Passion, Reason and the Shore: Reframing the fossil fuel divestment debate

Commentary on the fossil fuel divestment campaign repeatedly pits passionate student campaigners against pragmatic university administrations. Indeed, this tension makes for compelling journalism. But this passion versus reason narrative distracts from an opportunity facing both campaigners and their targets to make a meaningful contribution to climate justice.

The problem lies with the way the debate is rehearsed.

Writing in a patronizing tone, critics often point out the lack of understanding among campaigners for how reasonably efficient markets work. But the students themselves admit it is not their goal to bankrupt oil and gas companies. The campaign is inspired by an ethical concern for avoiding complicity with companies seen to be ‘wrecking the climate’.

Divestment proponents also struggle to communicate their position with a wider audience. They assume all ethical investors are strictly concerned with avoiding complicity with poorly behaving companies, alienating investors that seek to elicit ethical behaviour through engagement. Campaigners also miss important nuances when appealing to value-neutral investors. It is widely held that divestment is a last resort for managing risks (see here). Alternative risk management strategies such as re-weighting and forceful stewardship can avoid the volatility that divestment inflicts on beneficiaries.

Commentary on both sides of the debate lacks an appreciation for differences in asset owners’ beliefs and constraints. Divestment might be right for one endowment fund, but it does not follow that it will be right for another. While framing divestment as an all-or-nothing approach provides a tidy narrative for a complex issue, it is not likely to lead to productive dialogue capable of changing either side’s perspective.

A review of university responses to the divestment question illustrates just how different asset owners are. Some cite the alignment of values and minimal costs as reasons to divest. Others cite the minimal impact and the high costs of changing investment strategy as reasons not to divest. Religious colleges make up the majority of schools that have divested, but some (e.g., Boston College) have decided against divestment.

More common ground is found in the sustainable investment commitments that accompany divestment announcements, regardless of whether they are in favour or against. Pitzer College committed to creating a sustainable investment fund within its endowment, alongside its decision to divest. Harvard hired a new VP of sustainable investing and Tufts University will establish a new sustainable endowment fund. Both schools publicly decided not to divest from fossil fuels.

Student campaigners have been quick to call out administrations for offering ‘concessions’ in place of divestment. Universities that have divested have fallen out of the news cycle, and it is not clear what happens to campus divestment committees after a ‘win’.

It is here that campaigners miss a significant opportunity. If a preference for engagement is given as a reason not to divest (York U; Harvard), ask how your university plans to engage on such a complex issue. If the administration suggests that it would like to make more sustainable investments but their managers do not offer such options, ask what your university, as the client, is doing to change this. In other words, take these ‘concessions’ as wins and see them through. With decisions to divest at over 30 campuses, it would be a shame for the momentum behind the local campaigns to fizzle out. Managing climate change risk extends well beyond restricting the burning of carbon and the rising of global temperatures.

University administrators also overlook an opportunity. A common refrain is that the university is best place to climate justice through its academic mission. But underpinning such statements is a traditional understanding of education that sees students learning about climate change risks in lectures and tutorials. Students are increasingly demanding learning opportunities beyond the classroom. The divestment campaign presents an opportunity for involving students interested in finance and sustainability in the management of endowments and ethical and sustainable investment committees.

Swiss Bank UBS suggests, “Fossil fuel divestment is not the answer. However, the fossil fuel divestment campaign is the answer” (emphasis added). Those failing to see this distinction are at risk of missing opportunities for managing risks and contributing to climate justice. The poet Kahlil Gibran encourages us to view reason and passion as our rudder and our sails. The passion of campaigners has brought about unprecedented attention to an issue that has for too long been dismissed, and the finance industry has brought pragmatic risk management strategies to an extremely complex issue. Both are needed to reach safer shores.