Update: The Future of Fossil-Fuel Divestment

by Duane Nichols on May 25, 2016

Ethical Approach: Divest of Fossil Fuels

It’s an age-old tension between radicalism and reform made more urgent by the existential threat of climate change.

From an Article by Chloe Maxmin, The Nation, May 18, 2016

At 11 pm on a cold Wednesday in February 2014, bleary-eyed Divest Harvard members gathered to discuss the campaign’s future. The group, which calls on Harvard to divest its 37.6 billion dollar endowment from fossil-fuel companies, was deeply torn. We had worked tirelessly for 18 months to build a campus movement, helping mobilize 72 percent of college students in support of divestment, organizing rallies, and hosting forums.

Still, after multiple meetings with our administration, there was no progress toward divestment. Some in our group wanted to “shake,” continuing dialogue with the administration in the hope that our voices could spark its conscience. Others wanted to bypass Harvard to try to “make” a new reality. They argued for escalation—blockades, sit-ins, and increasing forms of civil disobedience. Shake or make? That was the question.

The future of the fossil-fuel divestment movement today mirrors the dilemmas that Divest Harvard faced that frigid night. The movement oscillates between two paths forward. “Shake” aims to reorient existing institutions towards a climate consciousness. “Make” tries to confront, transcend and transform existing systems on the premise that only new structures can save us.

The shakers and makers of fossil-fuel divestment define its future. How are these distinct strategies playing out? I talked with youth leaders across the divestment movement to find out.

Fossil-fuel divestment organizing earned the title “historic” within three years of its inception. The first campaigns bubbled up on a few campuses in 2010. Led initially by Swarthmore students, divestment stood in solidarity with those on the front lines of fossil-fuel extraction. In July 2012, Bill McKibben wrote a now-famous article in Rolling Stone that showcased fossil-fuel divestment as a primary strategy for confronting climate change. Three months later, 350.org staged the “Do the Math” tour. Almost immediately, more than 100 campus campaigns emerged.

In October 2013, a report from Oxford University declared fossil-fuel divestment the fastest-growing divestment campaign in history. Now there are more than 400 campus and hundreds of off-campus campaigns. Over 500 institutions with more than $3.4 trillion in assets have divested. Hundreds of students have risked arrest. HSBC, the World Bank, and other major financial institutions have endorsed the economic rationale behind divestment. Even politicians—like Bernie Sanders and Martin O’Malley—now reject fossil-fuel money.

Fossil-fuel divestment has become one of the principal ways that youth engage with the climate movement. The movement aims to weaken the fossil-fuel sector’s influence in three ways: (1) pivot capital towards clean energy investments, (2) stigmatize the industry to create political support for climate action, and (3) ignite a massive social movement to fight the fossil-fuel industry. “It’s really mobilizing young people and making them feel like they do have a voice,” emphasizes Daphne Chang, a founding force behind Mt. Holyoke’s divestment campaign. The movement provides an inclusive platform for action.

Young people see another key goal of divestment: to hold institutions accountable in the age of climate crisis. Young Jong Cho, a campaigner for 350.org and 350 action says, “The divestment campaign and movement is more about highlighting the influence of the fossil-fuel industry on many of our institutions…[and] pushing our institutions to take a moral stance on climate change.” The climate crisis requires educational institutions to rethink how they operate and whether their practices threaten communities and jeopardize students’ futures.

Last spring, students organized the first nationwide coordinated escalation and activism surged. Since then, the movement has been in a “valley,” as Shea Riester, a young college alum who supports student activists, observes. “Generally, though,” he added, “you have valleys happen after spring escalations.… I think we’re going to see another round of escalation this spring…continuing some of this momentum.”

And he was right.

This spring so far, more than 40 divestment advocates have been arrested during campus protests. Four Divest Harvard students were arrested after a sit-in. Dozens of UMass students were arrested during an occupation. Yale announced partial divestment. The University of Mary Washington divested. The surge of student activity revived fossil-fuel divestment on campuses and reminded the world that student power is alive and well.

But the future of fossil-fuel divestment is defined by the tension between shake and make. This tension has existed since the movement’s inception, though it has not always been directly acknowledged. On the one hand, divestment is a financial tool of “the system.” The movement “shakes” things up within the current system by showcasing the total numbers of assets that have been divested, celebrating large pools of money that forswear fossil fuels, and highlighting financial experts’ support. At the same time, the movement uses divestment to confront the system and “make” a new reality. The divestment movement tackles the fossil-fuel industry, redirects capital towards new economies, and builds a mass movement working for climate justice.

Some campus campaigns accept divestment as a tool of traditional finance and aim to shake endowments into financial instruments that support a transition away from fossil fuels. These students build relationships with trustees to explore green investment opportunities. They encourage support for investments in climate solutions. These campaigns can be used to “facilitate incremental steps” or to look for “moments where interim compromises may exist, like a commitment to invest in local community development,” suggests Ophir Bruck, a former leader of Fossil Free University of California who now works in the sustainable investment field. For campus shakers, divestment is a way to change the conversations within administrations and reallocate endowments’ investments toward a livable planet.

In the finance world, shakers aim to use the existing economic system to rechannel capital towards investments in carbon-free technologies and capabilities. Lily Tomson, a student organizer with Positive Investment Cambridge, describes divestment as “genuinely trying to shift the financial territory.” Fossil fuel divestment adheres to its literal definition: a financial mechanism to move capital from one set of assets to another.

Campus makers, in contrast, see divestment as a tool to radicalize students against the fossil-fuel industry and any institution that colludes with its practices. They regard divestment as demanding more than just a shift in investment strategies. They aim to birth a new ethos of confrontation in the face of corruption and crisis. Riester sums it up: “We’ve seen how many hundreds of students have been at the table…and how little that has gotten them.” Instead, he says, students need to commit to nonviolent civil disobedience, “putting it all on the line” and not being afraid to “demand divestment in that direct way.” Divestment becomes a symbol for what young people are willing to do for all that they love. The end goal may not be whether a school divests or not. Power is built from struggle.

This view holds that divestment can be used to disrupt the economic system and build a new economy. Katie Hoffman, who co-founded the University of California’s divestment campaign, told me, “Finance for finance sake is one of the greatest challenges we’re up against in our society right now.” Iliana Salazar-Dodge, a senior divestment campaigner at Columbia University, paints a vision of this new system in a recent op-ed: “Worker-owned businesses and local funds are springing up across the nation…. They are building something beautiful.” Divestment and reinvestment can not only accelerate the clean-energy revolution, they can also be the building blocks of a new economy.

Shake and make contradict each other in many ways, but these two approaches also allow for broad engagement. Will divestment be able to succeed on both terms? Or will the different aims produce internal divisions that pit one activist against another and jeopardize the ability to build power? Can shake and make coexist? It’s an age-old tension between radicalism and reform made more urgent by the existential threat of climate change.

I have argued in the pages of The Nation that fossil-fuel divestment is a step towards true political prowess for the climate movement. Divestment stigmatizes the fossil-fuel industry, limits its political influence, and creates new political space for real climate solutions. To fulfill this theory of change, the divestment movement must actually claim that new political space. It needs to pivot its networks and engage with electoral politics.

Divestment can be an opportunity to make a new kind of politics. It’s time to “look beyond the divestment movement,” says Becca Rast, a US Campus Organizer with 350.org. “That includes young people running for office.” As many interviewees argued, divestment organizing trains a new generation of politicians. Campus activists learn the tools of politics immemorial: how to negotiate, organize, and engage in collective decision-making. When these millennials run for office, they will infuse new perspectives, capabilities, and values into our political system.

The shakers know what they are for: the shake modifies endowments, shifts the finance sector, bird-dogs politicians. But can the agents of destruction be shaken quickly enough to become agents of salvation?

The makers know exactly what they are against, but their solutions are still developing. They use direct action to confront and expose the status quo but still face the work of creating fresh solutions and new systems. This work takes time, effort, and creativity at a moment in history when we race against physics. Can the makers become a regenerative force in time?

After a winter snow, I watch the branches of Maine’s pine trees bend under the weight. I shake the branches and watch the limbs bounce back to their proud height. I feel satisfied to have released them from their burden. There are times, though, when the branch cannot snap back. It’s too damaged to withstand the next storm, and the trunk itself is compromised. No matter how much I shake, its life is over. A new tree will one day take its place and, in time, a new forest will grow.

<<< Members of the Divest Harvard campaign protest outside the Harvard Management Company in Boston on April 12, 2016. (Photo courtesy of Divest Harvard) >>>

See also: www.FrackCheckWV.net

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Elon Musk May 26, 2016 at 12:29 pm


We Must Revolt Against the Unrelenting Propaganda of the Fossil Fuel Industry

By Lorraine Chow, EcoWatch.com, May 5, 2016

During an interview at the World Energy Innovation Forum (WEIF) at Tesla’s Fremont, California factory Wednesday, Elon Musk criticized fossil fuel subsidies as well as the alleged “propaganda” tactics deployed by Big Oil and Gas to tarnish his companies, including Tesla, SolarCity and SpaceX.

“The fundamental issue with fossil fuels is … every use of fossil fuels comes with a subsidy,” Musk said in his talk with forum organizer and DBL Partners venture capitalist Ira Ehrenpreis.

According to the Tesla CEO, cheap oil and gasoline prices not only prevent drivers from switching their gas-guzzlers to electric cars, it also deters the fight against climate change.

Musk explained that the well-funded fossil fuel industry isn’t even paying for their contribution to environmental destruction. “It would be like if you could just dump garbage in the street and not pay for garbage pickup,” he said.

Citing data from the International Monetary Fund (IMF), Musk lamented he’s “competing against something that has a $6 trillion per year subsidy,” and that the low gas prices that subsidies create are “weakening the economic-forcing function to sustainable transport and clean energy in general.”

Musk suggested that a carbon tax would help curb Dirty Energy’s emissions but passage of such a policy would be “hugely politically difficult” and that politicians usually pick the easier path of providing subsidies for electric cars, “even though gas cars are getting a bigger subsidy.”

Although the electric vehicle maker said he was “encouraged by the Paris talks,” he still thinks that the transition to clean energy and sustainable transportation isn’t happening quickly enough.

Musk gave an example of how the fossil fuel industry has been feeding negative stories to the press about his many companies.

As Electrek explained: The CEO implied that the LA Times article from last year that misleadingly asserted that Musk’s companies received $4.9 billion in subsidies originated from the fossil fuel industry.

Musk suggested that the report was planted to counter the IMF study that found that the fossil fuel industry was receiving the equivalent of ~$5 trillion in subsidy a year. Both reports came out around the same time.

“After the IMF came out with their study showing that fossil fuels are subsidized to the tune of $6 trillion a year [it’s was actually $5.3 trillion in 2015]–like $6 trillion per year,” Musk said. “Then some representatives from the oil and gas industry added up all the incentives that Tesla had received and will receive in the future, which happens to coincide with the $6 billion figure.”

“We need to appeal to the people–educate people to sort of revolt against this and to fight the propaganda of the fossil fuel industry which is unrelenting and enormous,” he concluded.

Earlier in his talk, Musk also predicted that autonomous cars are the future of transportation. “It’s going to become common for cars to be autonomous a lot faster than people think,” Musk said, adding that half of all new cars will have self-driving technology within seven to 10 years.

“It’ll just be something where it’s odd if it’s not in your car. Like not having GPS or something like that, but even bigger. It’ll just be normal,” he said.

The entire interview was captured by Electrek in a video.

Note: Will Elon Musk’s Tesla Model 3 Recharge the U.S. Electric Vehicle Market?

See also: http://www.FrackCheckWV.net


Morningstar Update May 31, 2016 at 6:49 pm


Exxon, Chevron Shareholders Narrowly Reject Climate-Change Stress Tests — Update

By Bradley Olson and Nicole Friedman, Morningstar, May 25, 2016

Shareholders at Exxon Mobil Corp. and Chevron Corp. narrowly voted down resolutions calling for stress tests to determine the risk that efforts to curb climate change pose to their businesses.

Despite the defeat, the proposals drew more support than any contested climate-related votes in the history of the two biggest U.S. oil and gas companies. Preliminary results showed 41% support from Chevron investors that cast ballots and 38% support at Exxon, an indication that more mainstream investors are starting to take more seriously the threat of a global weaning from fossil fuels.

The number of shareholders supporting the climate-risk measures “is significant, and it will continue to grow,” said Beth Richtman, investment manager at the California Public Employees’ Retirement System, which manages about $290 billion.

“There’s a groundswell of share owners who are going to keep pushing this forward,” she said. “We need to see them rise to the realm of best practices in terms of climate risk reporting, and we’re not there yet.”

While the shareholder votes are not binding, supporters of the measures declared victory even in defeat after the oil companies’ annual shareholder meetings Wednesday.

“You have to read this as a shot across the bow of the industry,” said Andrew Logan, director of the oil and gas program at Ceres, a Boston-based nonprofit group that advocated for the proposals.

Exxon and Chevron had fought to keep the measures off the ballot, a push that the U.S. Securities and Exchange Commission rebuffed.

Rex Tillerson, chief executive of Exxon, said Wednesday the company includes in its energy outlook a proxy cost on carbon.

“It’s really the only way we know to accommodate in our financial decision-making the impacts of future policies that are yet to be formulated,” he said, adding that most Exxon projects are either too short-term or too large to not be economical even when that cost of carbon is used for planning purposes.

Exxon has also noted it published a 2014 report on managing climate risks that said none of the company’s oil and gas holdings are threatened by a global push to reduce carbon emissions.

Chevron told investors the proposed climate measure was flawed because efforts to limit warming could allow some energy producers, such as those who sell natural gas, to benefit while others fall out of favor, including coal mining companies. Chevron is a large producer of natural gas and factors in a theoretical future price of carbon when deciding which projects to sanction, making a stress test unnecessary, the company said.

“We don’t think this proposal will advance our thinking,” Chevron Chief Executive John Watson said Wednesday.

Measures of this sort have been pushed in prior years by environmental groups and activist investors, but now more traditional shareholders are putting their muscle behind the proposals as concern spreads over the effect that policies to mitigate climate change could have on energy company financials.

Those who led the filing of the Exxon resolution were the Church Commissioners for England and the New York State Common Retirement Fund, along with others. The lead filers for the Chevron resolution were Hermes Equity Ownership Services and Wespath Investment Management, a division of the United Methodist Church.

Investors representing more than $10 trillion in assets pledged to support the climate proxy measures, which assert that Exxon, Chevron and other big oil companies should be transparent about how their drilling prospects would suffer if the world turned away from carbon-intensive fuels, including crude oil.

The New York State Common Retirement Fund, Norway’s sovereign-wealth fund, the Church of England, Calpers and others actively campaigned for the proposals.

In December, nearly 200 countries pledged in Paris to hold the rise in average global temperatures to less than 2 degrees Celsius above preindustrial levels. This is the yardstick many shareholder resolutions have used to urge the companies to take greater action and show how such a goal will affect their business units.

Supporters of that effort say more investors want to see how companies are preparing for climate change impacts. A stress-test measure at Occidental Petroleum Corp. received 49% of votes, and similar proposals passed overwhelmingly last year at two other big oil companies, BP PLC and Royal Dutch Shell PLC.

In a report on climate released this month, Total SA, the French energy company, said it has reduced activity in Canada’s oil sands region and is avoiding Arctic exploration over concerns that some fossil fuels will have to stay in the ground if the goals set forth in Paris are achieved.

ConocoPhillips and Statoil ASA have issued projections that global oil demand could fall significantly by 2040 if measures to reduce climate risk are put in place. By contrast, Exxon’s projection for global oil demand in that year is 28% higher than peers’ forecasts.

“There’s an awful lot of shareholder disquiet about how Exxon is approaching climate change,” said Edward Mason, head of responsible investment for the Church Commissioners for England, which manages the assets of the Church of England.

Also on Wednesday, the White House said it plans to propose a new rule that companies with federal contracts must disclose whether they share information about the risks that a changing climate could pose to their operations, as well as their goals to reduce greenhouse gas emissions.

That rule, expected to be completed this fall, would affect most federal contracts. The U.S. government is a major buyer of oil products, including jet fuel and diesel used by the military.

Also at the Exxon annual meeting, shareholders did approve one proposal, giving investors greater power to propose director candidates. None of eight proposed shareholder measures passed at Chevron’s meeting.

See also: http://www.FrackCheckWV.net


FT View (London) June 3, 2016 at 4:17 pm

Fossil fuel producers face a future of slow and steady decline

FT View from the Financial Times (London), May 27, 2016

The annual meetings of some of the world’s largest oil companies this week were like therapy sessions for an industry that is suffering from existential angst. The international objective of holding the increase in global temperatures to “well below” 2C, agreed at the Paris climate talks last year, implies the obsolescence of all fossil fuel production within the next few decades. The oil companies have not yet reconciled themselves to quite what this means.

If governments stick to that commitment, fossil fuel companies will either have to find ways to stop greenhouse gas emissions from their products, or shift into renewable energy, or go out of business. At the annual meetings of oil groups including ExxonMobil and Royal Dutch Shell, that prospect was argued over by executives and shareholders, without conclusive result.

In their public presentation, at least, the European groups including Shell and Total are more willing to face up to the threat of climate change than their US rivals. While accepting the conclusions of climate science, Exxon and Chevron stress the importance of energy security and affordability over reducing emissions.

Calls from investors for the US companies to assess how their operations would fare under policies for a 2 degrees temperature rise were opposed by their boards and rejected in shareholder votes, albeit with substantial minority support. The leading European oil companies have started publishing their views of how such constraints would bite, but they remain reluctant to explore in detail what that outlook would mean for their investment decisions and future profits.

Modelling published in the journal Nature last year suggested that to stay inside the 2 degree limit, about a third of the world’s oil reserves and half its gas reserves would have to remain unburned. That does not mean oil companies have to give up on all investment in future production. Different reserves have differing prospects, depending on production costs. Shale oil in the US, for example, probably has more growth potential than Canada’s oil sands.

Overall, though, the message is one that is always hard for investors and management teams to hear: room for growth is tightly constrained, and in the long term output will have to fall rather than rise.

One option for escaping those limits is for the big oil companies themselves to take part in the energy transition. Total, which has the most ambitious plans for diversification, has set a goal of having 20 per cent of its assets in low-carbon energy by 2035.

But decades of unsuccessful ventures into alternative energy — such as BP’s Beyond Petroleum initiative — suggest that is a long shot. Disruption in other industries, from computers to taxis, has generally been led by new entrants, not incumbents.

Rather than investing in potentially stranded oil and gas projects, or gambling on new technologies that they do not fully understand, the oil companies would do better to continue returning money to shareholders through dividends and share buybacks.

The commitments made by Chevron, BP and most other groups to maintaining their dividends during the downturn, even if they have to borrow to do so, is an encouraging acknowledgment of that reality, even if the companies do not put it in those terms.

Instead of railing against climate policies, or paying them lip-service while quietly defying them with investment decisions, the oil companies will serve their investors and society better if they accept the limits they face, and embrace a future of long-term decline.

[A related article states that Calpers raises heat on Exxon over climate: US state pension fund wants greater access to oil group’s board]

Source: https://next.ft.com/content/701c3e74-23fb-11e6-aa98-db1e01fabc0c


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