5 February 2014
In 1934 when the FBI asked Willie Sutton why he robbed banks, he reportedly answered, “Because that’s where the money is.”
Today, if you ask an investor in the fossil energy sector to be candid about why he is robbing our children’s future, he would give the same response: That’s where the money is.
Whether we’re talking about government subsidies, or buying stock, or wildcatting for oil, or shoveling coal, or destroying a wetland for economic development, we are investing in things that degrade the future, squander natural capital, and spend our children’s inheritance.
That needs to change not only for moral reasons, but also because investments in things that hurt us tend to become bad bets. The increasing risk of investing in companies that help create climate change or whose profits are threatened by it is the reason the Securities and Exchange Commission wants companies to publicly report their climate risks each year and why most companies apparently don’t want to.
As Bill McKibben brought to light in Rolling Stone, sound science has concludedthat we have used nearly all our “carbon budget” – the amount of greenhouse house gases we can pump into the atmosphere before we trigger catastrophic climate change.
The International Energy Agency as well as the research McKibben sites have concluded that somewhere north of two-thirds of the world’s proven fossil energy reserves must remain in the ground if we’re going to hold global warming at or below the level that gives us a 50-50 chance of avoiding catastrophe. In investment terms, it means that tens of trillions of dollars of fossil industry assets will become worthless.
That’s why the divestment movement that McKibben, Mae Boeve and their platoon of climate warriors at 350.org is so important not only for our children, but also for investors who are betting on oil, coal and natural gas, as well as the communities and workers whose economic stability depends on those industries.
It was welcome news when the New York Times reported recently that 17 foundations controlling nearly $2 billion are taking their money out of businesses related to fossil fuels. They are joining a divestment movement that so far includes 22 cities, 20 religious organizations, nine colleges and universities and several other organizations.
(Some institutions have declined to divest in fossil energy, arguing that they can make a bigger difference as shareholders. Examples of their successes would be welcome.)
However, divestment is only half of what’s needed for investors and companies to get on the good side of history. The other half is reinvestment — redirecting their capital into energy efficiency and renewable energy enterprises, for example.
In a global study of corporate divestment last fall, the business consultancy EY found that more than half the companies it surveyed had made major divestments during the previous two years. A third of the companies were considering pulling money out of the utility sector; 57% of them said they would consider reinvesting in “fast-growth areas such as alternative energy”. But 88% of the companies in the survey were “leaving money on the table” rather that redirecting their assets.
For armchair quarterbacks such as me, it seems that:
• Organizations focused on divestment should give equal emphasis to reinvestment.
• The divestment/reinvestment community should work with corporations as well as institutions to redirect their capital to carbon-reducing enterprises;
• The foundation community should redirect some of its divested funds into stronger and sustained support for organizations such as 350.org and Ceres, the nonprofit that mobilizes investors to “build a healthy global economy”, and look into supporting campaigns such as GreenFaith’s Divest & Reinvest Now! and theGood Steward Campaign .
• More foundations and philanthropists should redirect their divested funds intoprogram-related and mission-related investments, where they provide capital to green enterprises with loans at very low interest rates. As the loans are repaid, foundations replenish and increase their assets for new investments.
The idea behind divestment is not to talk companies, foundations, pension funds and universities into trading financial gain for a better spot in heaven. It’s to find, develop and communicate ways that these institutions can fulfill their fiduciary as well as their moral responsibilities.
I don’t mean to suggest this is easy. Experts such as Mindy Lubber, the president of Ceres, point out that the redirection of investment capital into a clean energy economy has its share of complexities. But as they say, nothing that’s worthwhile is ever easy.
The goal is to move as quickly as possible to a world in which investors can be asked, “Why are you such a tree hugger?” and answer, “Because that’s where the money is.”