President Falk and the Board of Trustees recently announced their response to the call to divest the College’s endowment from fossil fuels. We should applaud the College for pledging to take important steps to improve efficiency on campus and for engaging the College around climate change. Unfortunately, these actions do not address the question that the Board was asked to consider: Is it fiscally responsible or appropriate stewardship for the College to invest in fossil fuels?
The Trustees claim that divestment is “largely symbolic” and that it is infeasible, as the College’s fund managers “will not accept investments from Williams … that involve the sorts of restrictions contemplated by the divestment proposal.” Divestment is neither symbolic nor impossible.
In the weeks that followed the College’s decision to remain invested in fossil fuels, several developments have reinforced the importance of divestment and illustrate that the College made the incorrect decision.
First, there is scientific and economic consensus that the planet’s sustainable carbon budget is at odds with the business plans of the fossil fuel industries. A recent article in Science Advances details how, if we burn all of the discovered fossil fuels, we will melt the Antarctic ice sheet and cause catastrophic sea level rise. In fact, of the 1500 gigatons of known fossil fuel reserves, we can only emit around 15 percent before 2050 to have an 80-percent chance of meeting the global 2 degree Celsius warming goal. This week, in an address to the venerable insurance firm Lloyd’s of London, Mark Carney, the governor of the Bank of England, detailed that the warming climate presents major risks for the global economy and global financial stability. There is growing momentum for large corporations and financial institutions such as insurers to begin building a price for carbon into their business. Unless the Trustees endorse a world in which we burn all of the known fossil fuel reserves, they should acknowledge that political and economic regulations will catch up with the science, meaning we will prevent companies from burning all of the fossil fuels on their balance sheets (and in the ground). While it is impossible to predict when it will occur, the value of fossil fuel companies will face a dramatic correction.
Second, a detailed investigative report, in the Pulitzer Prize-winning Inside Climate News, detailed how Exxon conducted groundbreaking research confirming fossil fuels’ role in global warming four decades ago, and then proceeded to spend the last three decades burying that research and funding political and public relations efforts to discredit climate change science. The College’s continued investment in companies that fund and profit from climate denial, such as Exxon, is directly at odds with the stated goal of addressing climate change. The College correctly divested from tobacco companies for exactly this type of corporate malfeasance and should do so again from fossil fuel companies.
The Trustees report argues that the College should not divest because it would require complete liquidation of the endowment at a loss of over $75 million with additional annual foregone investment returns of “tens of millions of dollars” annually. It is difficult to analyze these numbers, as the College does not release the names of the funds in which it invests – including whether any Trustees’ firms manage the College’s endowment funds (a conflict of interest in the divestment decision). While some investment managers may not want the College’s endowment funds if they were to come with the restriction to not directly invest in fossil fuel companies, there are other well-regarded managers who would be eager to accept the College as a client. The College has a fiduciary responsibility to generate strong returns on its endowment – yet the time horizon should be consistent with that of the College, long-term.
Ultimately, the President and Trustees’ decision hides behind faceless outside investment managers. The College deserves better. Man-made climate change is the existential issue of our time. At over two billion dollars, the College’s endowment is its largest resource. Ultimately, all of the other steps the College has announced are meaningless if the vast resources of the endowment are not directed away from fossil fuels. Reducing the carbon footprint of the College will be quickly negated if one investment manager responsible for a portion of the College’s endowment decides to invest in developing new oil or gas fields or fossil fuel power plants because it is seen as the path to short-term financial gain.
Divestment will take several years and have an upfront cost, yet it is financially responsible and the correct stewardship decision for an institution that aims to remain a leader today and 100 years from now.
Jeremiah Schuur, MD, MHS ’96 is an emergency physician at Brigham and Women’s Hospital in Boston and an assistant professor of emergency medicine at Harvard Medical School.