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By Carol Pierson Holding

The fossil fuel divestiture campaign GoFossilFree equates the end of oil, gas and coal to the great moral crusades of our time — Apartheid and tobacco — while hoping to reduce demand for fossil fuel stocks and thereby threaten their stock prices.

It’s a tall order. As long as GoFossilFree was focused on divesting university endowments, the campaign was a gnat on the haunch of the elephant. After all, why should an industry worth $5 trillion be afraid of endowments worth $467 billion, whose investments in oil and gas are probably 10%, or $50 billion, at best? Chump change to this industry’s behemoths.

But more recently, the FossilFree campaign began targeting pensions as well, and that’s a problem. Consider the numbers: as of 2013, US pension assets totaled $21 trillion. Using that same 10%, you’re talking $2.1 trillion in fossil fuel stocks. That’s a number big enough to scare even Big Oil.

The first real threat came in 2015 from California’s state pensions. In April of that year, the California legislature voted to divest its coal stocks from the pensions’ $657 billion investment fund. A scary precedent and one that got Big Oil’s attention.

Evidence of Big Oil’s alarm is clear on the anti-divestment site divestmentfacts.com. Funded by the Independent Petroleum Association of America (IPAA), the site used to publish letters from University Presidents justifying their decisions not to divest and a few reports on how much individual college endowments would lose through divestment.

In June, the DivestmentFacts site underwent a radical change. Focused now on pension funds, the site promotes the idea that under divestment, pension funds will lose $7 billion over twenty years. Three studies from three separate universities support the claim.

A closer look at the study authors reveals how much more the IPAA is investing to stop pensions from divesting. The lead study is authored by none other than the notorious economist and lawyer Daniel Fischel, the short-lived dean of Chicago Law School who resigned over a sex scandal and one-time expert witness in criminal trials of Mike Milken and Charles Keating as well as officers of Enron and Philip Morris. Fischel is Chairman and President of Compass Lexecon, one of the largest consultancies that specialize in what Charles Ferguson described in the Huffington Post as “The sale of academic ‘expertise’ for the purpose of influencing government policy, the courts, and public opinion… now a multi-billion dollar business.” The other two studies are by academics who are also Senior Consultants at, yes, Compass Lexecon. That’s some pricey research.

Shortly after releasing the three studies, the IPAA published a survey of pensioners conducted by FTI Consulting, which owns — wait for it — Compass Lexecon. FTI’s report warns, “Even the largest college endowment funds in existence today hold only a fraction of the assets managed by public pension funds,” then goes on to present “statistics” that prove pensioners don’t want divestment. A spokesman from the American Petroleum Institute (API) draws on heart strings when he concludes, "Millions of retirees and pension holders depend on income from oil and natural gas investments to live.”

Both oil lobbying organizations, API and IPAA, are funded mostly by the fossil fuel majors, with the bulk coming from Shell, BP and Chevron, companies that have the most to lose from divestiture. And they’re right to spend whatever they have to, because the truth is, the smart money in pensions should flee oil and gas for economic reasons. Looking ahead, HSBC Global Research found that global carbon regulations could result in fossil fuel companies losing 40-­60% of their value, which will translate into reductions in share price. Similar warnings have come from CitiBank, Standard and Poor’s, and the Bank of England.

Big Oil is right to be afraid. Pension fund divestment has moved to Europe. Just two weeks ago, the EU issued a directive that, on ratification, will require all pensions to “consider climate and risks related to…‘stranded assets,’”, referring to oil and gas reserves that may never be used. EU pensions total £3.2 trillion, $4.4 trillion at today’s depressed exchange rates.

Spending on anti-divestment is just a finger in the dike. Big oil and gas will lose to carbon-free energy. Will they follow buggy-manufacturers who never embraced the automobile and were pushed out of business? Or will they imitate American carmakers that entered the electric car market? Perhaps divestment will exact the same financial pressure on oil and gas that forced dramatic innovation in the American auto industry.

Keep your fingers crossed.

Photo courtesy of Friends of the Earth Scotland via Flickr CC.

Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and rankings information on 16,495+ companies from 135 industries in 133 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

By Carol Pierson Holding

Last week, at Seattle’s Newground Social Investment holiday party, the firm’s Founder Bruce Herbert, a leader in SRI, gave a toast in which he applauded Bill McKibben’s leadership in fossil fuel divestiture. Herbert asked the crowd to support McKibben’s efforts, both in attending events (Herbert attended McKibben’s “Do The Math” divestiture launch) and in our investment practices.

At first, I was thrilled. I wondered if the Do The Math campaign had already spread beyond college campuses to the broader SRI investment community. If so, the movement was spreading even faster than I could have hoped.

Four days later in Newtown Connecticut, a 20-year-old gunman trained a semi-automatic gun on a 2^nd grade classroom, killing 20 small children and 6 adults. In the midst of writing about fossil fuel divestiture, I realized there was something bigger going on: despite all the successes the SRI industry can claim, it has been a failure when it comes to products that kill.

SRI was first practiced by religious groups who refused to invest their money in companies whose products were harmful to their congregations, mostly alcohol, tobacco and gambling. These “sin” screens have been in place for at least sixty years. Later, other screens were commonly added for harmful industries such as pornography, weapons and the military. But none of these industries has been seriously affected by SRI.

This is not to undercut the work that SRI has done. Over the years, it has played an important role in anti-war, anti-nuclear, environmental movements, civil rights and economic justice, including most famously apartheid.

But as Robert Zevin, an early SRI advocate, says in a blog for Huffington Post, SRI’s original moral purpose has been subsumed to profit:

“Many of us are now embarrassed to say that our religious or moral or political views should and do affect our investment selections. We know the gatekeepers don't want to hear it; and they know that many of their institutional clients definitely don't want to hear it.”

And investors have even less influence when they simply refuse to invest. The old guard of SRI would hold stocks just to give them a seat at the table – or rather, at the annual corporate meeting. Now, even investors as socially minded as the Gates Foundation are interested in only one thing: returns. That Foundation may do worlds of good for global health, but its biggest investments after Berkshire Hathaway are in McDonald’s and Coca Cola, two companies most at odds with children’s health.

At least sixty years of investors boycotting the gun trade has yielded zero result. In fact, SRI activism works best when rewarding companies that care about being good, whose products sustain life rather than take it. For example, CSRHub, the social responsibility data aggregator, created a special issue called “NRA Anti-Gun List” so that CSR executives can support companies that take a stand against guns, rather than providing a list of gun manufacturers and dealers to boycott.

Only new regulations prompted by consumer outrage will restrict guns. I fear the same is true for climate change. Noble a thought as it is – and as much as we all love having an outlet for our outrage ‑ the truth is, divestiture itself will have as little effect as investment screens for guns. But the moral outrage that the campaign is sparking, like the moral outrage sparked by the massacre in Newtown, is a different story. I look forward to restrictions and even bans being enacted at all levels of government on both guns and fossil fuels. Investors and consumers can take care of keeping the responsible companies in line. I am thankful we have other means to handcuff the really bad businesses.
Photo is courtesy of Patrick Feller via Flickr CC.