Divestment Year In Review 2022
Commitments to environmental, social, and governance principles are a collection of socially responsible investing values widely known by their acronym, ESG. In 2022, they have become particularly controversial. That’s because ESG investments pose an existential challenge to the power and place of the fossil fuel industry in profitable business sectors. So Big Oil and its counterparts are throwing lots and lots of money at legislators everywhere, with the goals to sustain their Über wealth streams and to eliminate divestment campaigns wherever possible.
But divestment advocates have not given up. In fact, the Go Fossil Free divestment campaign continues to be a key strategy to systematically challenge the political power of the fossil fuel industry. 350.org explains the ways that the movement creates uncertainty about the long term financial viability of the industry and moves money away from dirty energy towards climate solutions.
- Since its inception in 2012, 350 institutions and local governments alongside thousands of individuals representing over $1.5 trillion in assets have pledged to divest from fossil fuels.
- High profile pledges to divest include Norway’s Sovereign Wealth Fund, the Episcopal church, the Church of England, Rockefeller Brothers Fund, World Council of Churches, the California Academy of Sciences, the British Medical Association, and Newcastle, Australia, home of the world’s largest coal port.
- There are now active campaigns underway at over 450 universities and hundreds more cities, foundations, churches, and other institutions around the world.
Is Divestment a “Woke” Conspiracy?
In December, the Florida Treasury announced it would remove $2 billion worth of state funds from the financial services company BlackRock. Why? They have other goals than producing returns, according to the Florida CFO Jimmy Patronis. He called BlackRock’s ESG focus “social-engineering” while failing to acknowledge the strong returns BlackRock has delivered to Florida taxpayers over the last 5 years.
Florida Governor Ron DeSantis has made an attack on “woke” corporations a central tenet of his governing — remember how he revoked a number of Disney’s tax benefits because of its opposition to his “Don’t Say Gay” measures? DeSantis pitches Florida as “where woke goes to die.” He spearheaded the law against investing state funds in companies that embraced ESG principles. “We are prioritizing the financial security of the people of Florida over whimsical notions of a utopian tomorrow,” he proclaimed.
Mother Jones argues that dredging up woke theory in conjunction with ESG investment “has a much more explicit point of origin in an old conspiracy theory—and it offers a striking example of how power brokers exploit disinformation for their own benefit.”
As false narratives around ESG initiatives have gathered life, Republicans have accused large and powerful Wall Street financiers of ignoring the interests of businesses and their employees.
It’s not just Florida, either. Texas Republican lawmakers are interrogating investment companies for their shift to climate-friendly portfolios that recommend state employees and retirees cut ties with companies funded by fossil fuels. Senate Bill 13 limits Texas governmental organizations from entering into certain contracts with investment companies that have restricted ties with carbon emitting energy companies. The law was passed last year to protect Texas’ big oil and gas sectors and their legislative campaign donations. The investment companies accused of violating Texas law include BlackRock, State Street Global Advisors, and Institutional Shareholder Services, Inc.
Even Tesla CEO Elon Musk has slammed ESG metrics, calling them “a scam” and “the devil.” Isn’t Tesla’s company’s mission “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible” at conflict with discounting ESG investments? If the company, indeed, is dedicated to “building a world powered by solar energy, running on batteries, and transported by electric vehicles,” aren’t ESG funds helping to make that goal possible?
Now it turns out that conservatives are tying social-emotional learning programs at schools that teach children how to learn and succeed in a group, be a good friend, and express their feelings constructively to ESG indoctrination. Companies have gone woke, this thinking suggests, because of ESG scores that restrict freedom-loving values.
Quinn Slobodian, a Wellesley College historian who has studied disinformation around globalism suggests that, rather than being bound by evidence, the woke/ ESG connection amounts to little more than marketing. “All of the talk of ethical capitalism, net zero futures, the replacement of human labor by robots, and shareholder versus stakeholder capitalism—that’s really just the PR side of the World Economic Forum,” he says. “If you think that they’re talking about an actual program that’s about to be unrolled globally, then you’ve vastly overestimated their sincerity.”
Protests to Make Fossil Fuel Investments Transparent Continued in 2022
Around the globe, students and other climate activists have voiced concerns about institutions that continue to support fossil fuel infrastructure. As example, Michigan State University (MSU) student environmental activists were instructed to remove protest signs during a campus basketball game. Their signage included the plea, “Trustees: Divest Now.” Soon afterward, they were escorted from the arena. The group had also protested at a recent football game, holding up banners with slogans like “No Oil Money.”
These Sunrise movement youth have pushed the Board of Trustees to withdraw its investments in fossil fuel companies and redirect them toward renewable energy sources. The public demonstration was the result of months of unsuccessful attempts to harness the trustees’ attention.
“We’ve been met with pretty much just apathy, and, in some cases, outright disdain for the movement,” MSU student Adi Kumar told WKAR Public Media. “The trustees … they’ve not really been committed at all to the divestment campaign, and there’s been pretty much no action so far on their part.”
According to the MSU Investments Office, last year the school held nearly $90 million in private fossil fuel investments. The Board of Trustees Investment Policy directs the board to maintain fiduciary responsibility and push for investments that will generate the “maximum return.” Former Trustee Pat O’Keefe says the investment team’s priority should be to generate a profit for the university and to fund programs for students.
In contrast, the Sunrisers argue that the school has a moral and financial obligation to break its commitments and withdraw investments in fossil fuel corporations. What the trustees are doing is wrong, they say, and students must rise up to prevent their futures from burning because of profit-making schemes.
In many cases, there is little public information available about the income that universities receive from their partnerships with oil, gas, and coal firms. Some students have taken a different divestment tact than protests — they’re filing legal complaints accusing their institutions of breaking the law with their fossil fuel industry investments. They accuse their institutions of violating the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which is law in every state except Pennsylvania, the District of Columbia, and the US Virgin Islands.
Final Thoughts
The Harvard Business Review acknowledged this year that fossil fuel asset sellers vote with their dollars and proclaim their positions publicly — and $40 trillion is an eye-popping commitment. Divestment by one party involves investment by another, though, which translates to more capital flowing to the fossil fuel sector, in contravention of the seller’s objectives.
“Ultimately, divestment can only work if it’s paired with long-term action, and that’s where run-off can help,” they say, which would involve holding a fossil fuel company’s debt to maturity and then not renewing or extending another loan. It could mean operating a physical asset (like a refinery) until it is no longer useful, to include resisting investments in improvements that would make the asset more productive and longer-lived.
To hold an asset knowing that it will not be permitted to produce profit is a tough call for most of us. However, if it is considered within a broader context of tools for mitigating climate risk, it could have real impact.
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