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May 08, 2014 9:42 AM Close the Coalhouse Door

By James Wimberley

The US campus movement for university divestment from fossil fuels has claimed its first big scalp. From Climate Progress:

Stanford University announced Tuesday it would divest from the coal industry, making it the first major university to do so. ..

“Stanford has a responsibility as a global citizen to promote sustainability for our planet, and we work intensively to do so through our research, our educational programs and our campus operations,” said Stanford President John Hennessy. “Moving away from coal in the investment context is a small, but constructive, step while work continues, at Stanford and elsewhere, to develop broadly viable sustainable energy solutions for the future.”

Stanford is keeping oil and gas shares in its $18.7bn endowment, but the policy is under review. Deborah DeCotis, the chairwoman of the Stanford board’s special committee on investment responsibility:

“Don’t interpret this as a pass on other things.”

I reckon the oil and gas portfolio is now untenable and will be sold in the next 18 months.

The divestment movement launched by 350.org is well-aimed. The endowments of American universities (over $400 billion in all) come from gifts they received as noble and altruistic causes. They can’t with a straight face apply the investment standards of Gordon Gekko. Once they allow an ethical wedge, it is bound to split away climate-destroying investments.

Second, these endowments are very large, and divestment will make waves. More than lowering share prices by the selloff, it will lead other investors, including amoral ones, to treat fossil fuel companies as less reputable, riskier and more vulnerable to adverse policy shocks. Their cost of capital will rise, reducing their capex and eventually production. “Stranded asset” has entered the Wall Street vocabulary.

The Seven Sisters are already in decline as oil producers. They are being forced by nervous stockholders to cut back on their increasingly expensive investments. None of them bid for Brazil’s last deep offshore leases, which went to the Chinese.

Harvard next.

* * * * * *
Alec Glasgow singing the eponymous song of my headline. It’s about the past human costs of coal, but can also stand for the future ones.

[Cross-posted at The Reality-Based Community]

James Wimberley was head of the mutual assistance section of the department of education for the Council of Europe in Strasbourg, and secretary to the Councilís higher education and research committee. He is retired.

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