December 20, 2018

McKibben All Wrong on Divestment

Leader of the divestment effort Bill McKibben took to The Guardian this weekend to discuss how divestment is impacting fossil fuel companies directly. The only thing missing from his piece was facts.

Here’s a takedown of some of McKibben’s main points:

Myth: There have been 1,000 divestment commitments to date and just under $8 trillion in commitments.

Fact: As Divestment Facts has debunked time and time again, the claim that trillions of dollars have been divested to date is just plain false.

Divestment activists count, as outlets like Mother Jones have even pointed out, the total amount of assets a fund has as “divested” assets, even if the number of fossil fuel-related shares sold amounts to less than a percentage point of that total.

A much more realistic estimate can be found in a recent report from the Political Economy Research Institute (PERI) at UMass Amherst which found that divestment pledges “as of March 2018 amount to $36.1 billion.”  That’s a far cry from the $8 trillion claim that McKibben can only get The Guardian to cover.

Myth: “In 2018, New York City became the largest city in the world to date to divest.”

Fact: In direct contrast to McKibben’s claim, New York City this week announced the start of a Request for Proposal (RFP) process to look at the divestment process for a few of its funds. It has not divested anything to date, and the process of doing so is a long way off if the RFP process is only just beginning. Bottom line: New York City’s efforts to divest have been a mess since the start, and it’s worth highlighting that, despite 350.org’s best efforts, New York State continues to say no to costly, ineffective divestment.

Myth: All types of institutions have divested, including “…half the UK’s higher education institutions,” “harder-nosed players, from the Norwegian sovereign wealth fund,” to “European insurance giants such as Axa and Allianz.”

Fact: Let’s not forget our first point here that the number of entities to actually divest are far slimmer in number, and even smaller in total assets, than 350.org would like you to believe. Just check out this year’s fall semester in review to see how divestment stacked up at universities across the United States and you’ll see a trend.

As for Norway, in August 2018 a government-appointed commission pumped the breaks on the idea of divestment first brought up in November 2017, serving up a stern rebuff of prior advice from the central bank and eager activist groups. The commission advised that Norway’s trillion-dollar sovereign wealth fund continue to invest in oil and gas companies, stating “A sale of energy stocks would challenge the current investment strategy of the Fund, with broad diversification of the investments and a high threshold for exclusion.”

And for the United Kingdom, divestment announcements have long been on shaky ground, with many having little to no public sourcing. In 2017, for instance, the Times Higher Education reported nine new colleges had all signed a pledge to not invest in fossil fuels — despite none of these universities having endowments to begin with.

And let’s not forget that Cambridge University has rejected divestment, a marked blow to the movement.

Myth: Divestment “is one big action you can take against climate change without big cost.”

Divestment not only does nothing to support the environment, having no direct impact on policy, emissions, or corporate behavior, it also comes with a hefty cost.  Whether impacting pensioner payments, hurting taxpayers who are left to backfill underperforming pensions, or limiting endowments to provide for faculty and scholarships, divestment poses real financial risks. Paying for real solutions that help the environment is one thing but creating costs for a symbolic gesture and a few repeated headlines is simply not worth the price.

McKibben Myth: Divestment is squeezing the coal industry in particular and beginning to hurt oil and gas.

Given that divestment is merely the selling of shares that are later bought up, it’s a bit of a leap to suggest the movement is having any impact directly on fossil fuel companies. But for argument’s sage, let’s look at the market dynamics today, beginning with coal – the industry McKibben says is being beaten by divestment.

According to the International Energy Agency (IEA) today, “…despite significant media attention being given to divestments and moves away from coal, market trends are proving resistant to change.” Why is this the case? The answer is simple: Asian and developing markets. From the IEA:

“But coal demand grows across much of Asia due to its affordability and availability. India sees the largest increase of any country, although the rate of growth, at 3.9% per year, is slowing, dampened by a large-scale expansion of renewables and the use of supercritical technology in new coal power plants. Significant increases in coal use are also expected in Indonesia, Vietnam, Philippines, Malaysia and Pakistan.”

Whether you think coal should continue to be utilized or phased back, the reality is that much of the developing world still relies on this plentiful, affordable resource for energy. Much more than empty divestment gestures will be needed to change this dynamic.

As for oil and natural gas, divestment activists fail to recognize both the overwhelming reliance on these resources as well as the continued innovation and environmental benefits coming from energy producers.

McKibben states, “Divestment by itself is not going to win the climate fight. But by weakening – reputationally and financially – those players that are determined to stick to business as usual, it’s one crucial part of a broader strategy.” Ignoring solutions and focusing on politics is no way forward for the environment or the individuals that rely on endowments and pensions for their livelihoods.

Time to focus on the facts and find real solutions, not empty headlines.