This was a game-changing weekend for the international climate justice movement. On Sunday, 400,000 people, including 200 from the college, marched through the streets of New York City in what was the largest climate march in history. Hundreds of thousands more joined over 2,800 solidarity marches and actions in over 160 countries. On Monday evening, the $850 million Rockefeller Foundation, built off of the family’s oil fortune, along with dozens of other institutions, announced that it is divesting from fossil fuels.
In a statement announcing the decision, the president of the Rockefeller Brothers Fund said that the foundation is “quite convinced that if [John D. Rockefeller, the founder of Standard Oil] were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”
Over $50 billion have now been divested from fossil fuels; the movement is picking up speed. It is nearing what has been a critical point for previous divestment efforts — when the movement begins to snowball — causing more and more institutions to divest and leading to indirect economic impacts on the industry. Due to the economics of fossil fuel production, the ultimate effect could be even more powerful than previous divestment movements.
The Oxford University study, “Stranded Assets,” called the fossil fuel divestment movement the fastest-growing divestment movement in history. In 2011, Swarthmore Mountain Justice had the only fossil fuel divestment campaign in the world. In the fall of 2012, Unity College, a small college in Maine, became the first college to divest from fossil fuels; the city of Seattle also pledged to divest and the movement grew to 100 campaigns. By December 2013, the movement had swelled to 400 campaigns. This past spring, the movement moved from strings of victories to creating historic societal shifts when the world’s largest financial asset manager, Blackrock Inc., created a fossil-free index, Stanford University divested from coal, and world leaders such as World Bank President Jim Yong Kim and anti-apartheid leader Desmond Tutu endorsed the movement.
As studies like “Stranded Assets” detail, divestment is very effective at leveraging social power to create societal change and compel legislative action. Investors can use divestment to leverage their political and social power and stigmatize the targeted industry. As the movement reached a critical mass in the mid-to-late 1980’s, divestment from apartheid South Africa publicly stigmatized firms doing business in South Africa. Institutions, including Swarthmore, used their financial and political weight to highlight the injustices of the apartheid regime. Society began to shift as more and more institutions did so, and world leaders came out against apartheid and exerted more pressure on the unjust status quo. Soon, it became unconscionable to invest in companies doing business in the fossil fuel industry, and the US government began to publicly criticize the apartheid regime.
In addition to highlighting the injustices of the fossil fuel economy and compelling change for moral reasons, fossil fuel divestment also can have an indirect but powerful economic impact. By highlighting the incompatibility of continued fossil fuel consumption with a stable future climate and building pressure for policies like carbon taxes, fossil fuel divestment has already created uncertainty around the continued profitability of fossil fuels. Major financial institutions like Morgan Stanley, Bernstein, Citi, Deutsche Bank, Goldman Sachs and HSBC have issued bearish reports questioning the long-term profitability of fossil fuel investments.
Their logic is clear: if the world is to prevent a two-degree Celsius rise in global temperatures, 80 percent of existing fossil fuel reserves must be left in the ground. If governments take action to prevent the extraction of all these reserves through a carbon tax, the fossil fuel industry will suddenly have billions of dollars in “unburnable assets.” Nelson A. Rockefeller, trustee of the Rockefeller Fund, said that he “foresees financial problems ahead for companies that have stockpiled more reserves than they can burn without contributing significantly to climate damage.” A carbon tax could lead to plants, pipelines and other infrastructure shutting down before they provide positive returns for investors. Thus, investors become hesitant to make large capital investments on expensive projects with slow returns on investment, which are extremely prevalent in and crucial to the fossil fuel industry.
The combination of social pressure and strong economic uncertainty creates the potential for a powerful snowball effect. This effect was discussed last week on Chris Hayes’ The Majority Report — as more institutions divest, stigmatize the fossil fuel industry and make increasingly present the threat of carbon tax, investors will begin tapering off funding for fossil fuel projects as uncertainty increases, thereby creating space for investment in a more just and sustainable energy future. In doing so, divestment will further erode the fossil fuel industry’s economic and political power to prevent a carbon tax, thereby making such a policy more likely and further discouraging investment.
The announcements by the Rockefellers and others Monday are a critical point in this cycle. They represent savvy investors who are ceasing both capital and stock investments in fossil fuels. Earlier this year, Goldman Sachs halted its capital investment in a proposed coal export project after intense pressure from environmental groups made it an economic gamble. Now, three out of six proposed coal export terminals on the West Coast are without funding. Goldman Sachs did not make this decision out of concern for climate change or those impacted by coal mining; they did so for fiduciary reasons. The divestment movement can be a powerful way to catalyze this change by creating the circumstances wherein a carbon tax is possible and support for renewables make it both economically and socially unconscionable for firms or colleges to invest in deadly fossil fuels.
Following this momentous weekend and in the leadup to the historic UN climate negotiations next fall in Paris, Swarthmore is well-positioned to take leadership in the fight for social justice and live up to its values of social responsibility. As an institution, we not only have access to a $1.8 billion endowment and disproportionate amount of political and social power due to our prestige, but Swarthmore students are regarded as leaders in the international climate justice movement as founders of the first-ever fossil fuel divestment campaign. Just as MJ’s campaign catalyzed a movement over the past three years, a decision by Swarthmore to divest could help catalyze historic shifts in how our society addresses the climate crisis.