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Divestment Dialogue

9.9.14


In late April and early May, Harvard Faculty for Divestment (proponents of shedding endowment investments in companies that produce fossil fuels) posted letters to President Drew Faust and members of the Harvard Corporation reiterating their support for divestment and calling for an open forum for community discussion of the issue.

In an e-mail dated July 10, posted on the faculty group’s website, William F. Lee, writing as the Corporation’s new senior fellow (as of the beginning of that month) and on behalf of the University’s senior governing board, responded to those earlier messages. In itself, his response was a notable example of engagement by a Corporation member, and perhaps a sign of greater interest in being involved in campus conversations (Lee works in Boston and lives in the nearby suburbs). As he briskly noted at the outset, “We fully support President Faust’s conclusion in her letters of October 2013 and April 2014 that the most responsible, effective, and institutionally appropriate way for Harvard to confront the challenge of climate change is to intensify our academic efforts in this important domain through both research and education, to continue Harvard’s aggressive efforts to reduce the University’s own carbon footprint, and to otherwise promote sustainability in the day-to-day activities of our community. Like President Faust, we do not support divestment, believing that engagement is preferable to withdrawal.”

That said, “None of us doubts the reality or the seriousness of the dangers posed by climate change,” Lee wrote. “Thoughtful people, however, hold divergent views about the right way for an institution like ours to confront climate change.” He continued, “All of us believe that Harvard—and the world—must make accelerated progress toward ending reliance on fossil fuels. In our judgment, engagement with energy-producing companies in shared research and development on both the improved efficiency of energy use and development of renewable sources of energy is more likely to achieve this aim than divesting ourselves of investments in fossil fuels and distancing us from the companies that produce them.”

He cited the value of having a voice as a shareholder, the potential to partner with companies exploring alternative fuels or mitigating measures, and consistency “with our continuing reliance on fossil fuels. Unless we are prepared to change our life styles profoundly…it appears to us problematic to signal that the companies that provide these essential goods and services are beyond the pale.”

Now, having conferred during the summer, the faculty advocates of divestment have responded in their turn, releasing a letter to Lee dated September 9, noting, “[T]he difference between us is not about ends but means.” The faculty members pointed to recent research summarized in a publication under the auspices of the Principles for Responsible Investment (to which Harvard became a signatory this past spring); a summary there concludes that “pressure from the state, NGOs and the public impact a corporation’s decision to report GHG [greenhouse gas] emissions data, but pressure from equity investors and debt lenders does not. At the same time, stakeholder pressure does not influence the extent of the reporting, with very few companies disclosing what is considered complete information.” (The underlying research is available here; an examination of European companies’ voluntary disclosure of GHG data concludes, in the careful language of social science, that “we provide evidence that proxies for stakeholder pressure appear to influence the choice to disclose GHG emissions, but that they appear to have much less impact with regard to reporting completeness. These results are consistent with stakeholder theory arguments that pressures from stakeholder groups impact environmental reporting.”) The faculty correspondents interpret this finding to mean that remaining involved with fossil-fuel producers through stockholding is not likely to be influential. Indeed, they advocate a “divestment strategy [that] aims to make a difference—by stigmatizing the industry, highlighting artificial disparities in the marketplace, and opening up political space in which real alternatives can flourish.”

University investment policy, they continue, “seeks ‘robust investment returns’ and minimizes certain financial risks, but it does not minimize planetary risk. With a growing number of investment professionals, we are convinced that robust returns are obtainable without investing in fossil fuels.” They conclude by reiterating their request for a community forum on divestment.

Lee responded in an afternoon statement, acknowledging the latest communication from the faculty group, pointing toward common goals, and hinting at further engagement with them: “As the response from faculty recognizes, combatting climate change and protecting the environment are goals we share. We will review this message, just received today, carefully. We have learned a lot from members of the faculty, who have a broad range of views on this issue,  and look forward to continuing to do so.”

On Other Campuses

While these exchanges take place, other actions are under way on other campuses. Some of the most interesting were announced by Yale president Peter Salovey, in an August 27 message and briefing on “new sustainability initiatives.” He noted that the Yale Corporation’s Committee on Investor Responsibility did not recommend divestment, but did instruct the committee that advises on proxy voting to “generally support reasonable and well-constructed shareholder resolutions seeking disclosure of greenhouse gas emissions, the impact of climate change on a company’s business activities and products, and strategies designed to reduce the company’s long-term impact on the global climate including through the support of sound and effective governmental policies.” At the same time, Yale’s chief investment officer began contacting external managers who invest endowment assets “to indicate that [they]—as a matter of sound business practices—should take into account the effects of climate change on the businesses in which they are or might be investing and anticipate possible future regulatory actions in response to the externalities produced by the combustion of fossil fuels” (read the report on this initiative in The New York Times on September 8).

Other measures Yale announced included:

The debate on divestment will certainly continue. In a recent issue of The Chronicle of Higher Education, Donald P. Gould, chair of the investment committee at Pitzer College, explained that institution’s decision to divest, in order to align “the college’s actions with its mission and values.” He said divestment aimed not at energy companies, but at changing public discourse and policy, and defined the action not as a political statement but as an action in accord with climate science (which has unfortunately become “politicized daily”).

Clearly, the action on climate change and higher-education institutions’ responses—beyond the intensification of their core research and teaching missions—seems to be broadening in inventive, productive ways.

 

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