Letter to the Editor: Swarthmore and The Bank of England

Editor’s note: This article was initially published in The Daily Gazette, Swarthmore’s online, daily newspaper founded in Fall 1996. As of Fall 2018, the DG has merged with The Phoenix. See the about page to read more about the DG.

With its welcome announcement that Swarthmore’s “investment managers … have been asked to detail their methods of evaluating direct costs of climate change…and related [carbon] regulatory policies on future returns,” the Board of Managers is now about in step with the Bank of England and perhaps the Norwegian Sovereign Wealth Fund. It has not gone as far as the Australian National University, or, of course, as many of us believe it should go, in dissociating itself from the financial risk and planetary destructiveness of the fossil fuel industry.

In a shift in policy at the end of October, the Governor of the Bank of England told a parliamentary committee that “his officials have discussed the idea that most of the world’s proven coal, oil and gas reserves may be ‘unburnable’ if global warming is to be kept within safe limits.” The Bank’s Financial Stability Committee will monitor this issue and “the financial risks of being overly exposed to fossil fuel investments” (Financial Times, November 30, 2014).

While the largest Norwegian pension fund has actually decided to sell off a $75 million investment in coal, the country’s sovereign wealth fund (the world’s largest at $870 billion), has determined to “become a more ‘active and engaged investor on climate matters’ and exclude investments in companies that are ‘severely harmful to the climate’ on a case-by-case basis.” Ironic but telling, since the fund is based on Norway’s oil income (http://gofossilfree.org, stories by Louise Hazan, November 19, Melanie Mattauch, December 3).

The financial press from Britain’s Daily Telegraph (hardly a hotbed of liberal thought) to Bloomberg.com is running stories taking seriously the risk that the fossil fuel industry will drastically lose value if its assets are “stranded,” now that the global effort to restrain emissions has been revivified by the US/China deal (Ambrose Evans-Pritchard, www.telegraph.co.uk, November 19; Alex Morales, Bloomberg.com, December 2).

Having one’s investment advisors study the matter is only meaningful, of course, if divestment, complete or partial, remains a real possible outcome. The Australian National University (ANU), initially in an effort to stave off its own student divestment campaign, hired a research firm to investigate the environmental performance of companies it is invested in. In the event, ANU has decided to divest from the seven worst companies identified, constituting about 1% of its portfolio (Lenore Taylor, www.theguardian.com, October 17). Facing a furore from Australian politicians, ANU’s vice-chancellor (i.e. president) Ian Young stated that “climate change is the most serious issue ever to have faced humanity.” Young’s academic training is in Civil Engineering, and he has worked in the past as a consultant to the offshore oil and gas industry. He goes on: “The divestment debate is nuanced. … [T]he University Council has taken what I believe to be a measured approach” (http://vcdesk.anu.edu.au, October 9).

Perhaps this models a next attainable stage for Swarthmore. Several analyses have suggested that the cost of divestment may be much less dire than the Board has projected in the past. See not only the study by Northstar Asset Management, referenced in Swarthmore Mountain Justice’s letter to The Daily Gazette on September 26, 2013, but also the one by Paul Ruud, professor of Economics at Vassar (www.advisorperspectives.com, July 30, 2013). Both studies lead off with references to the “Cost of Divestment / Questions and Answers” generated by Swarthmore’s Suzanne Welch and Christopher Niemczewski in May 2013. Both take apart the ‘flawed methodology” in Timothy Adler and Mark Kritzman’s paper on “The Cost of Socially Responsible Investing,” the only source cited in the “Questions and Answers” as backing for its  conclusions.


The Board of Managers is to be loudly applauded for taking a step beyond its previous stance and, perhaps, beyond its comfort zone. So are the Swarthmore students who have kept up a steady stream of well-argued statements this fall in The Phoenix and The Daily Gazette, and who presented their petition to the Board this weekend, signed by over 800 students and 300 of us alumni, as well as faculty. All the stakeholders will watch to see what the Board’s step means, specifically whether it opens up the possibility of complete or partial divestment, without which possibility this step goes nowhere. All stakeholders need to keep working to bring Swarthmore home.

Featured image courtesy of http://i.telegraph.co.uk

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