What’s the financial case for divesting from fossil fuels?

So far, $50 billion has been pledged in divestment from fossil fuels over the next five years. Gwen Ifill sits down with Jenna Nicholas of Divest-Invest Philanthropy, who advised the participating foundations, to discuss the financial and social ramifications of this environmental campaign.

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  • Editor’s Note:

    PBS NewsHour incorrectly reported that 67 foundations with $50 billion in assets have so far pledged to divest their investments in fossil fuels over the next five years. In fact, the 67 foundations are part of a larger group of 181 institutions and local governments and 656 individuals that collectively represent more than $50 billion in assets being divested from fossil fuels as part of this movement. The transcript text reflects the original broadcast report.


    In all, 67 foundations with $50 billion in assets have pledged to divest over the next five years. Advising those foundations was Divest-Invest Philanthropy. Its director, Jenna Nicholas, joins me now. Welcome.


    So explain to our viewers what exactly it means to divest.


    What it means to divest is — and we're seeing this with endowments and individuals that are coming on board to do this — is to remove one's holdings from fossil fuel companies.

    So, there is an initiative called the Carbon Tracker 200. So, many institutions and individuals are starting with the Carbon Tracker 200, the 200 of the worst fossil fuel companies in the world. And then many are going much further.

    So this is coal, oil, gas. And then what we're doing is paralleling this divest side with the invest side, and it is investing in clean energy solutions, whether it's energy efficiency, renewable energy, agriculture, water purification technology and such like.


    Well, let's focus on the divest side for a moment.

    Is goal here to incur economic costs on the companies you are divesting from or just shame?


    Well, a big part of it, and the big motivation for a number of the individuals and endowments that are coming on board here is really this case being made around stranded assets, which is really that there is an overvaluation of the price of these fossil fuel companies and that really if we were to burn all the fossil fuels in the world, that the impact that that would have on temperature rises is so much that it doesn't make sense from a financial perspective to continue to invest.

    So a big part of it is the financial case that's being made for divestment. And another part of it is that shaming piece and to really try to put pressure on the fossil fuel companies to invest in research and development for alternatives and to really move in another direction for the future.


    We have search divestment campaigns involving apartheid in South Africa, with tobacco companies. And looking back on them now, it's unclear whether they — they didn't kill those individuals. They didn't stop those industries from producing those products.

    But, in the case of apartheid, we were talking about freedom. And in the case of tobacco, we were talking about health. What are we talking about here? What is the immediate benefit?


    Well, a number of things.

    And just on that point about the — making the parallel to apartheid South Africa, it's been really powerful. And today at our press announce, Desmond Tutu has spoken out really drawing the parallels between divesting from apartheid South Africa and divesting fossil fuels, and he has been a great spokesperson for the divest-invest campaign.

    And really a big part of it in terms of here is that it's both the climate justice perspective, but also social justice, economic justice and really seeing the interconnectedness of all of the issues that arise. This isn't just an environmental campaign, but really seeing the ramifications that this has on a systemic level across the whole of society.

    And so and not really being just about environmental justice, but really the systems that play at large, and so a big part of this is saying that business as usual is no longer the way that we can be operating moving forward.


    And yet universities like Harvard, for instance, have said this is not the way that they want to affect their endowment. They figure it would cost them. And that's really not what endowments exist for. And they have resisted joining this movement. What do you say to them?


    Well, it has been a sort of fascinating few months in terms of this, because, of course, on the other hand, we have Stanford University, my alma mater, that has come on board and is taking a step and they're starting with divesting from coal.

    And so I think there is a lot of debate that's going on here. And I think that Harvard's statement to not engage in this has led to a lot of engagement from students and from alumni. And many thought leaders and financial leaders are saying that actually the financial argument for saying — around not divesting is not as strong as the financial argument for divesting.

    So I think it's going to be a really interesting process to see how the next few months play out. And our hope is that the $50 billion announcement that was made today and having leaders like Stanford University and the Rockefeller Brothers Fund on board will really help to drive more of these conversations happening in other institutions and universities and others.


    How do we know that so-called sustainable investing is not just a fad?


    So, a big part of this — and really we have been seeing this, that this isn't just a recent initiative — there have been institutions that have been doing sustainable investing for a while. The Calvert fund in the late 1970s started — one of the pioneering sustainable investment funds.

    And many others over the years that have joined this — the initiative around sustainable investing. And now a lot of banks, J.P. Morgan, Goldman Sachs, UPS, Credit Suisse, are developing sustainable investing practices. A lot of clients of these banks are coming to them and saying that they want to have more sustainable investing options.

    This really seems to be something that's here to stay. And a big part of that and a big part of the emphasis that we have been making with this movement of it not just being about institutions, but really individuals in general, is that really the opportunity to be able to have an alignment between values and the investments that these individuals and institutions are making is something that cuts down to the really core essence for a lot of individuals and institutions.

    And so it seems to be that we have reached a tipping point and that this really is a movement that is here to stay.


    Jenna Nicholas of Divest-Invest Philanthropy, thank you very much.


    Thank you, Gwen.

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