PCUSA Information Sheet on Divestment from Fossil Fuels

Information Sheet:  Commonly Asked Questions (adapted from 350.org)

What is divestment?

When you invest your money, you might buy stocks, bonds or other investments that generate income for you. Universities (and colleges in the US), as well as religious organizations, retirement funds, and other institutions put billions in these same kinds of investments to generate income to help run their institutions.

 

Divestment is the opposite of an investment–it simply means getting rid of stocks, bonds or investment funds that are unethical or morally ambiguous. Fossil Fuel investments are a risk for investors and the planet–that’s why we’re calling on institutions to divest from these companies.

 

There have been a handful of successful divestment campaigns in recent history, including Darfur, Tobacco and others, but the largest and most impactful one came to a head around the issue of South African Apartheid. By the mid-1980s, 155 campuses—including some of the most famous in the country—had divested from companies doing business in South Africa. 26 state governments, 22 counties, and 90 cities, including some of the nation’s biggest, took their money from multinationals that did business in the country. The South African divestment campaign helped break the back of the Apartheid government, and usher in an era of democracy and equality.

 

Huge oil companies like Exxon or BP have billions of dollars in assets.  How can the divestment of our relatively small amounts of funds have an impact?

Divestment isn’t primarily an economic strategy, but a moral and political one. Just like in the struggle for Civil Rights here in America or the fight to end Apartheid in South Africa, the more we can make climate change a deeply moral issue, the more we will push society towards action. We need to make it clear that if it’s wrong to wreck the planet, than it’s also wrong to profit from that wreckage. At the same time, divestment builds political power by forcing our nation’s most prominent institutions and individuals (many of whom sit on university boards) to choose which side of the issue they are on. Divestment sparks a big discussion and — as we’re already seeing in this campaign — gets prominent media attention, moving the case for action forward.

 

At the same time, there are certain economic impacts.  If enough institutions like churches and colleges divest, it will begin to make these companies sweat. While sale of stock might not have an immediate impact on a fossil fuel company, especially one as gigantic as Exxon, what it does do is start to sow uncertainty about the viability of the fossil fuel industry’s business model. Here’s why: in order to keep warming below 2°C, a target that the United States and nearly every other country on Earth has agreed to, the International Energy Agency calculates that the fossil fuel industry will need not to burn approximately 80% of their reserves of coal, oil, and gas. These assets are factored into the share price of every fossil fuel company. Globally, the value of those reserves is around $20 trillion, money that will have to be written off when governments finally decide to regulate carbon dioxide as a pollutant. By divesting from fossil fuels, we are not only building the case for that government action, we’re starting this important discussion about the fossil fuel industry’s “stranded assets.”

 

On the flip side of that coin, divestment also starts to build momentum for moving money into clean energy, community development, and other more sustainable investments. Let’s say divestment eventually succeeds in moving just 1% of the money that is in some church endowments towards sustainable alternatives. That’s roughly millions worth of new investments in things like solar bonds, revolving loan funds, and advanced energy industries. More importantly, when other investors, be they individuals or pension funds, see the nation’s leading universities begin to move in this direction, they’ll also look into it. University endowments won’t be enough to fuel a clean energy revolution — that’s why we’re still pushing for government action — but they build the case for investment in important ways.

 

What if the church administrators say they can’t divest because they don’t know where their money or endowments are divested?

A common refrain is “We can’t divest because we don’t even know where the money is invested — and even if we did know, we couldn’t make that information public because it would reduce our profits.”

 

Well, here’s where you get to play your trump card. It may be true that administrators don’t know what stocks or bonds they own at any given moment, but administrators and boards hire the money managers, and thus get to decide where the money is, or isn’t, invested. If they really wanted to divest from fossil fuels, all they would have to do is tell the money managers to do just that!

 

It sometimes makes sense to bring public attention to the fact that organizations may be trying to keep their investments secret, but don’t let this argument distract you from the fact that they are the ones who get to make the call, not the money manager. Transparency becomes a much more important issue after winning the divestment campaign so that you can hold them and the money managers accountable for actually following through with the divestment promise.

 

Can we still make a reasonable return/profit if we don’t invest in fossil fuel companies?

While it’s true that fossil fuel companies are extremely profitable (The top five oil companies, last year, made $137 billion in profit—that’s $375 million per day), they’re also very risky investments (1). Coal, oil and gas companies’ business models rest on emitting five times more carbon into the atmosphere than civilization can handle, which makes their share price five times higher than it should be in reality. In addition, disasters like Exxon Valdez, the BP oil spill, along with massive fluctuations in supply and demand of coal, oil and gas, make energy markets particularly volatile, and therefore risky.

Report after report has shown that investing in clean energy, efficiency and other sustainable technologies can be even more profitable than fossil fuels (2). It’s a growing market, with over $260 billion invested globally last year, and a safe place for your institution to invest (3).

 

There are also a number of ways to re-invest locally that help build your community and stimulate good jobs. Projects like energy efficiency and rooftop solar have high up-front and labor costs, but save institutions money in the long run, because electricity, heating and other costs are reduced significantly. You can find out more about community re-investment at http://grist.org/climate-energy/how-you-can-help-clean-energy-eat-big-oils-lunch/ .

(1) http://www.ceres.org/resources/reports/sustainable-extraction-an-analysis-of-sec-disclosure-by-major-oil-gas-companies-on-climate-risk-and-deepwater-drilling-risk/view

(2) http://www.forbes.com/sites/mindylubber/2012/03/20/investors-are-making-money-on-renewable-energy/

(3) http://www.reuters.com/article/2012/01/12/us-clean-tech-investment-idUSTRE80B1NX20120112

 

Can’t shareholders make these changes from within the fossil fuel industries?

Shareholder action can be an effective tool to make small reforms at a company, such as pressuring Apple to institute better labor practices at the factories it works with in China. Over the last decade, there has been an attempt to use shareholder action to change the behavior of the fossil fuel industry, as well. While there have been some limited successes — instituting sustainability practices inside the company, for instance — there haven’t been any resolutions that have been able to address the core problem with the industry: the massive amounts of carbon they insist on dumping into the atmosphere for free. Voting for climate friendly resolutions is a good thing to do, but it’s not going to solve the problem. Scientists say that in order to keep warming below 2 degrees C, we’re going to need to leave about 80% of the fossil fuel industry’s current reserves underground. This is an achievable goal, but it’s the type of move that no group of shareholders would ever vote for willingly. Make no mistake, Exxon could still make a profit as an energy company if it transitioned its massive wealth and expertise over to renewables, but they’ll do it because of government regulation, not because they willingly decide to make the move.

 

That’s why it’s time for divestment. We need to make the moral stakes of our current situation clear: the fossil fuel industry is wrecking the planet and it’s immoral to profit off that wreckage. Divestment is a clear and powerful action that helps build the case for government action, along with making the economic point that we should be moving our money into the solution as supposed to the problem. If we’d started this campaign 30 years ago, then shareholder action would make more sense, but with the rapidly closing window for action, we need to act swiftly and boldly. Divestment can be an uncomfortable step to take, but it’s the right thing to do — and it will make a far greater impact than any shareholder resolution we could ever pass.

 

Which fossil fuel companies are the worst offenders?

We’re all complicit in fossil fuel consumption, and we should do all that we can to reduce our own use, but the real culprits — the ones who are rigging the system — are the fossil fuel companies. The largest 200 coal, gas and oil companies own oil, gas and coal reserves that represent a significant percentage of the entire global market(1). These companies, incidentally, are also the largest contributors to politicians’ of all stripes in this country and across the world — they’re the ones writing laws, and getting billions in government handouts each year (2).

 

There are many more companies that contribute indirectly to climate change — the multinationals that build drilling equipment, lay oil pipelines, transport coal, and utilities that buy and trade electricity. But right now, consider these 200 companies. For a full listing of companies, go to:  http://gofossilfree.org/companies/ .

Top 5 Coal companies

1.             Severstal JSC

2.             Anglo American PLC

3.             BHP Billiton

4.             Shanxi Coking Co. Ltd.

5.             Exxaro Resources Ltd.

Top 5 Oil and Gas companies

1.             Lukoil Holdings

2.             Exxon Mobil Corp.

3.             BP PLC

4.             Gazprom OAO

5.             Chevron Corp.

(1) http://www.carbontracker.org/linkfileshare/Unburnable-Carbon-Full1.pdf
(2) http://endfossilfuelsubsidies.org/files/2012/05/fossilfuelsubsidies_report-nrdc.pdf

 

For more information go to https://sites.google.com/site/fossilfreepcusa/ or   www.350.org .

For a sermon on this issue go to http://www.theriversidechurchny.org/news/article.php?id=489 .

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