President Of Oberlin College Makes Case For Fossil Fuel Divestment

Classes have resumed again, so my blogging will be slightly less regular. But I will do my best to keep sharing resources and thoughts.

An article was posted a few days ago on James Lawrence Powell–Acting President of Oberlin College, President of Franklin and Marshall College, President of Reed College, President of the Franklin Institute, and President of the Los Angeles County Museum of Natural History–made the case of fossil fuel divestment. And his argument is eloquent and compelling.

Among other important points in the article, Powell lays out ten objections to divestment and his rebuttals. These are important points because they come from the perspective of someone who understands the inner workings of a prestigious higher education institutions and their respective endowments. 

Here are ten objections global warming activists are apt to hear from trustees and college administrators, with my responses.

1. “Scientists disagree as to whether global warming is even real.” Among 33,700 authors of peer-reviewed scientific articles on global warming published between 1991 and November 2012, many of them scientists at American universities, only about one author in a thousand rejects human-caused global warming.

2. “Global warming is not a moral issue like Apartheid.” Apartheid was immoral because a class of better-off whites oppressed poor blacks. Global warming is immoral because the third world countries and foundering island nations who are the least responsible will suffer the most. Colleges who showed enough concern for Africans to divest over Apartheid should recognize that global warming is likely already worsening drought and famine in East Africa. Climate models project a future of increasing drought over most of Africa, southern Europe and the Middle East, most of the Americas, Australia, and Southeast Asia.

3. “Global warming is not a health issue like smoking.” A recent study in Health Affairs analyzed the health costs of six “climate change–related events” in the U.S. between 2001 and 2009. The events included ozone pollution, heat waves, hurricanes, infectious disease outbreaks, river flooding, and wildfires. The six accounted for $14 billion in lost lives and health costs (Knowlton et. al, Health Affairs, November 2011 vol. 30, 2167-2176). According to a study published in the medical journal Lancet: “Climate change is the biggest global health threat of the 21st century.” The lead author of the study said, “The impacts will be felt all around the world – and not just in some distant future but in our lifetimes and those of our children.”

4. “Colleges have no direct interest in preventing global warming.” Unlike Apartheid, global warming is already affecting colleges and students directly. The AAUP says that Hurricane Katrina caused “undoubtedly the most serious disruption of American higher education in the nation’s history.” Hurricane Sandy closed dozens of colleges and according to CNN, affected an estimated 1.2 million students. Even if scientists are unsure exactly how much global warming contributed to Katrina and Sandy—not whether they contributed—those two storms and other recent extreme weather events offer an ominous portent of what lies ahead. Colleges will not be immune from the coming heat, wildfire, drought, megastorms, and sea level rise. Today’s college graduates and their children and grandchildren will have to live in the greenhouse world that we are knowingly creating.

5. “We do not invest or divest for social causes.” But colleges did divest over Apartheid, selling their stock in oil companies doing business in South Africa. Harvard, for example , sold Mobil, Shell, and Texaco. Thus the question is not whether a college will divest from fossil fuel companies, but when divestment is justified. By threatening human health and even the future of civilization, global warming is a worse evil than Apartheid and a far greater danger than smoking.

6. “Our sole endowment objective is to maximize investment return.” The overriding obligation of those responsible for a college endowment is to ensure that future student generations benefit to the same relative extent as the current generation. Trustees achieve this balance by adjusting how much of endowment earnings they spend each year and how much they reinvest. But global warming puts a new slant on the matter. By investing in fossil fuel companies, colleges are using their current financial resources in a way that jeopardizes the quality of life of their future alumni. By any reasoned and humane interpretation, this violates colleges’ professed commitment to intergenerational equity.

7. “Selling stock in fossil fuel companies will lower investment return and cause the college to have to make significant budget cuts.” This is the same argument that some colleges made when faced with the issue of divesting over Apartheid, yet many went ahead and found little financial effect. One academic study from 1986 found that “Historical returns since 1959 indicate that the South Africa-free portfolio, diluted with Treasury bills to bring its risk in line with the NYSE, would have outperformed the NYSE by 0.187 per cent annually. ” (Financial Implications of South African Divestment, Blake R. Grossman and William F. Sharpe, Financial Analysts Journal, Vol. 42, No. 4 (Jul. – Aug., 1986), pp. 15-29.) When a college sells stock it has the exact same amount of cash as the market value of the stock at the time of sale, minus transaction costs (estimated at 0.4% in the study of South African divestment), and can reinvest that money. The immediate financial consequences are small and phasing in divestment over several years would ameliorate the long term consequences.

8. “Divestment is controversial and would hurt future fundraising.” Colleges did not let the fear of controversy stop them from divesting over Apartheid. Yes, donations from fossil fuel companies will decline, but gifts from donors who agree that global warming is a moral and a financial issue will rise, and there will be more of those donors. Colleges ought to do what is right, not what is expedient.

9. “Our most effective impact on climate change comes through our teaching, our research, and the careers of our alumni.” While colleges and universities have gone about their business during the second half of the twentieth century, CO2 emissions have risen by 40% over natural levels, enough to make a temperature rise of at least 2°C (3.6°F) during the rest of this century inevitable. In 2011, CO2 emissions rose by 3.2% to the highest level ever recorded. Business-as-usual by colleges has failed to curtail global warming and there is no reason to believe that more business-as- usual will produce a different result.

10. “Divestment won’t do any good.” It is true that divestment will have little financial impact on the fossil fuel companies. Instead, the impact will come from example and moral suasion. Divestment would have the benefit of asking colleges and their trustees, who include some of the most influential members of society, to address global warming and take a stand on an issue that directly affects colleges and their alumni. The publicity from a widespread divestment campaign would call attention to global warming and pressure fossil fuel companies to become part of the solution. In addition, divestment would provide colleges with the funds for a different type of investment. The top 500 colleges have over $400 billion in their endowments. Redirecting just 1% of that amount would free $4 billion for investment in companies that produce clean energy.”


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