Gary Horvitz, an activist working on 350.org’s divestment campaign in the US, looks at why Harvard University is so seemingly reluctant to ditch its investments in the fossil fuel industry.
On October 3, Harvard president Drew Faust issued a letter detailing why Harvard will not be divesting from fossil fuels. The letter is a litany of the familiar objections raised by financial institutions and endowments to the idea of divestment: that seeking social ends will cost them money; that divestment reduces their investment options; that, rather than ostracise them, they prefer engagement with fossil fuel companies to “encourage them to become a positive force.”
But Faust also breaks new ground with a novel rhetorical contortion by claiming Harvard will not be divesting because of… academic freedom! She implies that divestment would violate their donors’ intentions to “advance academic aims” (it was their idea to invest in Exxon Mobil); that directly profiting from fossil fuel development is essential to their “independence”; and that divestment would sully the academic purity of the institution, which it apparently prides above all else, including an opportunity to demonstrate profound and far-reaching moral leadership.
Presumably, being evenhanded in its investments has become part of Harvard’s standard of being evenhanded in its academic pursuits—which, in the face of an unfolding major extinction event, looks suspiciously like clinging to an increasingly obsolete definition of fiduciary responsibility trumpeted by Wall Street since the 50s that regards any consideration of morality or the common good as a fool’s errand.
Faust declines to permit the endowment to become anything other than an “economic resource” or to be drawn into leveraging it for social purposes, as i f— by holding fossil fuel investments — it is not already so.
With the fabric of the biosphere under strain and life support systems at risk, there is no longer any such thing as neutral investing. That’s the unique thing about climate change. No one gets to stand unaffected on the sidelines — except maybe Harvard?
She also raises the objection that divestment limits investment options and reduces returns. That might be true if there weren’t alternative energy investment options. As it is, fossil fuel investments probably occupy less than 5% of the entire endowment and it’s already been shown by a number of models (here, here, and here) that the risk to overall returns is minute to non-existent.
Aside from the academic freedom argument, what about that engagement strategy? Between 2008 and 2010, there were more than 200 proxy initiatives by shareholders on sustainability issues. Forty-eight per cent of those were withdrawn because the targeted companies promised to address these concerns, which they did in 80% of cases. So in response to 230 initiatives, 38% were successful.
Was Harvard a party to any of those shareholder initiatives? In 2011, Ceres and Green Century Capital Management filed shareholder resolutions with oil and gas companies pressing for reduced methane emissions, recycling of wastewater and for the elimination of superfluous fracking additives. Was Harvard a party to any of these actions? No.
In 2013, the Interfaith Center on Corporate Responsibility, representing 34 investor groups with billions under management, filed 180 shareholder resolutions with 127 companies pressing environmental, social and governance issues including accelerated investment in renewable energy. Was Harvard a signatory to any of these? No.
Ever since 2004, the major oil companies, Exxon, Chevron, Anadarko, Marathon and others, have been the targets of shareholder actions that have gained significant support (in excess of 25%) for greater transparency with regard to climate risk, greenhouse gas emissions and Kyoto targets. Yet these companies are only now beginning to deal with climate change as a reality while they continue to lobby against new climate legislation and drag their feet on complying with existing legislation.
Most recently, they are being pressed to publicly address the issue of stranded assets and the global carbon budget supported by the Intergovernmental Panel on Climate Change, which would mean they will have to leave up to 75% of their reserves in the ground. Can we expect Harvard to engage on these issues? How will the Harvard Management Company turn fossil fuel companies into a “positive force” by engagement?
Faust provides a list of the many good deeds performed by Harvard in climate research, technological innovation and social design, implying that some of these efforts are at least partially funded by investments in fossil fuels. Yet she also implies that because we are the ones dependent on the use of non-renewable energy for our culture and livelihoods, that a campaign to remove the social legitimacy of the suppliers of that energy is somehow misdirected.
For decades, the fossil fuel industry has been completely integral to manufacturing, urban design and transportation systems. They are completely integral to the creation and promotion of the consumer culture of individualism and the barely restrained debasement of nature known as the American Dream.
It is no accident that we are addicted to oil, that funds for mass transit systems meet political resistance, that policy initiatives are bogged down, that anti-pollution laws are met with foot-dragging and legal challenges, that worldwide annual subsidies to the fossil fuel industry remain in the neighborhood of $1 trillion, that decentralised power systems are resisted by monopolistic utilities and that autos are only now breaking mileage barriers that could easily have been breached decades ago.
The footprint of petroleum and coal, with campaign contributions, lobbying, astro-turfing, scientific obfuscation and tax resistance, is everywhere. Yet somehow, Drew Faust believes we are the ones who should kick the habit, leaving the pushers to continue untouched.
Harvard’s intentions and accomplishments regarding climate change do not exempt it from scrutiny or responsibility. It has recruited a new VP of sustainable investing from the largest public pension fund in the country. It is creating a ‘social choice fund‘ for future donors to the endowment to designate their contributions. However, past donors must apparently remain mingled with the “no choice” funds.
Yet the Harvard endowment, surrounded as it is by progressive non-profits who have for years been vigorously pushing the sustainable investing agenda such as the Tellus Institute, the Ceres Investor Network on Climate Risk, not to mention its own business school and the Harvard Initiative for Responsible Investment, has decided that while it must get up to speed, it is not ready to lead.
Regarding climate change as an urgent global challenge while overlooking how the major fossil fuel companies continue to deepen that challenge does require some logical gymnastics and stands in the way of fully integrating the critical moral and financial issues. If the mayors of a dozen cities can get it right; if municipal water boards, community colleges, universities and national religious institutions can get it right, maybe Harvard can get it right, too. Just not yet.
Gary Horvitz is an activist and volunteer working on the California divestment campaign for 350.org.
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