Students Are Clamoring for Fossil Fuel Divestment
For young people who believe climate change is the biggest challenge humans have ever faced, the time for debate has passed. Now they're aiming to hit fossil fuel merchants right in their market caps.
The Fossil Free campaign, which claims activists on 300 campuses and was kicked off by an article in Rolling Stone last summer by environmentalist Bill McKibben, is targeting primarily university endowments to stop investing in the top 200 oil, gas and coal companies.
Why face the uphill battle of targeting these companies when virtually everyone is to some extent dependent on the fuels they bring to market?
For Jamie Henn, communications director of Fossil Free's parent organization, 350.org, it comes down this: Scientists say a global temperature increase of more than 2 degrees Celsius (3.6 Fahrenheit) will be unsafe.
That increase will be met by the release of 565 gigatons of carbon dioxide into the atmosphere—at current projections a level that will be reached within the next 15 years.
Yet these companies' proven reserves, if exploited as planned, will exceed that amount fivefold, driving temperatures upward.
The argument goes, therefore, that it is environmentally reckless to not leave 80 percent of proven reserves in the ground. Of course, that is a thesis no coal, gas or oil company will easily be persuaded to embrace.
Exxon Mobil spokesman Alan Jeffers says whatever the environmental arguments, the bottom line is "there is simply no viable alternative" to carbon-based energy, and that the "symbolic villainization" of Exxon by movements like Fossil Free is counterproductive. (Chevron and coal giant Peabody did not return calls for comment.)
(Read More: Daniel Yergin on the Globalization of Energy Demand)
The movement faces a mighty Goliath. The endowments of the top 50 richest schools in the U.S. total about $269 billion. Say 5 percent of their portfolios are in the targeted fossil fuel companies, and say the campaign was so wildly successful that half of those schools chose divestment. That would put some $6.7 billion in play.
That would surely get attention, but consider that the seven companies named at the top of this story have a combined market cap of $3.8 trillion. The $6.7 billion amounts to less than one-fifth of 1 percent of that.
What's more, currently, none of the wealthiest schools have divested—although many have students agitating for it.
At Harvard, which has one of the largest endowments at more than $30 billion, Chloe Maxmin helped get a referendum urging divestment on the student government election ballot, and 71 percent of students voted in favor.
The university trustees are as yet unpersuaded, saying research and education are the proper routes to addressing climate change, not divestment.
Maxmin, a 21-year-old junior studying social studies and environmental science, is undaunted by the outsize wealth of Big Oil and its cohorts, and admits the economic damage the movement can inflict is limited.
She said the purpose of divestment is twofold: "Making a pariah" of fossil fuel companies and establishing their "rogue status" and building a movement that will alter and lend urgency to public discourse on climate change.
It's early in the going, Henn said, but in the six months since the movement got started in earnest, five small schools have divested. The first on board was Hampshire College, which was also the first to divest in South Africa during the anti-apartheid campaign of the 1980s—an inspiration for Fossil Free.
The first big fish they're hoping to reel in, Henn said, is Brown, which is endowed at about $2.5 billion. "They've already taken some steps," he said.
Tactics vary across campuses, Maxmin said, citing a 200-person rally on her campus in Cambridge, Mass., the staging of a shantytown for "climate refugees" at Brandeis and a sit-in at the office of the president at the Rhode Island School of Design.
In addition, hundreds of churches and 13 cities have committed to divestment, including San Francisco, whose board of supervisors voted unanimously in April to urge the retirement board to divest $583 million, Henn said.
Jay Friedlander, chair of sustainable business with Maine's College of the Atlantic, which has committed to divesting under this campaign, readily admits that a school like his, with its $32 million endowment, "is not going to change Exxon Mobil's world."
He says that divestiture is about more than that, however. "It's also about where resources can be redeployed, such as in sustainable and local enterprises."
Said Henn, "The goal is not to bankrupt Exxon Mobil, but to show that it is morally bankrupt."
More Harm Than Good?
Kathryn Morrison, CEO of Washington-based PR firm SunStar Strategic, which advises money managers on alternative energy, fears Fossil Free does more harm than good by "portraying themselves as left-wing Commie pinkos."
She suggested a smarter tack would be to convince people of the market opportunities in alternative energy and the economic impacts of climate change.
"I'm afraid of global warming," she said. "But I think they're not persuading the people they need to persuade. They're preaching to the choir."
(Read More: Want to Fight Climate Change? Build in Profits)
As for the potential impact of divestment? "It would mean nothing," she said. "It wouldn't be a drop in the bucket."
Fossil Free clearly sees it differently, contending that divestment is about making a moral argument around which people need to choose sides, and that if wreaking havoc on the planet is wrong, so is profiting from the process.
Targeting university boards is also key, Henn said, because that's where thought leaders and captains of industry can often be found.
(Read More: 'Circular Economy' Promises Billions: Advocate)
"We think it's powerful because it's a 'hard ask,'" said Henn, adding that because it can be tricky to disentangle investments from funds that know no university borders, the campaign asks for divestment within a five-year time frame.
Friedlander said College of the Atlantic's decision to divest was because the deployment of money has meaning and consequences. "It's about how a school should be investing its endowment," he said. "We shouldn't be profiting from companies not aligned with out values and goals."
And that's where the core of the debate lies: investment philosophy.
Morrison of SunStar offers the contrary point of view: "Money managers seek only maximum return on investment," she said. Divesting in fossil fuel companies "would be like divesting in tobacco or drug companies—and they're hugely profitable."
—By CNBC's Matt Twomey. Follow him on Twitter @Matt_Twomey.