What is divestment?
McGill University invests a $1.4 billion pool of money, called an endowment, to help fund the university and as a source of emergency cash. The main purpose of the endowment is thus to make money without taking too much risk, while respecting the values of the University.
Divestment is the opposite of investment – it means getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous and investing elsewhere instead.
McGill’s Board of Governors has already placed several ethical guidelines on the endowment (e.g. tobacco and Burma). The purpose of this campaign, for now, is therefore to add some new ethical guidelines to the way McGill invests. Fossil fuel investments and the tar sands are a risk for investors and the planet – that’s why we’re calling on McGill to divest.
Will McGill lose money by divesting from fossil fuels?
There is no compelling evidence that this is the case, but analysis by Corporate Knights has shown that McGill has lost an estimated $43 million by *not* divesting since we started our campaign. Additionally, the endowment fund contributes to only about 1% to the annual operating budget. The endowment is not a large source of budgetary funding. The fossil fuel sector is only a small part of the economy (even in Canada, where it is 3% of GDP), and there are many profitable alternatives. According to studies from investment firms like the Aperio Group, MSCI Capital Investment and Impax Asset Management, fossil-free portfolios have performed equivalently or better in the last ten years than those including fossil fuel companies.
More importantly, we know that civilization as we know it depends on a steep reduction in fossil fuels and far-flung extraction. These industries are based on a Jurassic business model of never-ending growth—a business model that will soon go extinct whether we like it or not. The chilling stakes behind stopping these companies motivates a lot of people (like us) to start making business as usual less profitable for fossil fuel companies and their shareholders. Moreover, the existence of a carbon bubble—an overvaluation of fossil fuel companies based on the assumption that they will extract all of their current reserves—means that their value is expected to drop dramatically as governments act on climate change. The current fluctuation of crude oil prices suggests that fossil fuel investments are already proving to be risky investments, as has been highlighted by observers from HSBC and the International Energy Agency.
What will my signature be used for? What good can signing this do?
Our petition to the McGill Board of Governors now has over 2500 signatories calling for divestment. Thank you to everyone who signed! According to the rules of McGill’s Board of Governors, if they receive 300 valid signatures expressing concern about McGill’s investments, they must form a group called the Committee to Advise on Matters of Social Responsibility (kCAMSR), whose task is to investigate the “social injury” that McGill’s investments are causing. We thought that if they agreed that fossil fuel companies are causing social harm, then there would be a good chance they would recommend divestment to the Board of Governors and that the Board would act on it. Unfortunately, CAMSR concluded that there was “insufficient evidence of social injury” caused by fossil fuel companies and decided against a recommendation to divest.
In the spring of 2014, however, CAMSR’s terms of reference were revised, and “grave environmental degradation” was added as an acceptable reason for divestment. For this reason, we have resubmitted our petition to CAMSR in February 2015, (thank you for your signatures again!) and are currently awaiting their decision by March 2016.
If I don’t know much about investments, what business do I have telling McGill who to invest in (or not)?
We do not feel qualified to tell McGill exactly who to invest in. We do feel qualified to say, because the world’s scientists and scientific bodies back this up, that if we let fossil fuel companies continue what they’re doing, our planet will continue to become sharply less hospitable for us to live on. We need urgent action. We feel qualified to argue, also, that fossil fuel companies cause tremendous social harm and should be divested from by McGill’s own policy and definition. See the “Tar Sands” and “Climate Change” tabs of this website for more information.
In addition, prominent financial institutions have drawn attention to the riskiness of fossil fuel investments and observed that they will be severely impacted by the need to dramatically lower carbon emissions in order to maintain a livable climate. In a 2014 speech, World Bank president Jim Yong Kim called for investors to consider climate and environmental impact in reviewing their portfolios, while the Bank of England similarly warned of the potential blow that declining fossil fuel stocks could deal to investors.
I agree that climate change is awful, but why should fossil fuel companies in particular be targeted?
We recognize that we live in an economy with shared responsibility for using fossil fuels (i.e. an oil company couldn’t exist without oil consumers, and it has not escaped our attention that our current dependence on fossil fuels in transportation, electricity, plastics, and agriculture is immense). Fossil fuel companies have a special responsibility for three reasons: first, because of their lobbying and funding phony science, fossil fuel companies have a special responsibility for inaction on climate change and for confusion in the public domain. Second, because they are the producers and relatively few companies (and surprisingly few jobs, despite the astronomical profits) are involved, they have a special power to cease exploration, stop lobbying, abandon the tar sands, and promise to keep 80% of their reserves underground. These steps are both ethical and necessary; to do otherwise is to commit social harm. Third, under common law producers are legally responsible for creating a product that is safe. This is known as producer liability. Even though smokers chose to smoke and home-owners chose to insulate their homes with asbestos, both tobacco and asbestos companies were convicted and held liable for billions in damages. The same principle applies to the fossil fuel industry, which means McGill’s investments are immoral, risky, and linked to unlawful activity.
As a reminder, these companies cause harm outside of climate change. Their addiction to risky, destructive, far-flung extraction puts their business agenda in conflict with indigenous communities and precious ecosystems worldwide. Standing alone, we believe that to be reason enough to divest from the Tar Sands and many, if not all, fossil fuel companies. Together, these arguments are overwhelming.
But we still need fossil fuel for cars. The new economy isn’t here yet. How can McGill divest on one hand and drive cars on the other? That seems contradictory!
Our divestment demand is the same as the demand from the climate science: that fossil fuel companies keep 80% (note we did not say 100%) of their reserves underground. In the meantime, this 20% must be used to power a transition, while we work on implementing cleaner and safer alternatives that can power our society and our economy. Society’s current overdependence on fossil fuels is part of the challenge that we must overcome, and that will require us to stop funding the problems and start investing in solutions instead.
Can university divestment have an impact?
Personal divestment is good and university divestment is better. North American universities have an estimated endowment of $400 billion. That’s enough money to put fossil fuel industries on the defensive. McGill’s endowment and pension funds alone invest about $2 billion dollars. Most individuals can’t make that kind of difference. But it is essential to remember that divestment is not just an economic tactic.
Universities, in their role as a centre for education and research, are also the moral, ethical, scientific, and cultural beacons of our societies. Universities are a special place for the creation of a better future. When universities invest in fossil fuel companies it legitimizes them tremendously. University divestment from fossil fuel companies revokes their legitimacy, otherwise known as their “social license to operate.” We may not be able to revoke their legal license to operate through divestment but it does encourage a perception in public consciousness and discourse that fossil fuel companies who don’t meet our criteria have an illegitimate business model. This is precisely what has already happened, for example, with tobacco companies. As a result, their political power – especially in the US – has plummeted.
Other ways of fighting global warming must go on in tandem. Divestment isn’t an isolated solution. Fortunately, there are movements at 300 schools across North America asking their universities for the same thing, as well as in 200 communities and religious institutions. Together, divestment can make a big difference.
Wouldn’t it be better to have ideas on what to invest in rather than what not to invest in?
We agree, that certainly would be preferable. We don’t have simple answers or rote formulas. If easy solutions existed, probably most universities would already be doing things that way. McGill already excels in many ways in terms of sustainability. We view our work as part of the conversation about the kind of McGill we’d like to help create – more a beginning than an end. While the solution might not be simple and may take some work to arrive at, we do believe that McGill can invest its money better.
Why focus on universities or individuals – isn’t it the government who needs to change?
We agree, we would love to be seeing any signs of swift government intervention to stave off the threat of peak oil, mineral scarcity, and climate change. We’re already locked in for 1.6 degrees of warming and we’re not preparing for peak oil. The urgency is real. That said, let’s remember that environmentalists have been trying to get through to our governments (and shareholders have been passing resolutions against these fossil fuel companies) for the past 20 years. Though we’ve had some victories, despite the hard facts and genuine alarm we’ve had far fewer victories than we need.
One goal is to publicly demonstrate, through divestment, that fossil fuel industries are rogue outlaws – their money is dirty money. The nature of the industry causes them to employ some of the best scientists in the world: they’ve known about climate change as long as anyone. They’ve been funding phony-science and confusion tactics for 20 years. All these companies have clearly and repeatedly put their profits before the truth, before democracy, before indigenous rights, before our climate, before the well-being of everyone on earth. The goal of divestment is to solemnly label them, without hyperbole or hysteria, as the reckless public enemy they are.
Isn’t divestment abrupt? Why not try shareholder activism first?
Shareholder activism is a powerful strategy for making relatively minute changes at a company. If our goal was to change details about the way these companies extract fossil fuels, shareholder activism might be the best strategy. But the core of the fossil fuel business plan is the problem. Groups have been filing shareholder resolutions at fossil fuel companies for the past 20 years with no major victories. Moreover, certain market regulators, such as the US, do not allow shareholder resolutions that attempt to change the core business of a company.