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Fossil Fuel Divestment: Catalyst or Just Catharsis?


andrew yarrow, is a former reporter for The New York Times. His next book, Look Magazine and Mid-20th Century Mass Media, will be published in 2021.

Published January 6, 2021


As graduates assembled on the steps of Widener Library for a photo of Harvard’s Class of 2019, those in the back row surprised onlookers by unfurling a banner reading “Harvard Divest Now.”

Divestiture has been employed as a potent persuader for decades, the tactic of choice in protests ranging from opposition to South Africa’s apartheid to Sudan’s atrocities in its war against Christian separatists. Could climate-change activists have a similar impact by persuading America’s richest university (endowment: $42 billion) to end its investments in the fossil-fuel industry? Or was the protest simply feel-good grandstanding on the part of privileged kids — or even a distraction from the sort of advocacy that could make a real difference?

Dirty Energy

The call for divestment of holdings in oil, natural gas and coal has grown into an impressively large movement in recent years. Many local governments, pension funds and nonprofits have committed to ditching at least part of their holdings in companies involved in producing “dirty” energy. These range from the giant University of California system to the World Council of Churches, the British Medical Association and the cities of New York and Paris.

Moreover, the amounts involved are an anything-but-trivial $14.5 trillion. In the words of, an international climate-change advocacy group, the goal is to strip companies’ “veneer of legitimacy that enables them to keep expanding operations at a time of climate crisis.”

Last year, Brown University President Christina Paxson called climate change “the single most pressing problem that society faces,” adding the very practical sentiment that the university’s “decision to halt investments in fossil-fuel extraction companies reflects the view that, as the world shifts to sustainable energy sources, investments in fossil fuels carry too much long-term financial risk.”

This came in the wake of protests like ones last fall in which University of Michigan students blockaded exits at the school’s Board of Regents meeting, and Harvard and Yale students overcame their long-standing rivalry to occupy the field during halftime of their iconic annual football game. While Harvard has pledged to “set itself on a path to decarbonize” its endowment, Lawrence Bacow, the university’s president, has made it clear that Harvard “cannot risk alienating and demonizing possible partners, some of which have committed to transitioning to carbon neutrality.”

Reality Bites

Others see universities’ reluctance to play hard ball in less high-minded terms. They may be wary of divesting because “members of their boards of trustees are typically industry leaders,” said Kerrina Williams, recruitment disruption organizer for Divest Ed, which helped launch campus divestment campaigns in 2012. “Even in successful campaigns, universities refuse to use divestment language because it reveals the power of student organizing and admits defeat.”

But for all the people committed and institutional money withheld, the impact of the movement is hard to discern. While the coal industry is indeed hurting (thanks mostly to ruinous competition from cheap renewables and cheaper natural gas), the mammoth oil and gas companies are hardly starved for capital. All told, the industry invested $1.85 trillion in 2018, with year-on-year outlays increasing in the United States, according to the International Energy Association.

“We never had the illusion that we would bankrupt the fossil-fuel industry,” said of Yossi Cadon of“This is not a financial campaign.” Rather, the objective is to goad politicians to act, and to act fast, he added.

Environmental activist Bill McKibben is on the same page. “Divestment is one way to weaken those companies,” he says, “financially, but even more politically.”

Institutional divestments and individual actions send a signal and may make people feel good about themselves. But the real action (beyond Gates-style efforts to jumpstart renewables) must be political — and on a large scale.

Not surprisingly, the American Petroleum Institute, a trade association for the oil and gas industries, has other ideas. Citing the Paris agreement’s expectation that oil and natural gas will still account for “nearly half of the global energy mix in 2040,” Aaron Padilla, the API’s manager of climate and environmental, social and corporate governance policy said, “We are proud of the progress the industry has made so that consumers do not have to choose between environmental progress and access to affordable, reliable and cleaner energy.”

Cadon and Williams dismiss this as “greenwashing,” claiming that less than 1 percent of industry investment has been in renewables and conservation. And it’s not as if oil and gas have been irresistibly profitable: investments in fossil-fuel companies have underperformed the S&P 500 in recent years. But Big Oil isn’t having it. Mike Sommers, API’s CEO, put the industry’s position bluntly: “We aren’t going anywhere.”

So, how much of an impact is divestment having on climate change? Thus far, not much. “Divestment, to date, probably has reduced about zero tons of emissions,” Bill Gates told the Financial Times. People who want to change the world would do better to put their money behind “breakthrough energy ventures and funding only companies who, if they’re successful, reduce greenhouse gases by 0.5 percent.” Gates is doing just that.

Institutional divestments and individual actions — think driving an electric car or not eating meat — send a signal and may make people feel good about themselves. But the real action (beyond Gates-style efforts to jumpstart renewables) must be political — and on a large scale.

Former California governor Jerry Brown had the right idea when he issued an executive order to make the state carbon-neutral by 2045. But even California, with a GDP larger than Britain’s, cannot make much difference on its own. National governments working in concert are essential. And the necessary agenda is long: investing in green technologies and energy, taxing carbon emissions, ending subsidies to fossil fuel companies that totaled an astonishing $5.2 trillion in 2017 and more.

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So, once more: are the Harvard go-getters who made the fuss just spinning their wheels? While the impact is plainly limited thus far, I think there’s good reason to believe the movement is not wasting our time. Although “the actual economics of divestment are not nearly as compelling as divestment people want you to believe,” Jeremy Grantham, co-founder of a multibillion-dollar asset management firm, agrees. “The pariah aspects are much more important.”

main topic: Climate Change
related topics: Finance: Capital Markets