Divest or double down?

Thank goodness the graduation season is finally over. I witnessed pomp and circumstance at prep schools from Orlando to the Napa Valley and at colleges from Los Angeles to the Ivy League. The surprising topic at all of these cap-and-gown fests? Endowments divesting their holdings in fossil fuel companies.

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Responding to growing demands by students, the President of Pitzer College proudly announced that her institution had voted to divest. Cheers erupted. Ditto at Stanford. And in the UK, 15,000 students signed a petition for the likes of Oxford and Imperial College in London to divest too.

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Given the mounting evidence of climate change and its cost on food production, public health, and from storm damage, it's not surprising that advocates would try to use the kind of tactics that brought attention to the tobacco industry and South Africa during apartheid. But are these unquestionably good intentions actually misguided?

One investment professional told me that the rush to dump tobacco stocks in the 1990s resulted in temporarily lower share prices, which allowed the companies to buy back their stocks at a bargain, while the businesses thrived and share prices rose again over time. And just what constitutes a "fossil fueled" stock? ExxonMobil and Peabody Energy for sure, but what about FedEx or Southwest Airlines that use prodigious quantities of petroleum products? What about GE or Bechtel that supply equipment and services to develop fossil fuels and convert them to energy we can use?

More to the point, beyond trying to punish these companies, what are we doing to replace the fossil fuels they profit from? Divesting tobacco stocks made sense, because no one is forced to smoke and the overall campaign got many people to quit. There are alternatives to coal, indeed clean energy like solar and wind are now cost-comparable to coal, especially as a price for carbon, mercury pollution, and toxic ash disposal is factored in, but how soon can we expect large scale alternatives to oil? And we'll need alternatives in more than the transportation sector. What about making plastics, pharmaceuticals and cosmetics? Or making artificial rubber, something that other environmental advocates applaud as they try to end the deforestation caused by rubber tree plantations?

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Finally, this kind of divestiture campaigning creates the classic "slippery slope." If endowments respond to these campaigns, how about other worthy causes, such as the companies that arguably spawned the recent recession by creating and selling questionable mortgage-backed securities (and even profited by betting against their success) like Goldman Sachs or Bank of America? Shouldn't we be equally concerned about the "S" and "G" in corporate ESG (Environmental, Social, and Governance) practices?

Make no mistake, I'm thrilled to see these issues gaining attention from students, the press, and investment professionals, but the cheers heard at commencement speeches suggest a victory, when this is little more than a feel-good declaration of war. A more effective and comprehensive approach might be to campaign for investment criteria that cover all ESG "best practices" and clarify what we can be FOR instead of simply what we wish we could be against. Yes, I say "wish" we could be against, because I saw very few students, faculty, or parents at these graduations who had not arrived using those same fossil fuels for transportation and who watched students marching under floodlights powered by still more burning of carbon.

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Instead of the blunt instrument of divesting, what about civilizing these companies and our own consumer choices while we're at it? For investing, perhaps a page from the playbook of non-profits like CERES and its Blueprint for Sustainable Investing; or the ESG guidelines from Commonfund.org; or setting minimum standards for companies in a portfolio, prioritizing industry leaders in each sector and divesting the laggards, for things like carbon emissions as reported by the Carbon Disclosure Project. Or follow the example of many of the Rockefeller heirs who used shareholder resolutions to push oil companies towards more sustainable practices and development of alternatives, which will ultimately decide if fossil fuel companies will still be in business 50 or 100 years from now. After all, can you name any buggy whip makers?

Passionate support of good causes gets serious dialogue and solutions started. If the student divestiture movement does that, we will thank them one day for helping us transition to more sustainable energy and a healthier planet. But if all it accomplishes is the sale of a few shares of stock, very little will change and our fossil fuel addiction — and the pain that comes with it — will continue for generations to come.

Commentary by Terry Tamminen, former secretary of the California Environmental Protection Agency. He is also the president of Seventh Generation Advisors and co-founder of the R20 Regions of Climate Action. Follow him on Twitter @terrytamminen.