Divestment (and investment)
The difference between not wanting and wanting
Prior to coronavirus (really a universal preface at this point), I had been thinking a lot about divestment and climate. The steady beat of, “Divest!” surfaced in my feeds, but I didn’t feel super-engaged. I began to wonder if I could do anything meaningful - are there options open to me, simple area man? What should I do with my modest 401k? If I do something, will it matter? What’s the lever arm that I’m pulling on when I divest?
My thinking, was (and likely continues to be) both vague and broad, with a significant element of genuine ignorance. So, to get my head around divestment, I intended to write up a piece on the origins and current status of the movement, limiting the scope to the Ivies, Stanford, and MIT. But there was too much to know, and I got bogged down. The problem seemed intractable with little progress being made. On one side, students and faculty members, on the other, the endowment and cries of fiduciary responsibility. There were active student groups and disbanded ones, and lots of blogs and twitter pages without recent posts. There were many promises of divestiture - specifically around coal, but limited progress beyond pledges.
The more digging I did, the less sure I was that divestment would mean anything to the climate, even if big endowments got involved. The basic premise “giving less money to fossil fuel companies” seems like an unambiguously good idea from the perspective of climate and returns (waves in the general direction of oil prices), but somehow didn’t make a lot of sense in the context of the rest of what I’ve found about climate leadership. From what I could make out, divestment efforts didn’t seem to correlate with progress and leadership on climate.
What did seem correlated was investment.
It seemed to come in different flavors - Germany poured money into solar in the early days at a loss to try to build the market. They succeeded, and with enormous investment came early leadership in the solar market. While they haven’t maintained that leadership (see below), they’re a world leader in renewable power and the top solar producer among developed countries as a percentage of usage.
In the 2010’s, China’s state investment and manufacturing pushed out German and US solar companies. While the US poured money into improving fracking and natural gas tech, China poured trillions of dollars into domestic solar, and bankrolled development internationally, out-invested the US $3 to $1 (certain years), and has lead the industry in every quarter in recent memory. But their progress is unrelated to divestment. China is home to the largest and most polluting fleet of coal power plants in the world. They’re building more coal plants, and coal usage was (pre-coronavirus) projected to increase this year. Nonetheless, despite China’s reliance on and continued investment in old technology it is indisputably driving the world’s renewable energy progress.
Other examples abound: Texas's growth into a solar and wind powerhouse amidst the oil and gas boom in the Permian Basin; Norway uses 95%+ renewable energy (hydro) but half of its exports revenues come from oil and gas.
Less bad ≠ more good
At a personal level, this makes sense. We often default to thinking of divestment as a stand in for “less”. As in, “I believe that the climate is changing, and I want to leave the world in a livable condition for my son, so I’m going to divest from big oil. Less money in, less oil out.” But, the more I thought about it, the less sense this seemed to make. Divestment isn’t really a vote against, it’s just an absence of a vote in favor.
A bit too on the nose analogy: If I want to get in shape, I could 1) stop doing bad things, and 2) start doing good things. We can all agree that the best move would be to do both. Less bad stuff, more good stuff. However, if my philosophy mirrored a divestment campaign, I would stop drinking, stop eating burgers all the time, and stop staying up late. But where does that really get me? I haven’t started going to the gym. I haven’t changed the way I eat outside of avoiding beef. I’ve stopped accelerating in the wrong direction, so perhaps I’m not in worse shape, but I’m not really in much better shape either. Maybe even, and this is just a hypothetical, when I try to do less bad stuff, I compensate elsewhere. Fewer beers, and more, say, Ben and Jerry’s Super Fudge Chunk.
In practice, let’s say, a money manager for Harvard decides to divest from Exxon’s sweet sweet 6.7% annual dividend at the behest of her students and faculty. Yay! But, she can’t let the money just hang out - she has a fiduciary responsibility to invest wisely and earn returns. So, she’s looking for a high dividend, name brand stock that’s stable and likely to be around for the next 50 years. She’s feeling thirsty, and she goes with Coca-Cola (3.4% dividend), and Molson/Coors (5.6% dividend). Now, instead of supporting a company that drills for oil, she’s supporting companies that drive water around in trucks that burn gas. And, that’s probably a little better than owning Exxon stock? So, I guess that’s a win, but it sure doesn’t feel like one.
Once I had this in my mind, I began to see the idea at the heart of this issue popping up everywhere: Equating doing less of a bad thing with doing a good thing.
Flying less, driving less, traveling less. Less is better than more, don’t get me wrong, but it’s still flying, and driving.
Turning down the thermostat and wearing an extra sweater inside to reduce the climate impact of heating your house.
Parents talking about minimizing screen time with their kids, not how to engage and teach their kids in ways that are feasible and positive. (Shout out to parents at home during the quarantine, ya’ll are amazing, or trying to be.)
Climate and race
These examples, and many other, came to mind, but the analogy with racism was the most powerful. Particularly, the idea that divestment is enough — that not acting racist is enough. Beverly Tatum’s analogy for the dynamics of racism in society came to mind:
"I sometimes visualize the ongoing cycle of racism as a moving walkway at the airport. Active racist behavior is equivalent to walking fast on the conveyor belt… Passive racist behavior is equivalent to standing still on the walkway. No overt effort is being made, but the conveyor belt moves the bystanders along to the same destination as those who are actively walking. Some of the bystanders may feel the motion of the conveyor belt, see the active racists ahead of them, and choose to turn around…But unless they are walking actively in the opposite direction at a speed faster than the conveyor belt- unless they are actively antiracist- they will find themselves carried along with the others".
Obviously, the racists in this analogy are fossil fuel companies. I don’t need to tell you that they’re not going to stop walking.
I remember the mantra of “Reduce, Reuse, Recycle” as the sustainable and green message of my childhood. While it’s still relevant today, each of those commands relates to decreasing usage. We can’t reduce, reuse, or recycle our way out of this mess. We need to change. And not by half steps — what we need to do is shift paradigms — not just less gas, electric. So how do we do that?
As I see it, we have three ways: Vote, Work, Invest.
Vote! Pretty much table stakes here, but the divestment that would really matter for oil and gas would be driven by a change in political support. Do we need structural change? Yes! Can we wait to act until we have structural change? Hell no. So vote, and then proceed below.
Work! In some sense, I suspect every company will become a climate company in the next 20 years, a bit like every company has become a software company in the last 20. Nevertheless, I can’t help but see climate work as a good place to be: the salaries will prevent you from indulgent behavior, working on meaningful problems will allow you to stay positive during *gestures widely* all of this, and tragically, there no way this isn’t a growth field.
Invest! Don’t get a car with good gas mileage, you’re still buying gas. Lease or buy an electric car. Don’t divest from Exxon, buy solar panels, get LEDs, buy carbon offsets, get a heat pump. Capitalism is our current system, money is our tool, so people, we gotta buy stuff! Divestment isn’t going to do it because we need new stuff, and to get new stuff, we have to give people money to make it. And honestly, I wish I was kidding.
And, if you find yourself saying “it’s not going to pay off for me,” that’s fine. If you can’t afford to, you can’t afford to. I’m not an eco-fascist advocating for negative growth or for climate-change inspired poverty. Nevertheless, if you can afford to invest, you should do it. I want an electric car; but we can’t afford one right now as I’m attempting to switch careers in the middle of an economic crisis. (Hahaha, it’ll be fine. Right? Anyway.) When we can, we will.
The return on your more sustainable purchases isn’t necessarily going to accrue to you, and you should probably be okay with that. Buying a Tesla or Volt might cost you more than running out the clock on your current car. But every Tesla or Volt sold:
promotes the build-out of infrastructure for electric charging and battery tech and electric engine R&D instead of gas stations and internal combustion engines;
forces the hand of less innovative automakers around the world to figure out electric cars; and
deprives oil companies of operating cash when you decline to fill up.
Alternatively, you could save that money, and pass it down to your children. But it’s hard to imagine the value of additional money in a world we opted not to save.
TL/DR: Next time, when you see “Divest!” I want you to think “… and invest!”
Open threads for future pursuit:
A better way forward on divestment: Climate NPS
We need to promote a way of demanding not only less bad investment, but more good investment. What if instead of advocating for divestment, we introduced a concept of a Climate net impact: Harvard gets a rating of -10 for 5% of their portfolio in coal, -9 for 12% in oil and gas, -4 for 5% in car companies, and so on. Then they get +10 for 4% in solar, +9 for 3% in grid efficiency companies, +5 for 4% in electric car companies, etc. Then you sum it all up, and can see which way they’re actually walking on the climate conveyer belt like the one Beverly Tatum describes.
Divestment, what is it good for?
A bunch of things, actually. I want to breakdown why the “Divestment” beat will keep going, and why that’s a good thing in three pieces: PR, climate engagement, and killing off polluters operating on the margin.
What I did with my stocks and 401k
And what I didn’t. Progress has been uneven.
What the hell I have been up to
But seriously, what the hell have you been up to?
This one is probably not going to happen, but I can’t quite shake it: As an atheist, there is something nonetheless pleasingly allegorical about our situation: we have all sinned. Our sins have brought our world to a difficult place, and caused us to suffer. We need to change in order to save ourselves.
What can we learn from religion about engaging with our past bad behavior, and changing it?