What’s the point? Why divest?

In the short term, we believe Harvard should stop using Endowment funds to back companies whose profitability is directly linked to environmental degradation. For investments in the fossil-fuel industry to pay off, the industry must utilize its enormous reserves of coal, oil and gas, which will cause irremediable damage to the planet. Fossil-fuel companies have stated publicly that their business plans are based on continued extraction. Our investments will make money only to the extent that those business plans succeed. We should not touch any investment predicated on this outcome. Now and in the long run, Harvard should exercise intellectual and moral leadership to help spur the change in opinion and policies needed to prevent climate catastrophe. Harvard’s divestment will catalyze needed debates and divestments elsewhere.

How will divestment have any effects? For example, we surely cannot put companies like ExxonMobil out of business, right?

Divestment will accelerate a growing movement to change public opinion and, eventually, public policy. U.S. public opinion is not there yet, and Harvard needs to do whatever is possible to make the issue more urgent. Sixteen of our peer colleges and universities have divested or are divesting entirely from fossil fuels. (For example: The Rockefeller Brothers Fund was the most recent non-profit to make headlines doing this. Stanford University has recently divested from coal.) Research on public opinion change/diffusion of information reveals a pattern known as an “opinion cascade.” Each new entrant reduces the costs for new entrants and increases the costs of not entering. The actions of key players, particularly early on, make more difference than their numbers alone. Civil Rights activists in South Africa like Nelson Mandela, Desmond Tutu, and others have argued that university and non-profit divestment from South Africa in the U.S. had significantly beneficial impacts on the anti-apartheid movement in South Africa. In short: divestment can do a lot.

Isn’t it hypocritical to divest from fossil fuels institutionally if neither the institution nor any of us personally can stop using fossil fuels?

Transitioning to sustainable energy requires collective action -- it cannot be accomplished by individual action alone. A first step towards appropriate public policy is to move climate change away from the political back burner to which fossil-fuel companies have effectively relegated those policies. Divestment will facilitate that movement.

We advocate for three complementary tracks: 1) Divesting from our holdings in the fossil-fuel industry as soon as possible, 2) Winding down institutional and personal reliance on such fuels, and 3) Advocating for government financing for the infrastructure necessary to replace those fuels with sustainable energy sources.

Why do we need to be looking outward and not from within the University?

Harvard’s relatively small holdings in fossil fuels give us as divestment advocates little leverage. Moreover, we have no special expertise in these stocks. We urge a division of labor in which investors who have a potential effect on public opinion, like Harvard, divest and those who can marshal real expertise on the subject of fossil fuel stocks work from within.

When the University has acted as a responsible stockholder in fossil fuel companies, it has acted for good ends, arguing that the ends justify the means. Harvard was not a participant in the most important recent stockholder move, which pressed Exxon to make the statements on fossil fuel that revealed how deeply their expectations of future profits depend on greater use of fossil fuels.

A frequently suggested alternative to divestment would be for the University to exert strong pressure for limits on exploration and on taking known reserves out of the ground in accordance with good scientific estimates of the percentage of known reserves that must remain unused to avert climate change. For example: The UK financial research firm Carbon Tracker has estimated that fossil fuel companies will be investing nearly $700 billion a year to explore for new fuel that is highly expensive, volatile, and difficult to extract. Harvard could and should press for cancelling such expenditures designed to acquire reserves that should not be burned.

If the companies in which we invested accepted such a shareholder proposal, it would be reasonable to rethink our divestment strategy. If they rejected it, as we imagine would be the case, divestment should be our response. Harvard has not taken this position. Moreover, the decision by the Rockefeller Brothers Fund to divest occurred after the Rockefellers had “met privately with the company…in efforts to get it to moderate its stance on issues pertaining to the environment and climate change.” Given the probabilities, it would be better to divest as soon as possible.

Can’t we do better through research and innovation in green technology?

We do not see the choice as “either/or.” The best course is to do everything possible; divestment should be coupled with green innovation technologies. Harvard should be a leader in research and green technology. We welcome Harvard’s new Sustainability Plan and other measures that make the University a leader in this field. But we also need to work to change the rules of the game so that these fuels stay in the ground and not in the atmosphere.

Can’t we learn to dispose of the carbon?

Many technological fixes have been proposed to allow greater use of fossil fuels without endangering the planet (e.g., carbon capture and sequestration). Some of these new technologies have promise and may turn out to be part of the solution to global warming, but it would be foolhardy to bet the planet on any one of them, or on all of them together. We need more than technological band-aid solutions to a problem that requires radical shifts in investment and ideology.

Won’t this open a way to other calls for divestment on political grounds?

In a case like this, there is no avoiding political action: not divesting is as political as divesting. This divestment movement is not like any other. The university would be divesting from a bet with an immoral foundation because the value of fossil-fuel shares depends on a scenario inconsistent with the welfare of humanity. As Derek Bok said in the context of earlier divestment proposals, “There are rare occasions when the very nature of a company’s business makes it inappropriate for a university to invest in the enterprise.” This is such an occasion because the fossil-fuel industry business involves potential catastrophe for the planet. It is thus qualitatively different from other divestment issues, on which reasonable people may differ. If one reason for the university’s disinclination to divest derives from the symbolic signal such an action would give, the decision not to divest is an equally political signal.

Won’t some fossil fuel companies discontinue funding for important research at Harvard?

This is indeed the point. Would the university invest in a company owned by an individual simply because that individual said it was a prerequisite for a donation? In general, the university should not accept funds from entities that impose a condition that the university invest in them. The same is true of future investment opportunities.

Will divesting hurt our portfolio?

Some Wall Street analysts compare the “carbon bubble,” based on assumptions about use of current reserves, to the recent housing bubble, based on assumptions of constantly rising prices. If this is right, there would be financial gain in divesting from fossil-fuel companies. If it is wrong, and fossil-fuel companies are underpriced in terms of future returns, fossil-fuel investments comprise only a small part of the endowment portfolio. Any loss will likely be minimal. The major problem for the portfolio in divesting is loss of diversity in investments. That said, even if there were to be significant impact, this should not be a primary consideration in a matter of this urgency.