The Case For Fossil Fuel Divestment
I recently had tea with my friend Abby Mohaupt who has worked diligently for years on the Presbyterian Church USA's fossil fuel divestment campaign. Her goal is to get both the Foundation and the Pension Funds to sell all of their fossil fuel and fossil fuel utilities holdings.
The biennial Presbyterian General Assembly once again voted down the measure saying that engaging with fossil fuel companies is the better route and that eliminating a sector of the market would hurt performance. Bottom line is that they are just plain wrong on both accounts.
Don't get me wrong, I believe that shareholder advocacy can make a world of difference on specific topics such as transparency, product safety, labor and political contributions. However, when the goal of engagement is to change the fundamental business model of a company, then it's simply a fool's errand. ExxonMobil is not going to stop extracting, processing and transporting fossil fuels because this group of investors asked nicely. It's not going to happen!
And trying to get them to improve operations is a marginal at best proposition. Their product still changes the chemical composition of the atmosphere for profit as Bill McKibben says. And as another Bill, Bill McDonough says, being less bad is still bad!
Every dollar that remains invested in fossil fuels is a dollar that is not being invested in sustainable solutions.
And what about performance? Is it true that if you eliminate a sector of the market from your portfolio that your account performance will suffer? NO!
Jeremy Grantham is co-founder and Chief Investment Strategist at GMO Investment Management. The firm has been around since 1997 and manages around $70 billion for its clients.
Today, I watched Mr. Grantham's presentation at the Morningstar Investment Conference where he talked about accelerating climate change and the technological progress needed to address it. He also talked about divestment.
Pardon the quality of the pictures, but these are the slides he presented that show you can remove any sector from the market, over any extended period of time, and your performance will not suffer. In fact, excluding energy (fossil fuels) from the portfolio actually improves performance marginally.*
Here's the bottom line, however. Every dollar that remains invested in fossil fuels is a dollar that is not being invested in sustainable solutions. It's easy to divest and make a change, no matter what your investment advisor tells you. Whether your portfolio is $10,000 or $10 billion, the opportunities are out there and accessible.
It is unconscionable when a religious organization that espouses creation care and social responsibility does just the opposite in rejecting fossil fuel divestment. There is no question that fossil fuel companies have both caused and continue to intensify climate change effects. These effects will impact us all, but will have a disproportionate effect on the poor, and the church's fear of losing performance at the expense of the poor is the ultimate hypocrisy - and has been proven to be incorrect.
*Data quoted represents past performance. Past performance is not an indication of future results and investment returns and share prices will fluctuate on a daily basis. Your investment may be worth more or less than your original cost when you redeem your shares. Current performance may be lower or higher than the performance data quoted.