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Transcript
THE CASE FOR FOSSIL FUEL DIVESTMENT AT
MOUNT ALLISON UNIVERSITY
A REPORT BY DIVEST MTA
JANUARY 2015
The following report was collaboratively written by members of Divest
Mount Allison and submitted to the Investment Committee of Mount
Allison University’s Board of Regents. The objective of this report is to
open dialogue on the potential for fossil fuel divestment at Mount
Allison University.
As a leader in shaping the minds of the next generation, we believe
that it is no longer morally tenable for Mount Allison University to
invest in the very industry that is compromising our futures and those
of future students.
We are prepared to take bold action on climate change and we are
asking Mount Allison to do the same.
Contributors (ordered as in text): Emma Jackson, Lauren Latour, Gabrielle Steeves, Alex Lepianka, Taylor Creaser,
Morgan McGinn, and Zoe Luba.
2
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
Dear Regents and Committee Members,
On September 21st, 2014, seven Mount Allison students, including myself, left an
apartment in Brooklyn, New York with banners in our backpacks and poorly chosen shoes on
our feet.
We caught the subway to Manhattan, bound for Columbus Circle. Within minutes, an
older woman came and sat beside me, “I think you’re going where I’m going,” she said. A
Presbyterian Minister and members of his congregation soon joined us, followed by a group of
Brooklyn high schoolers, and a pack of Harvard University students. By the time we had
reached Manhattan, we were surrounded by people of all ages from across North America and
around the world. In every direction, people were clothed in the signs and slogans of the
climate justice movement. Packed together, we moved towards the exits of the station and
spilled out onto the closed side streets of New York City.
That afternoon, ahead of the UN Climate Summit, we joined 400,000 others in New
York City, and hundreds of thousands more in over 2,500 solidarity events around the world, to
demand action on climate change. We were seven students among 50,000, marching under a
banner that read “Our Future. Our Choice.”
But the reality is that taking action on climate change at the institutional level isn’t our
choice, at least not yet. While our generation is confronted with the greatest challenge that the
world has arguably ever faced, the institutional power to enact change continues to fall beyond
our reach. At Mount Allison University, this power rests with you.
We know that cutting ties with the fossil fuel industry cannot wait until we are
occupying the positions that you currently hold. Already, climate change is wreaking havoc
around the world, compromising the futures that we, as students, are working towards within
the walls of this university. I cannot begin to explain how it feels to spend sleepless nights
working to gain an education for a future that is, at this very moment, being pulled out from
beneath me. But beyond this powerlessness, the worst part is in knowing that the very
institution that is helping me build my future is ultimately profiting from its demise.
When we left New York City on September 21 st, we left having made a promise to
400,000 others. That day people from around the world vowed to take bold action on climate
change through whatever means at their disposal. Now, we are upholding that promise, and we
ask only that you help us in doing so.
Yours,
Emma Jackson
B.A Honours Geography
3
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
TABLE OF CONTENTS
Executive Summary………………………………………………………………………………… 5-6
Introduction…………………………………………………………………………………………
6-8
What We Are Asking For………………………………………………………………………….
8-9
The Moral Imperative to Act………………………………………………………………………
9-10
Divestment as a Tool for Social Change…………………………………………………………. 10-13
South African Apartheid…………………………………………………………………... 10-12
Tobacco……………………………………………………………………………………. 12-13
The Economic Case for Divestment……………………………………………………………… 13-18
The Carbon Bubble………………………………………………………………………. 13-16
Alternative Investments…………………………………………………………………… 16-18
Direct Impacts of Divestment…………………………………………………………………….
19-23
Fossil Fuel Companies……………………………………………………………………
Climate Change…………………………………………………………………………..
Consumption and Behaviour Trends……………………………………………………
Public Policy………………………………………………………………………………
19-20
20-21
22-23
23
Positive Impacts for Mount Allison University………………………………………………….
24-27
Our Reputation…………………………………………………………………………… 24-25
Returns……………………………………………………………………………………. 25-26
Recruitment & Retention..……………………………………………………………….. 26-27
Conclusion………………………………………………………………………………………… 27-29
Appendix
List of Top 200 Publicly Traded Coal Companies……………………………………… 30-32
List of Top 200 Publicly Traded Oil and Gas Companies……………………………… 33-35
4
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
EXECUTIVE SUMMARY
5
•
Extreme weather events around the world make it clear that climate change is no longer a future
threat, but a clear and present danger that is already affecting the world’s most marginalized
communities. The best scientific estimates available—supported by international environmental
agreements—call for keeping global warming below a 2° Celsius rise in temperature above preindustrial levels. If this is to be accomplished, the scientific community asserts that we can only
afford to emit another 565 gigatons of carbon dioxide. However, despite these dire warnings, the
fossil fuel industry has 2,765 gigatons of carbon in their known reserves, and is continuing to
invest hundreds of billions of dollars each year in the search for more.
•
The fossil fuel divestment movement has emerged to directly challenge the unsustainable business
model of the top 200 fossil fuel companies and the power these corporations continue to exert
over our democracy and our economy. History shows us that divestment is capable of directly
contributing to the social, political, and economic change we so desperately need. In the late
1980s, college campuses and communities across North America called upon their institutions to
divest from the apartheid government of South Africa. Eventually, a total of 167 universities and
colleges withdraw their holdings from the companies that were propping up the regime. In doing
so, they not only applied direct economic pressure, but also revealed the immorality of the
apartheid regime. Similarly, divestment from the tobacco industry focused on the ethical
disconnect of profiting from activity that stands to harm society’s wellbeing.
•
As a post-secondary institution, Mount Allison University occupies a notable position of privilege
and with this, it holds a unique set of moral responsibilities. Already, climate change is revealing
itself to be one of the greatest social justice issues of our time. Its impacts continue to fall
disproportionately on the world’s most marginalized groups, and the direct activities of fossil fuel
companies continue to infringe on the treaty rights of indigenous peoples and on the human rights
of frontline communities. Mount Allison University has an obligation to act on behalf of those
who, around the world, do not have the power to do so.
•
Fossil fuel divestment stands not only as a product of a moral imperative, but also as a futureoriented financial decision. As many have argued, our capital markets are misaligned as the result
of misleading financial reporting and myopic estimates of future operating environments. In other
words, divestment may come as a call from shareholders wary of arrogant capital expenditure and
inadequate market evaluations of the true risks faced by the fossil fuels industry. To look critically
at the investments made in such an untenable industry is to realize that we exist in a carbon
bubble, where our market systems systemically fail to address the risks and costs of doing business
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
in an age defined by the maturity of climate policy frameworks and the maturity of sustainable
energy. Furthermore, investors must begin to take into account the growing body of evidence that
validates divested portfolios as sensible investment decisions, with insubstantial short-run effects
on returns. Faced with trillions of dollars worth of revenue standing to be lost, even institutional
investors indifferent to the moral implications of their actions must realize that divestment may be
supported at length on fiduciary grounds.
•
Divestment from fossil fuels holds the potential to directly impact the business plans of fossil fuel
companies, the speed at which climate change unfolds, the consumption behaviour of individuals,
and the environmental policies of governments at all levels. Mount Allison University’s divestment
from the top 200 fossil fuel companies can directly challenge the social license upon which the
continued operations and exploratory efforts of these companies depend. Furthermore, in placing
the ‘business-as-usual’ model of this industry at risk, fossil fuel divestment can catalyze the
renewable energy transition that our planet requires. Finally, if Mount Allison were to transition to
a fossil-free endowment fund, the university would become a key actor in shaping public
perception of the oil and gas industry, both at the national and international level. This shift in
public perception would be reflected in the votes of citizens, requiring governments at all levels to
finally take bold action on climate change.
•
As an institution of prestige, with a history of setting precedent, the returns that Mount Allison
University will enjoy upon divesting its endowment from the fossil fuel industry go beyond those
already outlined. Arguments have been made that are fiduciary, social, and moral in nature; but a
final call for divestment can be made at a uniquely local level. Mount Allison stands to set another
first—to push forward in a way that will uphold our reputation as an institutional leader, and to
reaffirm itself as an institution that not only enshrines the values that bring about social change,
but is capable of acting for the greater good.
INTRODUCTION
There is widespread recognition that immediate action must be taken to address the monumental
threat of climate change. However, despite scientists calling attention to the urgency of the climate crisis,
both Canada and the global community have thus far failed to take sufficient action to address both its
causes and consequences. As students, we recognize that climate change is the issue of our generation
and that the action we take today will impact not only the future of this generation, but also those of
generations to come. Climate change continues to be powered by a fossil fuel industry that is committed
to extracting all of the oil, gas, and coal reserves at its disposal, while also determined to discover new
carbon reserves that the planet cannot afford to burn.
6
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
The vast majority of the scientific community calls for keeping 80% of known fossil fuel reserves
in the ground in order to stay within the “safe” limit of a 2 degree Celsius rise in global temperatures.1
However, despite this dire warning, fossil fuel companies continue to spend billions of dollars on the
exploration and development of new reserves. In 2013, the top 200 fossil fuel companies spent $674
billion dollars exploring for new reserves.2 However, these multinational corporations were not acting
alone. According to the International Energy Agency, the fossil fuel sector receives subsidies of $500
billion dollars per year, six times the incentives that are provided for the development of renewable
energy sources. Without further reform, the Agency expects such subsidies to reach $660 billion by
2020.3 In the face of current threats to climate stability, this subsidized industry continues to obfuscate
climate science and distort the media’s portrayal of the facts, while simultaneously working to weaken
and dismantle climate mitigation policies.
In understanding these troubling realities, an unprecedented global movement has emerged
calling upon institutions to divest their holdings from the fossil fuel industry. The logic behind the fossil
fuel divestment movement is simple: if it is wrong to wreck the climate, then it is wrong to profit from that
wreckage. Already in Canada, over 30 divestment campaigns have been launched across the country,
joining over 400 active campaigns that are urging universities, cities, and religious institutions to commit
to fossil fuel divestment.4 Collectively, these campaigns are based on the premise that our global energy
system requires a rapid transformation, and that continued investment in the companies that are actively
working against this transition is no longer morally tenable. We know that working within shareholder
channels will not actuate the change that is urgently needed. The business model of the top 200 publicly
traded fossil fuel companies is based on expending the carbon reserves that our climate cannot afford to
burn. Then, to bring about that fundamental change, divestment from those companies must be a course
of action.
1
Intergovernmental Panel on Climate Change (IPCC). “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A:
Global and Sectoral Aspects.” Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on
Climate Change. [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O.
Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)]. 2014. Accessed
22 December, 2014. 2
“Unburnable Carbon – Are the World’s Financial Markets Carrying a Carbon Bubble?.” Carbon Tracker Initiative. 2012.
Accessed 20 December 2014, http://www.carbontracker.org/wpcontent/uploads/downloads/2012/08/Unburnable-Carbon
Full1.pdf
3
“IEA Analysis of Fossil-Fuel Subsidies Presentation.” The International Energy Agency.
http://www.iea.org/media/weowebsite/energysubsidies/ff_subsidies_slides.pdf.
4
7
Fossil Free Canada. “Divestment Commitments.” Accessed December 30, 2014. http://gofossilfree.org/commitments/. The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
The ‘business-as-usual’ model of the fossil fuel industry is resulting in one of the greatest social
justice issues of our time. Climate change’s impacts continue to fall disproportionately on the world’s
most marginalized groups— those which have contributed least to the crisis, and have the most limited
means with which to adapt to climate change. Furthermore, the direct activities of fossil fuel companies
continue to infringe on the treaty rights of indigenous peoples and on the human rights of frontline
communities.
Mount Allison University is an exceptional institution and, in many ways, it has prepared us to
tackle the world’s most pressing problems. However, we recognize that no university degree, no matter
how prestigious, will insulate us from the effects of climate change. We are among the world’s most
privileged individuals and as such, we have an obligation to act. By investing in the fossil fuel industry,
Mount Allison University is profiting from global climate change and undermining the very education that
it is providing to its students. We are, however, confident that Mount Allison University can rise to the
challenge climate change presents to become a bold leader in environmental sustainability. As students,
faculty, and community members, we are prepared to work through whichever avenues are deemed
necessary to ensure that Mount Allison University is investing in the futures of its students.
WHAT WE ARE ASKING FOR
Divest MTA began as “Protest to Divest,” a project developed by students in an environmental
activism class in September of 2013. Inspired by the growing fossil fuel divestment movement made
famous by author and environmentalist Bill McKibben and 350.org, this small group of students decided it
was time for Mount Allison University to live up to its reputation as a world-class institution, and pave the
way towards an environmentally and socially sustainable, fossil-free future.
Our demands remain what they were in the fall of 2013. First and foremost, we ask that Mount
Allison University immediately freeze new investments in the top 200 publicly traded fossil fuel
companies, and divest from direct ownership and any commingled funds that include fossil fuel equities
and corporate bonds within the next five years.
These 200 companies (a full list of which is provided in the appendix) are estimated to hold a
collective 740 gigatons of carbon dioxide, which, if released, are capable of catapulting global
8
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
temperatures above the 2° Celsius limit recommended by the Intergovernmental Panel on Climate Change
in their report Climate Change 2014: Mitigation of Climate Change, and as agreed upon by world leaders
as early as 2009 at COP 15, the United Nations climate summit held in Copenhagen.5
Furthermore, Divest MTA believes that social and fiscal transparency is of the utmost importance.
It is for this reason that we feel it necessary for Mount Allison University to make its annual reports of the
endowment fund investment portfolio publicly available, insofar as the information is available. In order
to progress towards becoming an institution that is rooted in ethical operations and free from fossil fuel
investments, this accountability to the Mount Allison community is imperative.
THE MORAL IMPERATIVE TO ACT
In their most recent report, the IPCC states that vulnerability and exposure to climate change
arises, “from multidimensional inequalities often produced by uneven development processes.”6 Impacts
from recent climate-related extremes have fallen disproportionately on the world’s most marginalized
communities and we know that without action, this trend will only continue. Climate change is thus a
defining example of social injustice. Firms that extract and produce fossil fuels do not bear any economic
burden for the harm they are imposing on others, and similarly, those who consume the most fossil fuels
are the last to feel the effects of climate change. In the last 25 years, 95% of deaths resulting from natural
disasters occurred in developing nations.7 Burning a large portion of the world’s proven fossil fuel
reserves would further inflict great social injury through the inundation of coastal areas; storms, droughts
and extreme weather events; ecosystem collapse; impacts on agriculture; threats to infrastructure; and
increased risks to human health. A report by the Environmental Justice Foundation warns that 10% of the
5
IPCC. “Climate Change 2014: Impacts, Adaptation, and Vulnerability.” 2014.
6
Intergovernmental Panel on Climate Change (IPCC), “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A:
Global and Sectoral Aspects.” Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on
Climate Change. [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O.
Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)]. 2014. Accessed
22 December, 2014.
7
Hoppe, Peter. “Developing Countries Are Most Affected by Climate Change and Need the Support of Industrialized Countries to
Adapt to the Unavoidable Risks.” Global Economic Symposium. n.d. Accessed 23 December 2014. http://www.globaleconomicsymposium.org/knowledgebase/the-global-environment/managing-adaptiontoclimate-change-in-the-developingworld/proposals/developing-countries-aremost-affected-by-climate-changeand-need-the-support-of-the-industrializedcountries-toadapt-to-the-unavoidable-risks.
9
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
world’s population is at risk of displacement, and the number of climate refugees could increase from 26
million to 150 million people by 2050.8
As North Americans, we possess a great deal of wealth and privilege and with this, we have a
moral obligation to act. It is the responsibility of our governments, communities, and institutions to take
bold action in support of those who currently occupy the frontlines of climate devastation. However, as a
university, Mount Allison University’s role is particularly pronounced. We know the science of climate
change, we understand its global impacts, and we acknowledge that, within society, we occupy a
position of influence. The unjust nature of climate change demands that institutions such as ours take a
strong public stance on the issue. We can no longer profit from the destruction of our planet, and instead
we must invest in our futures and those of subsequent generations.
DIVESTMENT AS A TOOL FOR SOCIAL CHANGE
The divestment movement has gained significant momentum in recent years at institutions around
the world, from university campuses to municipalities and places of worship. However, while divestment
from the fossil fuel industry is a more recent pursuit, divestment as a tool for social change has a
significant history across many movements. Though this report will go on to argue for the use of
divestment to accelerate our transition to a fossil fuel-free economy, it is useful to note these examples of
success as indicators of the potential of divestment.
SOUTH AFRICAN APARTHEID
One of the most well known examples of the use of divestment to enact social change can be
found in the case of Apartheid South Africa. By the 1970s and 1980s, the world was becoming acutely
aware of the injustices unfolding in South Africa under the Apartheid regime9. To this effect, student
activists on campuses around the world sought to directly influence the South African government in an
effort to end apartheid, holding demonstrations and other forms of protest. However, activists found that
8
Vidal, John. “Global Warming Could Create 150 Million ‘Climate Refugees’ by 2050.” The Guardian. 2009. Accessed 22
December 2014, http://www.theguardian.com/environment/2009/nov/03/global-warming-climate-refugees. 9
Hendey, Eric. "Institute of Politics." Harvard University. n.d.. Accessed on January 11, 2015. http://www.iop.harvard.edu/doesdivestment-work.
10
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
these tactics, although valuable, were not as direct an impetus for change as desired; the idea of
divestment was then brought to light as a more direct way to influence policy. 10
In this case, divestment targeted foreign capital tied to South African businesses. Companies,
organizations, and institutions like universities were encouraged to sell off any interests in firms operating
under the regime, in the hope that this would influence and condemn the repressive actions of the
government. Yet, as with our present-day divestment movement, these calls for action were not met
without certain criticisms: many believed that divestment from local companies would not have any
impact on the government, but rather create even more difficulties for Black South African stakeholders.
And while the effects on divestment from these Apartheid companies had minimal effect on share prices,
the global attention that focused on companies working under the discriminatory regime was invaluable.11
On campuses, administrators and university directors were made aware that having investment interests
tied to Apartheid put them in precarious position of compliance.12 Ultimately, a total of 167 universities
and colleges including McGill University, the University of Toronto, and Dalhousie University were
brought to divest from the regime.13 Beyond places of higher learning, the movement generated
divestment action from other institutions, as well as city and state governments.14
As a gesture, the power of these activist actions cannot be understated. At the time, the South
African economy was largely dependent on foreign investment to support the growth of their industries.
From the U.S. alone, there was an estimated $14 billion in foreign direct investments15. Despite the
relative strength of several primary sectors, the large flow of capital to South Africa became tied to the
repressive regime. Furthermore, the dependence on imports and investment-in-kind of many
technologically advanced goods, like automobiles and computers resulted in a significant impact to South
10
Gethard, Gregory. "Economics." Investopedia. 2014. Accessed January 11, 2015,
http://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp 11
Gethard,"Economics." 2014
12
Soule, S.A. "The Effect of Student Protest on the Diffusion of University: Divestment Decisions in the United States."
Midwestern Political Science Association. 2008. pp.5, Accessed on January 11, 2015,
<http://citation.allacademic.com/meta/p_mla_apa_research_citation/2/6/7/8/0/pages267809/p267809-1.php>
13
"Divestment Potential." Divest Dalhousie. 2014. pp.6. Accessed on January 11 2015.
https://divestdal.files.wordpress.com/2014/10/divest-dalhousie-collaborative-reports-to-the-ic.pdf.
14
Knight, Richard. "Sanctions, Disinvestment, and U.S. Corporations in South Africa." In Sanctioning Apartheid, by Robert E.
Edgar. Africa World Press. 1990. Accessed on January 11 2015. http://richardknight.homestead.com/files/uscorporations.htm.
15
11
Soule. “The Effect of Student Protest.” 2008.
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
African businesses once the movement grew.16 In brief, several academics have argued, as Soule (2008)
and Knight (1990) do, that divestment played a key role in the decline of apartheid.
TOBACCO
To broaden our historical understanding of divestment, a comparison between divestment from
Apartheid South Africa and a more recent cause can be drawn: in the 1990s, advocates wanting to see a
decrease in tobacco used similar divestment tactics to challenge tobacco corporations as earlier activists
used to challenge the Apartheid regime. Again, the goal was to bring the power of the tobacco companies
to light and to raise awareness about the severe health risks linked to smoking17. Those advocating the use
of divestment as a tactic presented a very clear rationale, “fram[ing] the issue as one of responsible social
policy, focusing on the ethical disconnect involved in profiting from such a health-destroying product.”18.
The call of the divestment activists to action did not go unheard: according to the Council for
Responsible Public Investment, six states, ten municipalities, nineteen colleges and universities, and
several public and private institutions have restricted or divested their stocks from tobacco company
holdings19. In 1997, when Massachusetts signed onto tobacco divestment legislation, Governor Joe
Malone stated that divestment was “the only way to get tobacco companies to finally wake up to the fact
that they sell a dangerous product.”20 And while the state’s imperative for divestment stemmed from
concerns for public health, the realigned portfolios—with holdings in tobacco-free alternatives—actually
outperformed those with investments in the tobacco industry. Stanford University realized a similar gain,
with the then-chief executive stating that the potential for more profitable ethical investments would
always be significant.21 As with Apartheid, the significance of the relatively small financial impact of
divestment was eclipsed by the critical discourse that followed. The risks of consuming tobacco were now
16
Knight. "Sanctions, Disinvestment.” 1990. 17
Divest Dalhousie. "Divestment Potential." Divest Dalhousie. 2014. pp.9. Accessed on January 11 2015.
https://divestdal.files.wordpress.com/2014/10/divest-dalhousie-collaborative-reports-to-the-ic.pdf
18
Wander, N, and R. E. Malone. "Fiscal Versus Social Responsibility: How Phillip Morris Shaped the Public Funds Divestment
Debate." Tobacco Control, June 2006: 231-241. Accessed on January 11, 2015,
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2596576/
19
“Tobacco Divestment Fact Sheet #2” Council for Responsible Investment. Social Funds. n.d. Accessed on January 11, 2015,
http://www.socialfunds.com/education/pdf/private.pdf
20
"Divestment Action Guide." Bhopal.net. 2001. Accessed January 11, 2015, pp.9,
http://www.bhopal.net/old_studentsforbhopal_org/Assets/DivestmentActionGuide.pdf
21
12
Divest Dalhousie. “Divestment Potential.” pp. 9
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
at the centre of public debate, as were the ethical hazards associated with holding investments in the
industry.
Between these movements, divestment has been instrumental in creating social and political
change which reaches beyond the financial pressures. In both cases, divestment movements tied together
moral, political and economic arguments to advance their cause. Now, the parallels between these
movements and the present movement for climate justice are apparent. The same arguments driving past
divestment actions are at the heart of fossil fuel divestment: a flow of capital in line with human interests,
a call to center our political and public debate around the issues of our time, and a challenge to the
unfettered growth of a perilous industry. In spite of opposition, these arguments and the divestment action
in which they are embodied have driven meaningful change—and will continue to do so as long as such
change is necessary.
THE ECONOMIC CASE FOR DIVESTMENT
THE CARBON BUBBLE
Capital markets rely on accounting frameworks to equate the risk, return, and price of financial
assets. As a general rule, investment projects must therefore be evaluated with strong methodologies,
according weight to the full range of possible outcomes. However, there is a growing concern that the
valuation process for certain financial assets tied to fossil fuel companies is inadequate insofar as certain
factors are not accounted for. Essentially, the misrepresentation of at-risk assets on these companies’
financial statements has left capital markets misaligned.
To describe this phenomenon and its implications, financial specialist firms such as think-tank
Carbon Tracker Initiative (CTI) have ushered the idea of a carbon bubble into the vernacular of
progressive investment. In effect, the idea holds firms to the ethical standards embodied by any
accounting framework with respect to the presentation assets and risk. Their conclusions are as follows: In
analyses by the CTI and the International Energy Agency (IEA), it was found that only 20% of the current
fossil fuel reserves reported and capitalized by the industry can be burned to maintain global temperatures
13
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
within 2° C of pre-industrial levels by 2050.22 In other words, these companies report long-term assets
without disclosing that their useful lives are at risk of being impaired by factors ranging from the
development of green markets to the development of global climate policy framework. The latter point is
especially significant: our headlines continually show national governments’ commitments to “reduc[ing]
emissions, in a mutually accountable way, with national plans captured formally at an international
level”.23
Such a change to the operating environment of fossil fuel industry would inevitably produce
“stranded assets,” as they have come to be known. Currently, under the assumption that operations will
proceed with no such risk, capital expenditure by these firms has more than doubled in real terms since
2000.24 Yet, even a loose interpretation of intergovernmental policy endeavors would suggest the
presence of a risk of impairment to the long-term assets reported by fossil fuel companies. Any such
framework poses a hazard to the projected value of these capital investments; many argue that these
capital expenditures are being directed towards developing un-burnable reserves.
However, when the financial reporting standards are held as intended, and these assets’ risks are
properly represented, capital markets will adjust accordingly. Therefore, “institutional investors need
better and more future-oriented investment appraisal to determine a fair assessment of their investment
risks and opportunities” relating to fossil fuel firms.25 As investment decisions are only as strong as the
financial disclosure on which they are based, faulty disclosure results in a misdirected flow of capital—
away from renewable energy and toward the fossil fuel industry. Even without considering the
eventualities of stranded assets, we have already seen that previous slumps in energy prices and
implementations of full-cost accounting frameworks have resulted in write-downs. To list two examples,
British Petroleum “is taking an impairment charge of 2.11 billion USD, primarily relating to its U.S. shale
gas assets,” and “Encana reported a 1.7 billion USD after-tax impairment charge against net earnings.”26 In
summary, as explained by a letter to the Bank of England issued by several British academics and
environmental agency representatives:
22
“Unburnable Carbon 2013: Wasted Capital and Stranded Assets,” Carbon Tracker Initiative and Grantham Research Institute,
2013. Accessed 23 December 2014, http://carbontracker.live.kiln.it/Unburnable-Carbon-2-Web-Version.pdf
23
“The Cancun Agreements”, United Nations Framework Convention on Climate Change. Accessed 26 December 2014,
http://cancun.unfccc.int/cancun-agreements/significance-of-the-key-agreements-reached-at-cancun/#c45 24
“World Energy Investment Outlook 2014 Factsheet,” International Energy Association. Accessed 3 January 2015,
http://www.iea.org/media/140603_WEOinvestment_Factsheets.pdf
25
“Unburnable Carbon”, Carbon Tracker Initiative
26
Rogers, Deborah, “Shale Impairments are Indeed and Embarrassment,” Energy Policy Form, 28 August 2012,
http://energypolicyforum.org/2012/08/28/shale-impairments-are-indeed-an-embarrassement/.
14
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As policy and technology work consistently over time to reduce returns in high carbon areas while
supporting low carbon ones, investing in high carbon sectors, . . . could result in stranded assets
and poor returns. Counter intuitively, institutional investors . . . continue to risk exactly that by
deploying significant amounts of capital into high carbon sectors, or in companies with significant
exposure to them.27
In response, the Bank of England acknowledged that such an emphasis on the risk of this
eventuality relied on three broad conditions, namely: exposure, the present failure of financial markets to
account for diminishing returns in their valuations, and sluggishness on the part of financial intuitions to
adjust their portfolios.28 While the likelihood of these conditions being met is rightly called into question,
research already suggests that a carbon bubble exists regardless. For example, in the spring of 2014, the
European financial advisory firm Kepler Chevreux published a report outlining net impacts of volume and
price effects assumed under three different scenarios relating to global energy trends and policy
frameworks designed to control atmospheric CO2. Their valuations of the carbon bubble are based on the
IEA report cited earlier:
Under a global climate deal consistent with a 2°C world, we estimate that the fossil-fuel industry
would stand to lose 28 trillion USD (in constant 2012 US dollars) of gross revenues over the next
two decades, compared with business as usual ... the IEA’s base-case scenario for global energy
trends out to 2035.29
This report also stresses that the base-case scenario also poses risks to the fossil fuel industry.
Though the monetary values are not derived in their evaluation, the IEA report made clear that a
difference in energy demand of several million tons of oil equivalent existed between a current policy
scenario, and the base-case scenario. The difference being that the base case and the current policy
scenario is that the latter “takes account only of policies already enacted as of mid-2013,” whereas the
former is a projection of green market developments and policy implementations.30 The conclusion is
27
Paul Abberley, et al., “Letter to Sir Mervyn King, Chairman of the Financial Policy Committee of the Bank of England,” Carbon
Tracker Initiative, August 2014. Accessed 2 January 2015, http://carbontracker.org/wp-content/uploads/2014/09/Letter-to-Bank-ofEngland-Financial-Policy-Committee-19th-January-2012-Final.pdf 28
“Letter to Climate Change Capital,” Financial Policy Committee of the Bank of England, 1 February 2012,
http://carbontracker.org/wp-content/uploads/2014/09/fpc-bank-of-england-response.pdf
29
“Stranded Assets, Fossilised Revenues,” Kepler Chevreux, 24 April 2014. Accessed 23 December 2014,
http://www.keplercheuvreux.com/pdf/research/EG_EG_253208.pdf
30
15
“World Energy Investment”, International Energy Association
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
therefore that any scenario deviant from the current policy framework would result in negative impacts to
the projected revenues of fossil fuel companies.
In broader terms, “financial analysts are already hedging their bets based on existing or reasonably
foreseeable market forces.”31 Proceeding under the assumption that the fossil fuel industry will not
disappear overnight, it must be recognized that these companies must continue to create value for their
shareholders. In fact, under pressure from activists and investors to comment on the risk of stranded
assets, ExxonMobil issued a statement asserting their confidence “that none of [their] hydrocarbon
reserves are now or will become ‘stranded.’”32 Yet, as Kepler Chevreux made note, such a claim is both
“too dismissive” and “far too binary” in assessing a global policy framework. In other words, ExxonMobil
had failed to properly report the full spectrum of risks faced by the fossil fuel industry.
At the very least, institutional investors must begin to demand the stress testing and reporting of
their fossil fuel investments under certain projections, thereby bringing about a more forward-looking
financial reporting standard. On the other hand, a more powerful message of investor non-confidence
may be sent: divestment. To speak nothing of ethics, there exist significant grounds to divest given what
many would argue as the wasting of capital expenditure on unrealizable extraction projects and the
tremendous value at risk of reported reserves. Essentially, any investor action that sets out to deflate the
carbon bubble would rightfully result in an alignment of capital markets, with management directing
investment not towards the dirtiest, costliest projects, but to the energy projects of the future.
ALTERNATIVE INVESTMENTS
Upon choosing to divest from the top 200 fossil fuel companies, the second portion of the
divestment decision is re-investing in companies that are fossil-free and working to transition to a green
energy future and a sustainable economy.33
31
“Carbon Asset Risk Initiative”, Ceres and Carbon Tracker Initiative. Accessed 23 December 2014,
http://www.ceres.org/files/investor-files/car-factsheet 32
“Energy and Carbon—Managing the Risks,” ExxonMobil, 2014. Accessed 23 December 2014,
http://corporate.exxonmobil.com/en/environment/climate-change/managing-climate-change-risks/carbon-asset-risk
33
350. org, Green Century Capital Management, and Trillium Asset Management, Extracting Fossil Fuels From Your Portfolio: A
Guide to Personal Divestment and Reinvestment, 2011. Accessed January 5 2015.
16
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As with any industry, investors in low-carbon fossil fuels and renewables must nurse valid
concerns about returns on their investments. Often, the assumption is made that by acting with an ethicsoriented approach as opposed to a purely financial rationale, returns on these investments will be
compromised. However, various analyses have concluded that this is not the case. To illustrate this point,
the financial analyst firm MSCI compared their All Country World Index with a modified version that
omitted companies in possession of carbon reserves. It was found that, over a time period of five years,
the active return differential of the fossil-free index was 1.2% higher than the conventional, fossil fuelinclusive index. Moreover, the modified index had a tracking error of only 1.9%, referring to the deviation
of a portfolio’s returns from its expected benchmark value.34
IMPAX Asset Management also investigated fossil free portfolios by four different approaches,
assessing hypothetical portfolios by analyzing how they would have performed over a five- to seven-year
timeframe. The nature of these portfolios ranged from wholly fossil fuel-free, to actively managed
portfolios with positive investments in environmentally sustainable options. Yet, for each of these green
portfolios, it was found that the returns were higher than those of conventional global index, with minimal
tracking errors.35
Investors would be right to point out that by constraining the breadth of a portfolio’s investments,
it increases the associated risk. However, while this relationship often holds true, investors frequently
overestimate the degree to which investments risks are affected by excluding the fossil fuel sector.36 A
study done by the Aperio Group found that removing the fossil fuel sector did have a marginal negative
effect on the performance of the portfolio, but it was by much less than initially expected. Furthermore,
the study determined that the impacts of divestment on measures of a portfolio’s performance can be so
low as to be statistically insignificant.37
The benefits associated with a flow of capital aligned with our environmental interests are not to
be enjoyed by investors alone; the growth of the green sector is positively affecting macroeconomic
variables. To speak employment, a report published by Bureau of Labour Statistics concluded that green
34
MSCI ESG Research. Responding to the Call for Fossil-Fuel Free Portfolios. 2013, Accessed 4 January 2015.
35
IMPAX Asset Management. Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment, 2013. Accessed 3 January
2015. https://s3.amazonaws.com/s3.350.org/images/Impax--20130704_white_paper_fossil_fuel_divestment_uk_final.pdf
36
350. org, Green Century Capital Management, and Trillium Asset Management, Extracting Fossil Fuels From Your Portfolio,
2011. Accessed 4 January 2015, http://greencentury.com/wp-content/uploads/pdf/DivestmentGuide.pdf 37
Aperio Group, Do the Investment Math: Building a Carbon Free Portfolio, 2013. Accessed 3 January 2015.
file:///Users/owner/Downloads/building_a_carbon_free_portfolio.pdf
17
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sector jobs in the United States are being created four times faster (at 4.9% between 2010 and 2011) than
the job creation rate for the economy as a whole.38 Domestically, 23,700 Canadians earn their living in
the renewable energy industry, compared with the 22,340 people employed by the oil sands.39 And while
the latter industry stands as a marginal producer at the mercy of market forces and climate legislation, the
former is a youthful candidate for an influx of investment capital.40
To speak to this, a report published by 350.org, Green Century Capital Management, and Trillium
Asset Management, highlighted the increasing breadth of the green economy. It found that there are seven
fundamental “pillars” of green investing from simple power generation to sustainable developments in
agriculture and design. Our imperative to innovate and incentivize away from a fossil fuel economy
makes investments in the sustainable economy increasingly desirable.41
In brief, it can be argued, and often is, that the imperative to align investments to our
environmental interests is more than a moral cause. Investors are increasingly being made aware of strong
economic arguments and calls for financial prudence relating to fossil fuel divestment. Institutional
investors are now confronted with a body of knowledge illustrating a chronic overestimation of risks and
undervaluation of returns on portfolios devoid of the fossil fuel sector. In other words, not only is the
growth potential of the green sector foreseeably immense, it is also an opportunity for tremendous profit;
investments in such a future-oriented economy will be made both in the interest of sustainability, as well
as in the interest of stake- and shareholders alike.
38
Lee, Don. “Green Jobs Grow Four Times Faster than Others,” Los Angeles Times, 19 March 2013. Accessed 4 January 2015.
http://articles.latimes.com/2013/mar/19/business/la-fi-mo-green-jobs-20130319
39 Blackwell, Richard. “Green Energy Sector Jobs Surpass Total Oil Sands Employment,” The Globe and Mail. 2 December 2014.
Accessed 5 January 2015. 40
IMPAX Asset Management, Beyond Fossil Fuels, 2013.
41
350. org, Green Century Capital Management, and Trillium Asset Management, “Extracting Fossil Fuels From Your Portfolio,”
2011.
18
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THE DIRECT IMPACTS OF DIVESTMENT
FOSSIL FUEL COMPANIES
In choosing to withdraw holdings from the world’s top 200 publicly traded fossil fuel companies—
as determined by Fossil Free Indexes, LLC— institutions around the world are tracing and publicizing the
direct link that exists between the fossil fuel industry and the current climate crisis. Colloquially referred
to as “The Carbon Underground 200,” this list includes both the top 100 public coal companies and the
top 100 public oil and gas companies, as ranked by the potential carbon emissions content of their
reported reserves.42 As noted by Fossil Free Indexes, these firms hold over 4x their carbon budget
allocation based on the carbon emissions potential of their known reserves.
While we recognize that withdrawing the university’s endowment fund from these companies will
not immediately stop their stocks from being traded nor prevent their current operations from proceeding,
Mount Allison University’s divestment can, nevertheless, have a direct impact on the fossil fuel industry.
Divesting from these corporations will severely compromise their social licence, sending a clear message
that, faced with the severe threat of global climate change, proceeding with ‘business-as-usual’ is no
longer an option. While many of these companies are choosing to dismissively wave aside the divestment
movement, recent actions reveal that they are, in fact, feeling threatened. In November 2014, the leading
electric utility firm NRG, which has built its business from coal and conventional power plants, stated that
it would be aiming to reduce its greenhouse gas emissions by 50 percent by 2030, and 90 percent by
2050.43 When asked of the firm’s motives, the company’s chief executive, David Crane, said, “The power
industry is the biggest part of the problem of greenhouse gas emissions, but it has the potential to be an
even bigger part of the solution.” He further cited the divestment movement as a catalyst for the
commitment, stating: “I don’t relish the idea that year after year we’re going to be graduating a couple
million kids from college … with a distaste or disdain for companies like mine.” Furthermore, following
Divest Dalhousie’s meeting with their Board of Governors on November 25th, 2014, Natural Resources
Magazine released a blog post which stated that, “the divestment movement is another example of how
42
“The Carbon Underground 200: The World’s Top 200 Public Companies Ranked by the Carbon Content of their Fossil Fuel
Reserves,” Fossil Free Indexes, 2014, accessed 27 December 2014, http://fossilfreeindexes.com/the-carbon-underground-2014/
43
Cardwell, Diane. “NRG Seeks to Cut 90% of Its Carbon Emissions,” The New York Times, November 20 , 2014, accessed 5
January 2015, http://www.nytimes.com/2014/11/21/business/energy-environment/nrg-sets-goals-to-cut-carbonemissions.html?_r=0
19
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difficult an environment it is for oil and gas companies to get their message out so they can advance their
projects and obtain a social licence to operate.”44
Indeed, fossil fuel companies around the world are increasingly having to confront this challenge
of securing a social licence. Educational institutions such as the University of Glasgow (UK), Victoria
University (NZ) and Unity College (ME, USA) have agreed to pull their financial holdings from the fossil
fuel industry. While others, such as Stanford University (CA, USA), have begun by specifically targeting
their investments in coal companies. Cities, including Seattle, San Francisco, Oxford, Melbourne, and
Brisbane, have also pledged to divest their holdings from carbon-intensive investments, understanding
that their economic and social stability will be severely threatened by the imminent effects of climate
change. In total, 181 insitutions and local governments and 656 individuals, together representing 50
billion dollars have committed to divestment.45Such cases prove that the divestment movement is an
effective instrument, capable of shaping the long-term business plans of fossil fuel companies.
Furthermore, as renewable alternatives become increasingly profitable, the divestment movement will
encourage the fossil fuel industry to finally transition into what it claims to be: an energy industry.
Overall, it is evident that this movement has the capacity to shut the doors on the ‘business-as-usual’
practices that are ruining our planet and our futures. As an institution of higher learning that “looks toward
a future where individuals actively engage in working together to meet new challenges in our everchanging world, both locally and globally,” we have an obligation to recognize the dangers of climate
change, and act to prevent and prepare for the probable challenges ahead. 46
CLIMATE CHANGE
Climate change is upon us. As previously discussed, world leaders have reached consensus that
no more than a 2 degree rise above pre-industrial temperatures is necessary to prevent catastrophic
climate change, and already we have begun to see a change in our planet. According to the IPCC, natural
44
Campbell, Darren. “Fight Over Fossil Fuel Investments Reaches Atlantic Canada’s University Board Rooms,” Natural
Resources: Oil, Gas, Mining & Alternative Energy in Atlantic Canada, November 28, 2014, accessed 5 January 2015,
http://www.naturalresourcesmagazine.net/?p=12205 45
“Divestment Commitments,” Fossil Free: Divest From Fossil Fuels, 2014, accessed 5 January 2015,
http://gofossilfree.org/commitments/
46
“Leadership Mount Allison Redevelopment: Proposed Vision, Mission, Goals.” Mount Allison University. n.d. Accessed 23
December 2014.
http://www.mta.ca/Community/Governance_and_admin/VP_International_and_Student_Affairs/Leadership_Mount_Allison_Revie
w/Proposed_Vision,_Mission,_Goals,_Values/Proposed_vision,_mission,_goals,_values/. 20
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
disasters such as hurricanes and typhoons are increasing as a result of climate change47. The 11 million
affected by Typhoon Haiyan in October of 2014 are among the most direct recipients of the damages of
climate change. A new study published in Nature reveals the global inequality of carbon output and those
most susceptible to the effects. This study calculates that we are currently on course to reach a level of 5
degrees warming by 2100, to dangerous consequence.
McGlade et al. suggest that the only way to stay within our 2 degree limit is to keep a third of oil
reserves, half of gas reserves, and 80 percent of current coal reserves unused between 2010 and 2050.
These same results conclude that 85% of Canadian oil must remain unburned. The study uses wellestablished economic modelling to predict that the cheapest, most accessible oil will be bought and
burned first, and that harder to access fossil fuels will be those that remain buried48. Knowing that we have
access to at least three times the fossil fuel reserves that the agreed upon two degrees will allow us
globally, we need to shift our habits and our resources.
As an educated community we know that we have to change our habits of unnecessary resource
extraction before the planet is altered extremely and irreversibly. Mount Allison students learn in courses
from across the faculties that climate change is a real and looming danger to our futures, our children, our
livelihood, to our environment. Surely, the number one undergrad university would not choose to be
blind to the effects that climate change will have on the lives of its leaders of tomorrow. Of what use will
any of our future efforts be if they are undone by the eruption of climate change?
Our education teaches us to voice our opinions and to take meaningful action against such
seemingly insurmountable challenges. Research and development – which we have been taught to
produce and to utilize- has created solutions. Alternatives to fossil fuels exist and it is up to members of
the Mount Allison community to use and support these technologies and research. As a public institution,
Mount Allison holds sway. Viable economic alternatives exist, and in order to act with the kind of long
term thinking promoted by our university, we must consider investment in the fossil fuel industry to be
unsustainable and unacceptable.
47
IPCC. “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects,” 2014.
48
McGlade, Christophe and Paul Ekins. “The Geographical Distribution of Fossil Fuels Unused When Limiting Global Warming
to 2°C.” Nature 517. January 7 2015. Accessed 10 January 2015.
21
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CONSUMPTION AND BEHAVIOUR TRENDS
Not only as an institutional investor, but as an institution of higher thought, Mount Allison’s
influence on the consumption and behaviour trends of industry stakeholders—whether they be
multinational corporations, small businesses, or individual consumers—would not be unnoticed. Should
Mount Allison transition to a fossil-free endowment fund, the university would be a key actor in shaping
public perception of the oil and gas industry, both nationally and abroad. In choosing to leave Mount
Allison’s holdings in the industry primarily responsible for climate change, the public perception remains
that the University implicitly condones these detrimental actions, and stands to profit from the resulting
global degradation. In contrast, the disengaging of university funds from the industry would set an
important precedent, undoubtedly actuating important, broader changes in consumption and investment
patterns.
Not only does Mount Allison stand to influence consumption and behaviour through its
institutional ability to spark debate, but it also faces the possibility of placing itself at the centre of such
discussion and social change. As what would be Canada’s first university to divest from fossil fuels, it is
presented with the unique opportunity to frame this already-bourgeoning discourse on campuses and
within communities across the nation.
Environmentally ethical consumer choices can be impeded by any number of factors, from
personal or cultural values, social learning, slanted education, social barriers, habits or availability of
information. Being a prominent local and national presence, a divested Mount Allison University is
capable of helping consumers and social actors overcome many of these hurdles, understand the negative
impacts of the fossil fuel industry and make environmentally sound economic choices.
In effect, the act of fossil fuel divestment by Mount Allison would elevate climate change
conversation on campus, engaging the university community—including current, past and prospective
students in addition to staff and faculty—bringing climate justice to prominence on a personal level. This
would be of such wide-reaching social and environmental importance that for this reason alone, fossil
fuel divestment by Mount Allison could be justified. Mount Allison is presented with the opportunity to
act on the values that will define this era, and to play a part in influencing the future of climate action and
the surrounding dialogue.
22
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PUBLIC POLICY
The fossil fuel divestment movement has the potential to meaningfully influence public policy
decisions, thus allowing institutions to take the lead in the vital economic and political restructuring that
our environment requires. A recent article published in the Wall Street Journal discusses the political
implications of the fossil fuel divestment movement and explains that, "we have the technology to make
the transition to 100% renewables over the next few decades, while meeting the energy needs of
developing nations. What we need is the political will and financial foresight to make it happen."49 As an
epicentre of knowledge and innovation, Mount Allison is particularly well-suited to influence public
policy. By divesting from fossil fuels, the University will be able to harness this leverage and become a
leader in influencing public policy decisions. When universities and other institutions indirectly
collaborate by collectively taking part in the international fossil fuel divestment movement, they can bring
fossil fuel divestment to a much larger audience. From there, this increased awareness can influence
governments to implement an environmentally sound policy framework.
Perhaps most importantly, by divesting from the fossil fuel industry, Mount Allison will be
supporting a transition to the clean energy sector, which is gaining momentum and has become a
substantial source of employment in comparison to the traditional energy sector. In 2014, jobs in the
Canadian renewable energy sector surpassed the number of those offered in the oil sands, with 23,700
positions compared to the oil sand’s 22, 340. 50 In choosing to divest from fossil fuels, Mount Allison will
be supporting this burgeoning area of the economy and playing a direct hand in transitioning our
economy.
Overall, it is evident that public policy still has a long way to go in terms of supporting
environmentally friendly initiatives, but it is important to recognize the large impact that initiating fossil
fuel divestment at Mount Allison can have on these decisions, which is why it is essential that Mount
Allison University divest now.
49
50
Dorsey, Ellen. “Should Endowments Divest their Holdings in Fossil Fuels?.” The Wall Street Journal. November 23 2014.
Accessed 2 January 2015. http://www.wsj.com/articles/should-endowments-divest-their-holdings-in-fossil-fuels-1416779351.
23
rd
CBC News. “Clean Energy Provides More Jobs than Oilsands, Report Says,” CBC News. December 2 2014. Accessed 2
January 2015. http://www.cbc.ca/news/business/clean-energy-provides-more-jobs-than-oilsands-report-says-1.2857520.
nd
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POSITIVE IMPACTS FOR MOUNT ALLISON UNIVERSITY
OUR REPUTATION
For over 175 years, Mount Allison has functioned within a framework of institutional excellence in
every possible facet of university operations. While consistently maintaining its status in the upper
echelon of academic distinction, Mount Allison has never shied from responsibility, originality and the
confidence required to pave the way for other institutions to follow. Mount Allison was the first university
in the Commonwealth to present a baccalaureate to a woman, it was also the first institution in Canada to
develop an extracurricular certificate leadership program for students, and today, it remains the university
with the largest per-capita number of Rhodes Scholars in the Commonwealth. Sustainability remains a
top priority at MTA, with the 2009-2016 University Strategic statement outlining the importance of
environmentally ethical behaviour, and sustainability as a necessity for the institution to operate.51 For
years, the university has been recognized for its commitment to environmental sustainability, a brand that
many hold in high-esteem. Although Mount Allison has policy in place to ensure that sustainable
behaviour and its mandate is upheld, the loss of the University’s Green Evolving Budget, the failure to
develop an in-house sustainability office, and the closure of Cuthbertson, the “Environmental Residence,”
have put at risk the university’s status as an environmentally-focused institution. Action must quickly be
taken if Mount Allison wishes to secure its standing as a socially responsible university.
Mount Allison University relies upon its terrific reputation to ensure high enrolment, and to
maintain a strong relationship with its donors and alumni, upon which the university depends. Although
fossil fuel divestment has proven to be successful in several American universities, churches, and even
cities, there has yet to be a university in Canada that has committed to complete fossil fuel divestment. 52
This is where Mount Allison truly stands to benefit, making a name for itself as Canada’s environmentally
conscious university: a powerful title upon which Mt.A can stake its reputation. Divestment from fossil
fuels would provide credibility not only to the reputation of the university community as a whole, but also
to the education being provided within these walls. Divestment would bolster the status of many of Mount
51
"Responsible Investment." Investment in Sustainability | Naropa University, Boulder, Colorado. Accessed January 19, 2015.
http://www.naropa.edu/about-naropa/mission/sustainability/investment.php.
52
24
“Commitments,” Fossil Free, 2014.
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Allison’s academic departments, not only Geography and Environmental Studies, but also the Sciences,
Religious Studies, Women and Gender Studies, Economics, Commerce, Philosophy and so many more,
by institutionally acting upon an issue that so many Mount Allison students are educated on.
Being recognized as the best oftentimes means being the first, taking the risk and setting the trend
for success. Mount Allison cannot afford to simply be a follower, taking cues from other institutions; we
must present ourselves as the trail-blazers and history-makers, setting a precedent of environmental
responsibility, which others might admire and emulate.
RETURNS
Divest MTA recognizes that the university’s primary responsibilities, as they pertain to the
endowment, are fiduciary in nature, and that returns are of the greatest importance. The concept of the
carbon bubble and stranded assets have been investigated and elaborated upon within this report, and yet
here it must be emphasized that upon divesting from fossil fuels, Mount Allison faces only a minimal risk
of deviation from current returns, and would likely position itself as a more responsible, future-oriented
investor.
As a case of evidence, a unanimous vote of approval was made by the University Endowment
Committee of Naropa College, a small liberal arts institution in Colorado—with approximately 13% of its
endowment invested in the fossil fuel industry— to divest from fossil fuels in October of 2013. The
college has reported that the transition “hasn’t had a significant change on their portfolio.”53 Another
example of successful divestment can be found in Sterling College, an environmentally-oriented school in
Vermont, which reported an increase of almost $1 million in their endowment after divesting in 2013
with full support of the University Board of Trustees.54
Juxtaposing the above cases, which are presented by universities characterized by their small size,
De Anza and Foothills community colleges, with a collective 24,000 plus students operate as a unit in the
San Francisco Bay area and began the process of divesting in 2012 when students brought their
53
"Responsible Investment." Investment in Sustainability | Naropa University, Boulder, Colorado. Accessed January 19, 2015.
http://www.naropa.edu/about-naropa/mission/sustainability/investment.php.
54
"News Archive - Sterling College." Sterling College. Accessed January 19, 2015. http://www.sterlingcollege.edu/newsevents/news-archive/.
25
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proposition to the Foothill-De Anza foundation. Robin Lyssenko, the former director of the foundation,
cited fiduciary responsibility first and foremost in his responsibilities; yet, after making the decision to
divest from fossil fuels, reported that Foothill-De Anza, like Naropa, had seen no significant impact on the
institutional portfolio’s returns.55
Although it might be argued that the above are only a small selection of cases, and are therefore
not an appropriate demonstration of the stability of post-fossil fuel portfolios, a recent study by the Aperio
Group deserves attention. This investigation found that theoretical risk to returns was negligible, with an
impact ranging from only 0.004% to 0.003% when fossil fuels were taken out of an investment portfolio.56
Between the EU’s pledge to reduce carbon emissions 40% by 2030, the United States and China’s
recent carbon reduction agreement, and foreseeable intergovernmental climate policy frameworks, it is
clear that action is being taken that threatens the continued prosperity of our fossil fuel-based economy. 57
It can and has been argued that, with its investment interests in fossil fuels, Mount Allison’s long-term
endowment portfolio’s returns are at greater risk. Divestment therefore stands not only as a tool of climate
activism but also as a gesture of financial responsibility.
RECRUITMENT & RETENTION
Being a small institution, Mount Allison is always at the mercy of student enrolment. Recently, in
2013 we felt the sting of a drop in enrolment of approximately 100 students, or almost 5% of our student
population.
Current and prospective students in 2015 have been brought up with the knowledge that climate
change is a result of human action, and that environmental sustainability is of concern to all. Mount
Allison attracts students of a high academic and socially responsible calibre, with departments like
Geography & Environment, Sociology, International Relations, Philosophy and Women & Gender studies
55
"Foothill-De Anza Foundation to Divest Fossil Fuel Holdings." Inside Higher ED. Accessed January 19, 2015.
https://www.insidehighered.com/quicktakes/2013/10/25/foothill-de-anza-foundation-divest-fossil-fuel-holdings.
56
"Do The Investment Math: Building a Carbon-Free Portfolio." Aperio Group. Accessed January 19, 2015.
http://www.aperiogroup.com/system/.../building_a_carbon_free_portfolio.pdf.
57
"2030 Framework for Climate and Energy Policies." European Commission. Accessed January 19, 2015.
http://ec.europa.eu/clima/policies/2030/index_en.htm.
26
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
drawing in young people from across the country, students concerned with contemporary issues and
developing solutions to those issues.
The first school in the United States to commit to fossil fuel divestment was Unity College, a small
university in Maine, similar to Mount Allison in many ways, and an institution which, in recent years, Mt.
A has formed a bond with. The decision to divest came not from students or in answer to a larger
campaign, but in fact was initiated by the University President Dr. Stephen Mulkey, who immediately saw
a positive increase in online donations to the University. Unity also saw an “uptick in our inquiries from
students” which was predicted to result in an increase in enrolment. The aforementioned Sterling College
chose to divest some time after Unity, and found that after divesting, records were set for student
enrolment numbers.58
Fossil fuel divestment sends a very clear and very positive message to students both current and
prospective: that Mount Allison is an institution dedicated to the betterment of the student’s future.
Divestment tells students that Mount Allison is one of the few universities in the entire world to have
listened to the warnings of the academics and experts it houses, heard the concerns of students and
earnestly responded, fully understanding what is best, not only for Allisonians now, but Allisonians in the
future.
CONCLUSION
Universities are supposed to be epicentres of innovation, ingenuity and enlightenment and yet, at
such a critical moment in our planet’s history, post-secondary institutions around the world are standing
on the sidelines, refusing to take the bold action required to prevent catastrophic climate change. Mount
Allison University is being presented an immense opportunity. In divesting the university’s endowment
fund from the fossil fuel industry, the fiduciary would be positioning this institution as a national and
international leader of climate action. Divestment would send a clear message across the country that
Mount Allison University, the number one undergraduate school in Canada, is committed to doing
everything within its power to ensure that its students will continue to succeed for generations to come.
58
"Divestment Potential A Compilation of Collaborative Reports by Divest Dalhousie." Divest Dalhousie. Accessed January 19,
2015.
27
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
Financial arguments against divestment are weakening. While oil and carbon stocks have
historically been solid investments, current conditions are likely to permanently destabilize this industry.
The United States and China’s recent historic agreement to cut carbon emissions proves that governments
are now mobilizing to meet the extreme threat of climate change. The fossil fuel industry will be the
greatest casualty of such agreements. A 2013 study by HSBC Bank warned that between 40 and 60
percent of the market value of European fossil-fuel companies, including British Petroleum and Royal
Dutch Shell, could be eliminated in a carbon-constrained world.59 In a low-carbon future, the top 200 oil,
gas and coal firms will be unable to bring two-thirds of their proven reserves to market. It is time for
Mount Allison University to wake up to the risks of staying invested in the fossil fuel industry. The
financial arguments against divestment are crumbling under scrutiny. Reports show that Big Oil and Big
Carbon are severely overpriced, and the inevitable correction for this overvaluation will soon fall on
Mount Allison’s fiduciary.
Yet, even with the financial case for divestment holding strong, there is still no greater reason to
pull Mount Allison’s endowment fund from the fossil fuel industry than the moral benefit of doing so. In
March 2014, oil giant Exxon Mobil scoffed at the notion that its 25 billion barrels of proven reserves could
become stranded. The company wrote that world governments lacked the political will to take the steps
necessary to prevent a 2o Celsius rise in temperature. Interestingly, Exxon did not attempt to contest the
science of climate change but rather, asserted that it had “the upper hand in the politics of climate
change.”60 The message here could not be clearer:
The fossil fuel industry is betting on international inaction. It is betting on our collective failure to act on
the greatest challenge we have ever faced.
In staying invested in this industry, Mount Allison University is doing the same. It is directly supporting an
industry whose primary interest is in maintaining the status quo— a status quo that planetary limits cannot
uphold. There is no “neutral choice” in the matter. Any institution that remains invested in fossil fuels is
implicated in the politics of climate change. As Ellen Dorsey, Wallace Global Fund’s executive director
59
Dickinson, Tim. “The Logic of Divestment: Why We Have to Kiss Off Big Carbon Now.” Rolling Stone. 14 January, 2015.
Accessed 23 January 2015.
60
28
Ibid. The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
stated, “If you own fossil fuels, you own climate change. And it’s not just owning their environmental
impacts. You own their political impacts too. You’re helping to build their war chest.”61
In directly supporting this industry, you are taking away our generation’s chances of combatting
the climate crisis. History will look back on these years as those that determined the future health of the
planet. We must decide now how we wish to be remembered. As students of this university, we rely on
this institution to have our best interests at heart, and we fully believe that Mount Allison does. However,
if you truly believe that you have provided us with an education that prepares us to rise to the world’s
greatest challenges, then you will give us a chance. Divest from the fossil fuel industry and provide us
with the opportunity to employ what we have learnt. Grant us the ability to begin building a world that
we want to live in, one that is inclusive of everyone, and one that, years from now, we will feel confident
passing onto future generations.
61
29
Dickinson, Tim. “The Logic of Divestment: Why We Have to Kiss Off Big Carbon Now.” 2015. The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
APPENDIX- TOP 200 FOSSIL FUEL COMPANIES
THE TOP 100 PUBLICLY TRADED COAL COMPANIES BASED ON THE EMISSION
POTENTIAL OF THEIR KNOWN CARBON RESERVES
RANK
1
30
TOP COAL COMPANIES
Coal India
COAL Gt CO2
57.722
2
Shenhua Group
31.523
3
Adani Enterprises
25.383
4
Shanxi Coking Company
18.445
5
BHP Billiton
13.469
6
Anglo American
12.985
7
Inner Mongolia Yitai Coal
12.223
8
Datang Intl. Power
12.206
9
China National Coal
12.071
10
Peabody Energy
11.469
11
Glencore Xstrata
10.453
12
Datong Coal Industry
10.281
13
Yanzhou Coal Mining
9.799
14
Public Power Corp (DEH)
9.339
15
Exxaro Resources
8.793
16
Yangquan Coal Industry
7.298
17
Mechel
6.739
18
Arch Coal
6.530
19
Alpha Natural Resources
5.482
20
Mitsubishi
4.738
21
Vale
4.401
22
Rio Tinto
4.338
23
EVRAZ
4.235
24
Raspadskaya
4.084
25
Asian Resource Minerals
3.181
26
UC RUSAL
3.081
27
Neyveli Lignite
3.035
28
Pingdingshan Tianan Coal
3.023
29
Cloud Peak Energy
2.881
30
Sasol
2.731
31
Severstal
2.726
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
31
32
AGL Energy
2.704
33
Tata Steel
2.679
34
Teck Resources
2.603
35
Kuzbass Fuel
2.504
36
Polyus Gold
2.294
37
Energy Ventures
2.184
38
Whitehaven Coal
2.055
39
Banpu
2.040
40
RWE
1.943
41
Consol Energy
1.887
42
W H Soul Pattison
1.850
43
Resource Generation
1.818
44
Bayan Resources
1.806
45
Churchill Mining
1.745
46
NTPC
1.740
47
Adaro Energy
1.607
48
Nacco Industries
1.557
49
Idemitsu Kosan
1.530
50
Alliance Resource Partners
1.475
51
Huolinhe Opencut Coal Ind
1.387
52
Coalspur Mines
1.380
53
Mitsui
1.366
54
Golden Energy Mines
1.354
55
Coal of Africa
1.339
56
Novolipetsk Steel
1.288
57
Wesfarmers
1.094
58
Tata Power
1.062
59
Magnitogorsk Iron & Steel
1.046
60
Sherritt International
1.012
61
Kazakhmys
0.998
62
New World Resources
0.972
63
Mongolian Mining
0.903
64
Itochu
0.878
65
Westmoreland
0.864
66
Cockatoo Coal
0.851
67
Shanxi Meijin Energy
0.784
68
Jizhong Energy Resources
0.742
69
Bandanna Energy
0.731
70
Polo Resources
0.726
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
32
71
Allete
0.723
72
CLP Holdings
0.696
73
Aspire Mining
0.670
74
Walter Energy
0.641
75
Aquila Resources
0.627
76
Coal Energy
0.614
77
China Resources Power
0.567
78
Indika Inti
0.485
79
ArcelorMittal
0.464
80
FirstEnergy
0.458
81
Black Hills Corp
0.431
82
Wescoal Holdings
0.430
83
Grupo Mexico
0.420
84
African Rainbow Minerals
0.379
85
Shanxi Coal Intl Energy
0.376
86
Capital Power
0.367
87
PTT Public
0.359
88
Lanhua
0.338
89
Fortune Minerals
0.328
90
Cardero Resources
0.323
91
Zhengzhou Coal Ind & Elec
0.319
92
Steel Authority of India
0.307
93
Jindal Steel & Power
0.301
94
Shougang Fushan Resources
0.299
95
Jingyuan CE
0.297
96
Stanmore Coal
0.287
97
Prophecy Coal
0.272
98
Marubeni
0.265
99
Cliffs Natural Resources
0.247
100
NSSMC
0.237
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
THE TOP 100 PUBLICLY TRADED OIL AND GAS COMPANIES BASED ON THE
EMISSION POTENTIAL OF THEIR KNOWN CARBON RESERVES
RANK
33
1
OIL AND GAS
COMPANIES
Gazprom
2
Rosneft
3
OIL Gt CO2
GAS Gt CO2
6.248
37.292
TOTAL O&G Gt
CO2
43.540
10.059
1.979
12.039
PetroChina
4.884
3.693
8.577
4
ExxonMobil
4.143
4.038
8.181
5
Lukoil
5.666
1.280
6.946
6
BP
4.203
2.197
6.400
7
Petrobras
4.676
0.674
5.350
8
Royal Dutch Shell
2.140
2.332
4.473
9
Chevron
2.545
1.591
4.137
10
Total
2.130
1.683
3.813
11
Novatek
0.387
3.391
3.777
12
ConocoPhillips
1.661
1.069
2.730
13
Tatneft
2.622
0.067
2.689
14
ENI
1.418
1.142
2.561
15
ONGC
1.449
0.703
2.152
16
Statoil
1.012
0.928
1.939
17
Sinopec
1.204
0.367
1.571
18
CNOOC
1.155
0.366
1.521
19
BG
0.593
0.664
1.257
20
Occidental
0.950
0.303
1.253
21
Apache
0.586
0.461
1.047
22
0.780
0.200
0.980
23
Canadian Natural
Resources
Anadarko Petroleum
0.450
0.454
0.904
24
BHP Billiton
0.345
0.552
0.897
25
Devon Energy
0.379
0.515
0.894
26
Chesapeake Energy
0.293
0.596
0.889
27
Bashneft
0.876
0.000
0.876
28
Inpex
0.393
0.369
0.762
29
Ecopetrol
0.580
0.157
0.737
30
EOG Resources
0.392
0.258
0.650
31
Suncor Energy
0.596
0.041
0.636
32
Marathon Oil
0.473
0.151
0.624
33
Hess
0.485
0.125
0.610
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
34
34
Imperial Oil
0.561
0.027
0.587
35
Encana
0.089
0.479
0.568
36
Energi Mega Persada
0.020
0.537
0.557
37
BASF
0.159
0.294
0.453
38
Repsol
0.182
0.265
0.446
39
OMV
0.260
0.152
0.413
40
Noble Energy
0.141
0.271
0.412
41
Woodside Petroleum
0.058
0.334
0.392
42
0.270
0.120
0.390
43
Pioneer Natural
Resources
Linn Energy
0.218
0.163
0.381
44
Cenovus Energy
0.309
0.053
0.362
45
YPF
0.235
0.121
0.356
46
Range Resources
0.090
0.261
0.352
47
PTT
0.111
0.228
0.339
48
Husky Energy
0.212
0.122
0.334
49
EQT
0.001
0.326
0.327
50
Continental Resources
0.238
0.073
0.311
51
Talisman Energy
0.111
0.199
0.310
52
KazMunaiGas EP
0.298
0.000
0.298
53
JX Holdings
0.271
0.000
0.271
54
WPX Energy
0.069
0.188
0.258
55
Santos
0.033
0.204
0.237
56
SK Innovation
0.226
0.000
0.226
57
QEP Resources
0.078
0.143
0.220
58
Southwestern Energy
0.000
0.219
0.219
59
Consol Energy
0.000
0.218
0.218
60
Cabot Oil & Gas
0.010
0.201
0.212
61
SandRidge Energy
0.134
0.077
0.211
62
Newfield Exploration
0.112
0.096
0.207
63
Murphy Oil
0.144
0.062
0.206
64
Dragon Oil
0.159
0.044
0.203
65
Freeport-McMoRan
0.155
0.028
0.183
66
Maersk Group
0.174
0.000
0.174
67
Concho Resources
0.116
0.057
0.173
68
Ultra Petroleum
0.008
0.162
0.169
69
Denbury Resources
0.139
0.026
0.166
70
GDF SUEZ
0.045
0.117
0.162
71
MEG Energy
0.155
0.000
0.155
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA
35
72
Whiting Petroleum
0.139
0.012
0.151
73
RWE
0.037
0.111
0.148
74
MOL
0.084
0.061
0.146
75
Crescent Point Energy
0.135
0.010
0.145
76
Polish Oil & Gas
0.036
0.108
0.144
77
Mitsui
0.048
0.095
0.142
78
Penn West Petroleum
0.111
0.029
0.140
79
Pacific Rubiales Energy
0.104
0.028
0.132
80
Oil India
0.073
0.059
0.132
81
Cimarex Energy
0.062
0.068
0.130
82
Energen
0.082
0.044
0.126
83
TAQA
0.065
0.055
0.121
84
Oil Search
0.028
0.088
0.117
85
ARC Resources
0.044
0.065
0.109
86
Canadian Oil Sands
0.109
0.000
0.109
87
Genel Energy
0.105
0.000
0.105
88
SM Energy
0.057
0.045
0.102
89
Sasol
0.004
0.085
0.089
90
National Fuel Gas
0.018
0.071
0.088
91
Tullow Oil
0.080
0.008
0.088
92
Pengrowth Energy
0.051
0.037
0.088
93
Xcite Energy
0.084
0.001
0.085
94
Vermilion Energy
0.069
0.013
0.082
95
Peyto E&D
0.009
0.070
0.079
96
Quicksilver Resources
0.017
0.061
0.077
97
0.026
0.050
0.077
98
Petroceltic
International
Forest Oil
0.026
0.050
0.076
99
Tourmaline Oil
0.009
0.065
0.074
100
Bonavista Energy
0.027
0.045
0.072
The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA