Divesting from fossil fuels is the path to sustainability
by Robin Happel
In recent years, fossil fuels have become something of a pariah in American politics. Class action suits, perhaps most famously Juliana v. United States, echo the lawsuits that broke the tobacco trust. Spearheaded by either youth activists or coastal cities, such lawsuits basically argue that Big Oil should be liable for the damage it has done to the planet. And, like Thalidomide or Big Tobacco, it should pay for its public deception about the true danger of its products, as its decades-long campaign of climate denial finally collapses.
Once thrown out, such suits are now more and more mainstream, signaling something of a sea change in the courts. This month alone, the Ninth Circuit unanimously ruled that the Juliana plaintiffs had standing. Chevron’s $9.5 billion dollar damages ruling is currently being reviewed in Canada, and potentially across every continent Chevron has offices in. BP is still paying perhaps the largest corporate settlement in American history for its oil spill in the Gulf of Mexico. And, should the Juliana plaintiffs someday win their constitutional claim, the U.S. government itself could be called upon to divest from fossil fuels.
In a recent interview with The Ram, Fordham’s Chief Investment Officer, Eric Wood stated that Fordham only indirectly invests in fossil fuels, and such investments are a relatively small portion of the overall endowment. Like many schools, Fordham invests conservatively, and prefers not to sell or shift portfolios when possible. But is investing in fossil fuels – even indirectly – really the safest option?
As more class action climate suits succeed – which, given the current momentum, seems almost a foregone conclusion – the effects on investors could be catastrophic. Following a false claim that they were paying damages for the Bhopal disaster, Dow Chemical stocks lost $2 billion in market value in a little over twenty minutes. Although the share price rebounded once the announcement was revealed as a hoax, someday such rulings may start to stick. When they do, investors should be prepared to pick up the tab. And, even beyond such financial losses, there is the public relations perspective.
Boycotts often begin slowly, but build rapidly. From the current campaign to cut ties with the NRA to how colleges divested from South Africa during apartheid, there are countless examples of how a fringe cause can become front and center within weeks, or even days. While divesting from fossil fuels may seem unrealistic now, it would perhaps be better to divest before public pressure mounts, and ties to fossil fuels become a potential liability. If Reagan’s tacit support for apartheid drove so many deans to divest in the 80’s, what will Trump’s clamoring for coal jobs do? The outrage over pulling out of Paris may well be a watershed moment, much like the Dirty Dozen campaign in the early days of the environmental movement. Recently, for example, Governor Cuomo and NYC Comptroller Scott Stringer announced that they hope to divest their roughly $390 billion in combined assets, and “decarbonize” public pension funds. The World Bank is phasing out funding of oil and gas exploration. The Norwegian government recently proposed pulling one trillion dollars out of fossil fuels, claiming that future returns are too risky. Even the family that founded Standard Oil is now selling their stocks, and calling fossil fuels “morally reprehensible.” Which side of history should we choose?
Already, colleges across the country have begun to divest from fossil fuels, and countless more are considering selling off their shares. By being a bit ahead of the curve, Fordham arguably gains in PR what it lacks in financial rankings. (Notably, according to a report compiled by the American Association of University Professors, our Moody’s bond rating is below Notre Dame, N.Y.U, and Villanova, and our endowment has been performing worse on average than the S&P 500 since 2010, resulting in potentially hundreds of millions in losses. Compared to other colleges, our yearly returns since the 2008 crash vary widely, but seem mostly middle of the pack according to rankings from the National Association of College and University Business Officers.) While Fordham’s endowment is obviously unable to compete with the likes of Harvard and Yale, in short, perhaps we could chart a new course, and become a leader in socially responsible investing. Additionally, our relatively lower rate of return means there is a lessened opportunity cost in switching to such ventures. Compared to some other schools, we can perhaps afford a slightly higher degree of risk.
Through impact investing practicums in the Social Innovation Collaboratory and countless classes in the IPED program, Fordham teaches its students that the free market can be instrumental in social change. Shouldn’t administrators practice what they preach? By expanding the existing 50-30-20 program and investing 20% or more in socially responsible causes, the administration can lead by example. In finding additional investment firms that support sustainable power, Fordham can truly live out the ideals of Laudato Si. We can put people and planet over profit, and carry on our code of cura personalis in all we do.
This is not to say that investing in clean energy is necessarily unprofitable, however. Renewable energy is currently growing much faster than fossil fuels, and countless investment firms, from Bill Gates’ Breakthrough Energy Ventures to the over $4 billion firm Riverstone, are hoping to cash in on the inevitable market switch as coal collapses. By 2016, solar was growing faster than any other form of power, and Bloomberg predicts that the global market for green energy will only continue to increase. Trump’s tariffs cannot fight the market forever, in short, and neither should we.
By transferring more of our endowment into mutual funds that foster clean energy start-ups, Fordham can plan for long-term returns, rather than continuing to put its chips on coal and other dying industries. (Currently, it should be noted, fewer Americans work in the coal industry than work at Arby’s.) Additionally, publicizing divestment would encourage more green initiatives on campus, and perhaps even spur undergraduate and faculty research into renewables. By creating a campus climate favorable to clean energy, Fordham can potentially profit more than by maintaining something of a culture of silence around our own investments. Columbia University scientists have been instrumental in the development of catalytic converters and coal scrubbers – who knows what our own faculty is capable of, with the right encouragement?
Assuming, in the absence of more detailed financial statements, that Fordham is indeed largely divested from fossil fuels, it should pressure its sister schools to similarly divest, and invest more actively in renewables. For years, the Alternative Investments Club, Fossil Free Fordham, and other student societies have pressured the administration to invest more in green initiatives on campus, and Fordham’s participation in PlaNYC has been a great success. By publicizing the current scaling down of fossil fuel investments, and working more openly with the Sustainability Committee to review our current investments, Fordham can lead the way among Catholic colleges in fulfilling the Pope’s vision of a Church committed to combating climate change. We can become a paragon of people over profit, and planning for the future of the planet beyond our gates.