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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.

By Carol Pierson Holding

On November 7 in Seattle, 350.org launched its “Do the Math” campaign to target college and university investment funds to divest of fossil fuel stocks. While this strategy is bound to raise awareness among college kids, I initially questioned if there was enough money at stake to actually influence behemoths like Exxon.

The audience at the kick-off was not a radical crowd. Like the Keystone Pipeline protests, attendees were about half college students and half veterans of previous divestment efforts. I walked in with two such veterans, now oceanographers in their 60s.

Ticket demand in Seattle was so intense that the event had to be moved to Benaroya Hall, where 2,000 seats sold out within days. Seattle was just the first city in a 21-city tour, all of which have had similar responses. The numbers and passion should be enough to spark college divestiture. But that still begs the question: will divestiture by colleges have any meaningful impact?

College and university endowments are about $400 billion, and given the high returns in fossil fuel, most no doubt hold these stocks.

On the other side of the equation is $27 trillion, or the value of 2,795 gigatons of fossil fuel reserves identified by financial analysts at the The Carbon Tracker Initiative.

In other words, even if all university endowments held only fossil fuel stocks and every stock was divested, it’s still only 1.5% of the value of underground carbon holdings.

So the question is, where else can this movement go?

350.org is using apartheid as its forebear, but in many ways, the comparison is inapt. South African manufactured goods and natural resources, even diamonds, could be sourced from other nations. Unlike the energy industry, substitutes were already available. Even more important, apartheid is a political issue and disruption would be limited to South Africa.

With fossil fuels, life itself would be disrupted. To name just one example: oil is the heart of global transportation systems, driving the auto industry, refineries, retail gas stations, encompassing hundreds of millions of jobs around the world. As the American Petroleum Institute says in its current ads, fossil fuels = jobs, energy, growth and security.

Even these seemingly unassailable arguments have holes. As Naomi Klein said this week to Bill Moyer, right now, fossil fuel companies don’t pay for the real harm in carbon waste. Hurricane Sandy’s direct economic loss is estimated at $50 billion so far. Swiss Re put total losses from Katrina, including loss of productivity, at $250 billion. Both extreme- climate events affected jobs, energy, growth and most certainly security.

What starts with college campuses could well move on to larger sustainable investment pools. Bloomberg News reported last week that—

“Institutional investors are now employing sustainable investing strategies in more than $3.7 trillion of investments -- a 22 percent increase in two years. Hospitals, retirees, pensions, banks and religious institutions used sustainable and responsible investing (SRI) strategies for $1 out of every $9 invested in the U.S. at the end of 2011.”

And the divestiture movement could spread even beyond SRI. Colleges and SRI funds use their shareholder clout to influence the actions of companies. But Lisa Woll, CEO of SIF, the SRI industry association that reported the results, credits another less selfless reason: clients are protecting themselves against risk.

Risk plays a much more important role in today’s post-great recession investment environment. Now, indices like the Dow Jones Sustainability Index are integrated into financial and management performance analysis. Blue-chip financial media from the Financial Times to the Wall Street Journal hold annual SRI conferences. Bloomberg added sustainability metrics to its analysis. Data providers such as CSRHub provide sustainability metrics to corporate supply managers and consumers when they are making purchase decisions.

The risk of what might happen in terms of fossil fuel liability for climate disasters could start to dissuade investors, especially with students and grumpy green grandparents taking to the streets. The SIF report on SRI investments found that climate change is already an issue for 23 percent of institutional asset owners using sustainability criteria. Institutional investor assets guided by environmental concerns increased 43 percent from 2010, to $636 billion.

Still chump change next to $27 trillion in carbon assets, but we’re starting to approach some numbers that could cause hurt. And hurt forces change, not just with carbon producers but with regulators. We used moral condemnation to drive divestment of tobacco companies, even after some funds lost value due to apartheid divestiture, and regulators stepped in where they’d been reluctant in the past. Are fossil fuel companies next?

Photo courtesy of Georgie R via Flickr CC.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 6,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.