Divestment isn’t primarily an economic strategy, but a moral and political one. Just like in the struggle for Civil Rights in America or the fight to end Apartheid in South Africa, the more we can make climate change a deeply moral issue, the more we will push society towards action. We need to make it clear that if it’s wrong to wreck the planet, then it’s also wrong to profit from that wreckage. At the same time, divestment builds political power by forcing our nation’s most prominent institutions and individuals (many of whom sit on university boards) to choose which side of the issue they’re on. Divestment sparks a big discussion and – as we’re already seeing in this campaign – gets prominent media attention, moving the case for action forward.
At the same time, there are certain economic impacts. Collectively, universities hold billions of dollars in their endowments. That’s a huge number – and getting all of that money out of coal, oil, and gas will make a pretty big splash. Add in pension funds and church, synagogue, and mosque investments, and we’re well on our way to making Enbridge, TransCanada and Syncrude sweat.
While sale of stock might not have an immediate impact on a fossil fuel company, especially one as gigantic as Exxon, what it does do is start to sow uncertainty about the viability of the fossil fuel industry’s business model. Here’s why: in order to keep warming below 2°C, a target that the United States and nearly every other country on Earth has agreed to, the International Energy Agency calculates that the fossil fuel industry will need to leave approximately 80% of their reserves of coal, oil, and gas unburned. Those reserves may be below ground physically, but they’re already above ground economically and factored into the share price of every fossil fuel company. Globally, the value of those reserves is around $20 trillion, money that will have to be written off when governments finally decide to regulate carbon dioxide as a pollutant. By divesting from fossil fuels, universities not only build the case for government action, they also start this important discussion about the fossil fuel industry’s “stranded assets.”
On the flip side of that coin, divestment also starts to build momentum for moving money into clean energy, community development, and other more sustainable investments. More importantly, when other investors, be they individuals or pension funds, see the nation’s leading universities begin to move in this direction, they’re more likely to follow suit. University endowments won’t be enough to fuel a clean energy revolution – that’s why we’re still pushing for government action – but they build the case for investment in important ways.