Divestment cools tar sands

By Judith Lavoie, March 2015

Divestment on its own won’t keep fossil fuel reserves in the ground—but it might help.

The divestment movement estimates it has encouraged over $50 billion to be moved out of fossil fuel stocks worldwide in the last two years. From the industry’s viewpoint, however, in the context of trillions invested in fossil fuels worldwide, such divestments from university foundations and endowment funds amount to peanuts.

But that is not the point, say divestment advocates, who want to persuade universities and other institutions to ditch carbon-related stocks. They point to recent slightly testy responses from the energy industry as proof the divestment movement is being taken seriously.

“Right now, the fossil fuel industry is on the defensive—from fracking bans, to thwarted pipeline plans, to a fossil fuel divestment movement that is truly hitting its stride,” said organizers of February’s Global Divestment Day after 400 events were organized in 48 countries. 

The growing divestment movement is more about driving a change in public attitudes than causing immediate financial hardship to companies dedicated to a fossil fuel economy. For those who doubt such tactics can be successful, compare the former heyday of big tobacco to today, when most investors would be hesitant to admit their portfolio was connected to tobacco.

Certainly, if the University of Victoria Foundation board caves to growing pressure from faculty and students and pulls out of energy sector stocks, it will not have a material impact on the companies, admitted James Rowe, assistant professor in the School of Environmental Studies. But, if enough culturally and morally powerful institutions, such as universities and churches, pull out of fossil fuel investments, it sends an important message.

As Rowe explained it, “In publicly removing investment from these companies, there’s a form of shaming that happens. If enough powerful institutions make this move, the social licence will be diminished.” Without public support, it should be harder for those companies to wield their influence and affect public policy, continued Rowe. He noted that between 2008 and 2012 the Canadian Association of Petroleum Producers (CAPP) met with representatives of the Canadian government 536 times. The Climate Action Network, one of Canada’s largest climate change coalitions, met with government representatives six times.

“There is concerted political action on the part of oil companies,” Rowe said, adding that CAPP appears to be obstructing climate policy that would reduce greenhouse gas emissions and move Canada towards a more sustainable economy.

It is a message resonating across the country, where there are currently more than 30 student-run divestment campaigns, said Kelsey Mech, national director of the Canadian Youth Climate Coalition, who started her divestment work while attending UVic.

Mech believes the divestment movement can affect the social licence that allows companies to continue developing the Alberta oil sands or building pipelines to take bitumen to foreign markets. If that social licence is removed, it will create the political space needed to allow for the shift “to a clean and just energy economy based on renewable energy.”

Divestment on its own might not result in two-thirds of fossil fuel reserves staying in the ground—as a 2012 report by the International Energy Agency suggests is necessary to avoid catastrophic climate change—but it is one tactic that can accelerate policy changes, Mech said.

As the campaign picks up steam, it’s natural that, both politically and in the court of public opinion, the oil companies are defending their self-interest, said Rowe. “There’s a growing body of scientists and activists suggesting that their entire business model should grind to a halt, so it’s not surprising that they would fight it.”

At a UVic forum in January, vice-president of Suncor Energy Inc, Steve Douglas, was given a rough ride by the overwhelmingly pro-divestment crowd as he noted that 90 percent of oil reserves on the planet are controlled by governments, so reducing investments in the small percentage of private companies will not help. Looking around the room, Douglas pointed out that not only are petroleum products in everything from lipstick to Lycra, divestment will not solve climate change.

The conundrum is that there is no doubt that climate change is real and burning fossil fuels is one of the culprits, but fossil fuels are essential to modern life, he said. “How do you reconcile those two ideas?” he asked. “How do we transition our energy system to meet the energy needs of the future in a climate challenged world?…We have to transition in a way that doesn’t dislocate our economy and our social system.”

Malkolm Boothroyd, a spokesman for Divest UVic, had a simple reply: If it’s wrong to wreck the Earth’s climate, it is wrong to invest in fossil fuels, he said.

The University of Victoria Foundation, which manages a $370-million endowment fund used for scholarships, bursaries and research, has about $39-million or 10.5 percent of its assets invested in energy sector stocks.

Last year, faculty members demanded that all new investment in companies whose primary interests are fossil fuel extraction, processing and transportation be frozen and that the administration initiate a three-year divestment plan.

Instead, the Foundation decided to maintain its current responsible investment policies that incorporate environmental, social and governance considerations. As part of the Foundation’s efforts to explore direct involvement in organizations that promote responsible investing, the board voted to become a signatory to the United Nations Principals for Responsible Investment. It also pledged to continue to gather information.

Rowe is hoping that, with growing pressure from faculty and students, UVic will be the first Canadian university to truly divest itself of oil and gas stocks and he expects that once there is an example in place, there will be a snowball effect. “I think the students at UVic are preparing some level of tactical escalation,” he said.

So far, conversations with the administration have been amicable, Rowe said. “But, I think that relationship is going to become a little more pointed and I don’t know how that will unfold…Students will up the heat on the administration across the country, both ideologically and tactically.”

UVic student Ida Jorgenson agreed. “I don’t think university students are going to stand for anything less than divestment,” she said as she collected names on a petition outside the divestment forum.

Those who fear divestment may cost too much are probably worrying needlessly, according to Yale University lecturer Cary Krosinsky, co-founder of the Carbon Tracker Initiative and a member of the UVic divestment forum panel. So far, figures show that divestment does not necessarily mean a financial loss. Funds without oil and gas stocks performed well last year, said Krosinsky, who is advocating for more extensive worldwide action—not simply divestment—to address climate change. As well, some argue that it’s prudent to divest because of the potential of “stranded assets” (the International Energy Agency estimates $300 billion—or more—of fossil fuel investments could be left stranded if governments introduce policies to keep to a 2-degrees celsius temperature increase). 

Pressure to divest increased at the University of BC as well in February after 62 percent of faculty members voted to urge the board of directors to sell its endowment investments in fossil fuel stocks within the next five years. More than $100-million of  UBC’s $1.2-billion divestment fund is invested in oil, natural gas and coal.

Concordia University in Montreal became the first university to partially divest last year when it established a $5-million fund dedicated to renewable energy. But the move was denounced as green-washing by some divestment supporters as there will continue to be oil and gas investments from the $95-million endowment fund.

In October, Glasgow became the first European university to completely divest from fossil fuels. In the US, Stanford University is divesting from coal, and Harvard students have sued the Harvard Corporation to compel it to divest. The case was in court in February.

While attention is focused on universities, investment questions are spilling over to other public institutions. In January, Victoria city councillors Ben Isitt and Jeremy Loveday hosted a town hall meeting on municipal investments.

The City of Victoria, like other municipalities, explained Isitt, is severely limited by provincial legislation, even though Victoria does have a socially responsible investment policy.

The City’s capital reserves of $125-million and short-term assets are invested in pooled portfolios administered by the Municipal Finance Authority. Victoria’s assets make up five percent of the fund. “We’re looking at preparing amendments [to the legislation] through the Union of BC Municipalities,” said Isitt, who has met with NDP opposition critics to work out what the amended legislation should look like.

Divestment is a start, but more action is needed if there is to be transformative change, Isitt said. “I think we have to take a bigger approach and look at the private enterprise economy. We have to focus on system change to address climate change,” he said.

However, for system change, there must be supportive ears within the federal government and even the most avid cheerleaders of the divestment movement agree it would take a massive amount of pressure to move the Harper government. “Absolutely we need a change in government before we see robust climate policy,” Rowe said.

With a federal election approaching, there are key groups at universities across the country ready to make divestment and climate policy a central issue.

Judith Lavoie is an award-winning journalist specializing in the environment, First Nations, and social issues. Twitter @LavoieJudith