The University of Chicago would not exist if it wasn’t for oil, but within fifty years, this school could cease to exist because of it. When higher temperatures across the Midwest bring more pollen and pollution to Chicago, or when increasing water temperatures foster the growth of toxic algae and invasive species in Lake Michigan, what will life be like for University of Chicago students? When extreme weather disasters, heat waves, droughts, and floods threaten food security in the United States, will an entire generation of students have to dedicate their lives to studying agriculture? Will University students be able to study whatever subject they want when increased glacier runoff in the Himalayas results in millions of climate refugees moving through the politically hostile China-India-Pakistan border region? All these issues will result from anthropogenic climate change, which is caused by greenhouse gas emissions. These emissions come, in large part, from the use of fossil fuels. To avoid having to face these issues, we have to get on a path away from these fuels. At the University of Chicago, this path starts with divestment.
Popularized by Bill McKibben and 350.org, the fossil fuel divestment movement asks institutions to pull their investments from the top two hundred fossil fuel companies. It’s a step towards a carbon-neutral world that is being taken by academic institutions, philanthropic organizations, cities, and churches around the world. So far, 501 institutions, including Stanford University, the London School of Economics, the Church of England, and the City of Seattle, have recognized the moral implications of fossil fuel extraction and divested from fossil fuels (Stanford has completely divested from coal and is now considering divesting from oil and gas).
Divestment has worked in the past, not necessarily because it directly impacts a company’s profits, but because it influences the public and political sentiment towards that company. A successful divestment movement occurred in the 1970s and 1980s, when hundreds of institutions divested from companies that did business in South Africa in a show of moral opposition to that country’s apartheid regime. This divestment movement—spearheaded by university students around the world—“greatly increased public visibility surrounding the injustices of South Africa’s apartheid government” and was an important component of the anti-apartheid sentiment that “contributed to the decline of apartheid” (4). Again, the point of the apartheid divestment movement in the 1980s was not to directly impact the financial success of those companies, but rather to emphasize that these companies were operating within a context of human rights infringements and to influence public and political sentiment towards those companies. Similarly, the goal of fossil fuel divestment is to influence public and political sentiment towards fossil fuel companies and to increase awareness about the role fossil fuel companies play in greenhouse gas emissions. That being said, a recent study at the University of Oxford goes even farther, saying that fossil fuel divestment could not only increase visibility about the risks of climate change, but also affect the financial success of fossil fuel companies:
“Indirectly, by triggering a process of stigmatization, the divestment campaign is likely to make the operating and legislative environment more challenging. Greater uncertainty over future cash flows can permanently depress the valuation of fossil fuel companies, e.g. by compressing the price/earnings multiples” (5).
Given that the social and political sentiment towards an industry can determine the success of a company, it is not irrational to think that fossil fuel divestment would, eventually, hurt the fossil fuel industry financially.
At the University of Chicago, the divestment campaign is being organized by the University Climate Action Network (UCAN), which wrote a 59-page report on divestment, as requested by President Zimmer. Last spring, UCAN successfully pressured the Council of the University Senate to discuss divestment. At the discussion, according to History of Religions professor Bruce Lincoln, “no one [except one member] was opposed to divestment and nobody thought it was inappropriate for us or the Board to be seriously considering the issue.” The Council of the University Senate cannot vote to make take action on divestment, but President Zimmer committed to relaying the Council’s thoughts to the University’s Board of Trustees. The sentiment of the Council of the University Senate—that divestment is an issue worth discussing—has yet not been echoed by the trustees. Instead, the Board redacted an earlier promise from 2014 to meet with UCAN and has made no effort to discuss divestment.
The Board is reluctant to make a decision on divestment, not because it does not see climate change as an issue, but because it does not recognize that the University’s investments in fossil fuels are at odds with the University’s mission. According to the University of Chicago’s website, “the Trustees are responsible for ensuring the capacity of the University to fulfill its mission for current and future generations.” In investing in corporations that continue to extract fossil fuels despite the growing effects of climate change, the Board is acting against its mission—it is negatively impacting the lives of its current and future students, who will have to deal with the extreme consequences of further global warming. Similarly, the University prides itself for its advancements in science, its connections with Argonne National Laboratory, and its commitment to scientific inquiry. At the same time, however, it invests between 3-5% of its endowment in fossil fuel companies that blatantly fund disinformation campaigns intended to confuse the public about the role of fossil fuels in climate change (Exxon knew about the effects of its actions on the climate as early as 1977 but made no effort to address those effects). This is as hypocritical as it gets, so why is the University not divesting?
A common argument against divestment is the worry that divesting from fossil fuels would be too costly. While there would be costs at first, divestment would occur over a period of five years and the cost of divesting 3-5% of the University’s endowment would be far less drastic than the cost of dealing with extreme weather, food insecurity, and other, unforeseen consequences in the future. Furthermore, though some argue that the monetary loss associated with divestment would take away scholarships from low-income students, it is unlikely that the costs of divestment would be large enough to affect student scholarships.
This grows less likely upon considering that, according to sources in the Board of Trustees, the University’s current endowment amounts to 7.55 billion dollars. Of those 7.55 billion dollars, only 3-5% are actually invested in fossil fuels, only one hundred million dollars a year are used for financial aid, one-fourth the amount invested in fossil fuels. Even if the University did not reinvest its gradual divestments, the decision to stop investing in fossil fuels would not realistically interfere with the school’s ability to provide one hundred million dollars in financial aid. Moreover, the University’s decision to continue investing in fossil fuels could be detrimental to low-income students, whose communities are often disproportionately affected by climate change and pollution. This is as obvious on the South Side of Chicago as it is in Kiribati.
In fact, the entire possibility of divestment hurting the University’s bottom line may prove to be a non-issue. Hugh Lawson, the global head of environmental, social, and governance investing at Goldman Sachs, argues that the costs of divestment can be minimal or nonexistent if handled properly. Divestment from fossil fuels does not limit returns, Lawson argues, if the institution is strategic in its reinvestments. Moreover, evidence suggests that a fossil-free investment portfolio might be more successful in the long-run. According to a recent analysis done by Impax Asset Management, fossil-free portfolios have performed better than portfolios that include fossil fuel investments over the past seven years. This trend will likely continue in the future. Investments in fossil fuels are now less secure and less profitable than they were in the past. Various studies by the London School of Economics, HSBC, and the University of Oxford have shown that fossil fuel companies are drastically overvalued (by as much as 60%); these studies predict that a carbon bubble will occur if fossil fuels are kept in the ground. This is because fossil fuel companies’ assets come from proven reserves—fossil fuels that they have discovered and plan to extract in the future. As of last year, the proven reserves of the top fossil fuel companies would release five times more carbon dioxide than the atmosphere can absorb to stay under the two degrees limit. Given that 190 countries have agreed to keep warming well below this limit, it seems that these assets will eventually become stranded.
At the end of the day, the argument that fossil fuel investments are necessary to the financial success of the University falls flat. As visiting professor Kevin Bales pointed out at a panel on divestment last quarter, there has to be at least one person in the University’s world-renowned economics department capable of coming up with a way for the University to make money without trivializing the future of its students.
Why, then, has the University proven so reluctant to divest? An answer lies in the University’s interaction with past divestment movements. Unlike Stanford, Harvard, Yale, The University of California, and 180 other schools, the University of Chicago did not divest from apartheid in the 1980s. Instead, it clung to its Kalven Report.
Written in the 1960s, the Kalven Report is the University’s statement about its role in political and social action, and so far it has been a considerable impediment to the fossil fuel divestment campaign. The general point of the report is to explain that the University, as an institution that promotes free inquiry, cannot take a social or political stance without hurting those of minority opinions on campus. The University’s defense of free inquiry is entirely valid. What is not valid, then, is the way in which the Kalven Report is being used against the fossil fuel divestment campaign. First of all, the report discusses the “discovery, improvement, and dissemination of knowledge” as the key responsibilities of the University. It is disturbing, then, that the University invests in companies that actively fund disinformation campaigns. If the University continues to invest in these companies, it is adhering to these companies’ strategy of disinformation and is therefore undermining the political legitimacy of the two degrees warming limit. That is political in every sense of the word.
Even within the context of the Kalven Report, however, fossil fuel divestment is not out of the question. Importantly, the report itself contains a special provision for social and political issues that threaten the University’s mission:
“from time to time instances will arise in which the society, or segments of it, threaten the very mission of the university and its values of free inquiry. In such a crisis, it becomes the obligation of the university as an institution to oppose such measures and actively defend its interests and its values.”
Anthropogenic climate change is such an instance; it’s an issue that is so complex and far-reaching that at the time the Kalven Report was written, humanity had never experienced anything like it. Every single effect of climate change, from extreme storms to sea level rise to food insecurity, will alter the lives of the University’s current and future students. In fact, current low-income and international students may come from communities that are already feeling the effects of climate change firsthand. By the Kalven Report’s own standards, then, the University has an obligation as an institution to act on this issue.
Despite the Board’s passivity towards the question of divestment, the movement has been gaining momentum on campus: More than one thousand students have signed UCAN’s petition, and over 230 faculty members have signed the faculty letter in support of divestment. Globally, this movement will not go away as long as temperatures keep reaching record highs, extreme storms keep forming, and nearly two hundred nations continue to strive for a warming limit well below two degrees. In the past six months, Sweden’s fourth largest city divested from fossil fuels, one hundred Stanford students participated in a week-long sit-in to pressure the school to complete its divestment by divesting not just from coal but from all fossil fuels, and President Obama rejected the Keystone XL pipeline.
Still, as the same Oxford report states, “divestment campaigns are a poorly understood phenomenon.” This is certainly true on our campus. When asked to sign a divestment petition, a few students scoff and sneer and cynically remark that our divestment from fossil fuels will be but a blip on these companies’ financial radars. These students are correct to a certain degree, as was Law School Professor Todd Henderson in his anti-divestment letter to the editor of the Chicago Maroon last fall: The University of Chicago’s divestment from fossil fuels will not necessarily impact fossil fuel companies financially. But this is not what divestment is about. This viewpoint assumes, wrongfully, that proponents of fossil fuel divestment do not understand the basic fact that when someone divests, someone else invests. It overlooks the political effect of fossil fuel divestment—the weakening of a company’s sociopolitical license to operate within a market.
This is a problem unlike any other we have ever faced. The more we wait to address it, the harder it will be to solve. There is no denying that the University of Chicago would not have come into being without the oil money of John D. Rockefeller. But this year, ironically, the Rockefeller Brothers Fund is divesting from fossil fuels. If a foundation entirely rooted in oil money can divest, it’s safe to say that we can too.
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