Harvard and Brown Fail on Climate

[xchrom]

http://www.thenation.com/article/178138/harvard-and-brown-fail-climate



University presidents once spoke their conscience on matters of great public importance. In the early 1950s, many protested the loyalty oaths that required faculty members to forswear membership in the Communist Party. One of the most courageous critics of McCarthyism was Nathan Pusey, first as president of Lawrence College in Senator Joseph McCarthy’s hometown of Appleton, Wisconsin, then as president of Harvard. In the 1960s, some university presidents openly opposed the war in Vietnam. Even at the cost of donor support, Yale president Kingman Brewster Jr. publicly contested the war and decried the inequities in the draft. He permitted protest demonstrations and skillfully kept the Yale campus open and relatively calm.

In the 1980s, a protest movement arose on American campuses as students—and some campus presidents—argued that it was immoral for universities to own stock in companies doing business in apartheid South Africa. Although Harvard president Derek Bok refused to support divestment over apartheid, Harvard eventually did sell most of its South Africa–related stock—and Bok did endorse the sale of stock in tobacco companies.

Today, university presidents and the institutions they lead confront a moral choice over a crisis that threatens human health and society on a far greater scale than either tobacco or apartheid: climate change. As Elizabeth Kolbert wrote in Field Notes From a Catastrophe, “It may seem impossible to imagine that a technologically advanced society could choose, in essence, to destroy itself, but that is what we are now in the process of doing.” In the last few years, students have begun urging their colleges and universities to divest from fossil fuel companies (FFCs), whose products are driving climate change. Two of the first university presidents to respond, Drew Gilpin Faust of Harvard and Christina Paxson of Brown, this fall placed themselves and their institutions on the wrong side of science and of history by rejecting divestment.

I believe that presidents Faust and Paxson were wrong, gravely wrong, not only in the broadest sense—because their choice harms humanity—but because they failed in their narrow duty to protect their institutions and their present and future students.

[Jim Lane]

1. The linked article asserts that divestment from South Africa helped to end apartheid

I'm dubious about that assertion.

An even more important objection is that selling fossil fuels is at the heart of what the FFCs (fossil fuel companies) do. Institutions divesting from American companies that did business in South Africa could reasonably hope that companies might decide to stop doing business there. In general, a big company that was targeted had only a tiny part of its overall business in South Africa. By contrast, it's not realistic to hope that divestment from the likes of ExxonMobil will persuade the corporation to get out of the fossil fuel business.

For these reasons, I'm not convinced that divestment is a cause that merits a lot of time and energy from climate activists.

[caraher]

2. What divestment can do is reduce demand for those stocks

One problem we face is that if we're serious about leaving fossil fuels in the ground, the value of every fossil fuel stock is vastly inflated. I think of divestment as one small means of bursting this bubble.

Either we fail to stop burning fossil fuels on an ever-increasing scale and face climate catastrophe, or we take serious measures to stop - which will necessarily remove the basis of the high value their stocks have now.

[Jim Lane]

3. The trouble is that it's a self-limiting strategy.

To the extent divestment succeeds, it (slightly) shifts the supply-demand curve for that stock. But the resulting lower price makes the stock more attractive to other investors, in terms of P/E ratio and other common criteria.

As you correctly note, the conclusion that fossil fuel stocks are overpriced depends on the assumption that "we're serious about leaving fossil fuels in the ground". There are obviously many investors who don't make that assumption. On the evidence so far, extraction of fossil fuels will continue, largely unchanged, despite its catastrophic consequences. In fact, one could make a strong argument that, as population growth and the increased demand for higher standards of living collide with Peak Oil and other facets of the limitation of fossil fuels, those stocks in the ground will (at least over the course of most investors' time horizons) become more valuable, not less.