than 2% today(…)”

But according to the Examiner piece, the museum’s letter wasn’t telling the whole story:

“According to the papers, the museum’s 2 percent figure fails to account for its $5 million pledge to private equity firm Denham Capital’s “Fund V,” which was explicitly advertised to investors as vehicle to invest in commodities such as coal, oil, and natural gas.

The Denham Fund has also actively invested in international energy developments, including shale developments in Ohio and Pennsylvania.  A museum spokesperson has confirmed that the Natural History Museum remains invested in the fund.

Turns out, the World Wildlife Fund (WWF) also invested in the same Denham fund as the museum, despite making their divestment declaration public in December 2015.

While WWF praised investors for divesting, the organization put $2.3 million dollars into the Denham energy fund with expectation that the investment end by 2020 according to reporting by NBC.  Marcia Marsh, the group’s Chief Operating Officer, told NBC that WWF also owns stakes in two other private equity funds that are invested in fossil fuels, not included in the Paradise Papers.

Bottom Line

The Washington Examiner’s  op-ed on the Paradise Papers not only gives a rare glimpse into the world of offshore investment, but also shows just how unrealistic complete divestment is. If anything, the Paradise Papers are proof that divestment is not the litmus test for environmental stewardship, as many green groups have hailed it to be.

Some organizations, despite pledges to do so, have taken years to slowly siphon their funds out of the industry and still have percentages invested with fossil fuel years after announcing divestment.  That’s because we know that divestment is a difficult and costly move that doesn’t have any impact on the environment or targeted companies.  These groups should focus on solutions instead of empty gestures.