What is divestment?
McGill University invests a ~$1.1 billion pool of money, called an endowment, to help fund the university and as a source of emergency cash. The purpose of an endowment is thus to make money without taking too much risk.
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. to exclude tobacco and Burma). 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’s no compelling evidence that this would cost McGill money. Firstly, interest made off the endowment fund contributes to only about 1% to the annual operating budget rather than being a large source of direct funding. More important is that 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 slightly better in the last ten years than those including fossil fuel companies
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 and extractive industries, 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 to the International Energy Agency!
If we were asking McGill to use only Socially-Responsible Investments (SRIs), conservatively speaking we could perhaps expect between 5-10% less return (though many argue that SRIs are equally if not more profitable. For example, McGill’s “ethical” pension plan has outperformed the others since the beginning), but we’re not even asking for that. For the moment, we’re saying “just don’t invest in fossil fuel companies.” There is no shortage of profitable and ethical stocks out there.
What will my signature be used for? What good can signing this do?
On Friday, February 1st we delivered over 700 signatures to McGill Board of Governors calling for divestment. Thank you to everyone who signed!
Here’s a reminder about what that petition did. According to the rules of McGill’s Board of Governors, if they receive 300 valid signatures expressing concern about McGill’s investments, a group called the Committee to Advise on Matters of Social Responsibility (CAMSR) must meet to investigate the “social injury” that McGill’s investments are causing. If they agree that fossil fuel companies are causing social harm, there’s a good chance they will recommend divestment to the Board of Governors and that the Board will act on it.
If they believe everything is in order we will succeeded in “waking up” this influential committee.
However, our petition is still open. Please feel free to keep signing (we’re now at over 1400 signatures). We’ll have more details on our plans for these signatures soon.
If I don’t know much about investments, what business do I have telling McGill who to invest in (or not)?
We don’t feel qualified to tell McGill 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 considerably 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 of social injury. See the “Tar Sands” and “Climate Change” tabs of the Divest McGill website for more information.
We 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 two 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 producer 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 are both ethical and necessary. To do otherwise is to commit social harm.
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 native people 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.
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. The 20% remaining must be used to power a transition.
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, with this divestment movement, there are movements in 500+ institutions across the world asking their universities for the same thing. 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 (though many are currently working on divesting!). 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 in a more ethical manner.
Stay tuned and get involved as this campaign progresses.
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 native 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.