Two days ago (12th May 2015) the University of Edinburgh concluded its review of fossil fuel divestment and published the report of the Fossil Fuels Review Group (report link). The accompanying press release summarised the decision as:
In reaching its decision, the University does not see choices as limited to ‘no change’ or ‘pull out of all investments’. It has been agreed that the University will use its research activities and its responsible investment to work with companies to reduce their emissions.
Thus marks a change in investment policy for the University, albeit one which has not exactly been welcomed by many.
I should state this clearly before writing any more: I am studying at the Univeristy of Edinburgh for a PhD in Carbon Capture and Storage and my stipend at the moment is provided by EPSRC, a UK research council. However, the research grant which I have to carry out experiments, attend conferences, etc. is provided by Scottish Power. In no way have Scottish Power influenced the research I have carried out, other than to set the original project proposal. My views are entirely my own and not necessarily representative of my funders, the University, or my colleagues. I have previously published on the attitudes of my PhD colleagues to fossil fuels: see here for starters.
Now I’ve made that clear, my position on the University’s divestment decision is that broadly I support it. The Review Group consider that, while it is indisputable that carbon dioxide emissions produced by the burning of fossil fuels is driving global climate change, the use of fossil fuels impacts and improves our lives much more broadly than simply burning for energy e.g. plastics, clothing, medicines, etc. Thus, in my opinion at least, while divestment in tobacco, apartheid and arms can only have a positive impact and message, divestment from fossil fuels is a far more complicated and nuanced affair than is immediately apparent. Our CO2 emissions are a consequence of improving immeasurably our lives. Until there are alternatives, so the University argues, fossil fuels are an essential part of modern day living and are deemed necessary for cheap energy in developing countries.
I think, though, that this is a weak argument. We are in a far stronger position now than ever to help developing countries bypass ‘dirty’ fossil fuels and invest directly in solar technologies, wind, wave, and so on instead of burdening these economies with the external costs of fossil fuel use, such as poor air quality, polluted drinking waters, and wars over resources.
The sooner we invest in ‘clean’ technologies, the better. The problem that the University faces, as considered in the report, is that moving investments to these types of companies is risky. Fossil fuels are a safe investment, for the time being. Companies are large and established, with relatively stable market conditions. Tech startups are small and inherently risky. The University would be looking to shift something like 9% of its portfolio, which they consider would expose them to too much risk at the present time. Campaigners for divestment don’t buy this argument, citing ‘profit over ethics’, but these investments are critical for the University to provide the teaching and welfare facilities that it does, and indeed is expected to as a top-tier academic institution. If it didn’t need to generate income in this manner, it wouldn’t. So, like it or not, profits are necessary to sustain the University. One could argue whether the Unviersity profits too much, but without evidence I can’t speculate on this.
The crux of the new policy on fossil fuel investments is that the University will now consider how ethically these companies operate, and this will apply to all investments across their portfolio. Edinburgh will only invest in companies which are showing that they themselves are investing in low carbon technologies (such as carbon capture and storage, as a convenient example) and making efforts to reduce CO2 emissions. Where companies are not doing this, the University will divest. I think this is a very pragmatic and sensible approach; using stakeholder power as leverage in business practice. Again, campaigners claim that this makes no difference. But a counter claim would be that by divesting, you are not removing those shares from the market, and so are free to be bought by investors who are perhaps not so ethically conscious. By retaining shares, you retain the ability to lobby and influence directly. Whether this works, or not, is debatable, but surely a better option than giving up this influence entirely? I agree that for issues such as smoking and arms, the clear ethical thing to do is divest, but as I’ve already argued the ethical grounds are muddier for fossil fuels.
Ultimately, my personal feeling is that divestment will happen eventually, and is something I do support. However I also believe that the University of Edinburgh has made a sensible decision to engage as shareholders, and use their influence to at least attempt to make a difference. Divestment may be the most ethical stance with regards pure CO2 emissions, but when one considers how far reaching fossil fuels are in improving our lives, it is a more difficult decision to make.