This is a work in progress. Please feel free to contribute questions, thoughts, amendments. For in-depth arguments for divestment, please see our rationale for divestment by UCT. Some of those arguments are particular to the university, but most apply more broadly. Also see our position paper, and our outline of the logic of fossil fuel divestment.
Q. How exactly do you divest? How do you know which companies to include and exclude?
We’re requesting that investors stop any new investments in fossil fuel companies immediately; and wind down over five years their existing investments in the Carbon Tracker Top 200 Companies judged by the size of their reserves – the coal, gas and oil these companies have underground waiting to be extracted.
Q. If money is withdrawn from fossil fuel companies, where should it be reinvested?
A. There are different options for an institution that seeks to reinvest money withdrawn from fossil fuels. One route is to seek alternative energy sector investments, such as renewable energy. The scope for this in South Africa is at present comparatively limited. Another route is to seek (hopefully ethical and sustainable) investments in other sectors. Yet another option is to invest in reducing the institution’s own carbon footprint, an investment which can bring very high returns indeed, as George Washington University is discovering. Here’s an article discussing reinvestment in depth. This article describes how a Canadian NGO went about divestment.
Q. How much money does UCT currently have invested in fossil fuels?
A. We don’t know. We first asked the university this question in November 2013. We asked again in September 2014. There is a chance, if the university’s SA portfolio (70% of total) reflects the overall sectoral balance of the Johannesburg Stock Exchange, that around 15% of its investments may be in fossil fuels.
Q. Is there somewhere I could read about what the implications are for UCT? I’ve no idea how much they invest in fossil fuels now .. or what the impact would be if they immediately divest? For example: is this just a gesture? (and easy to support) or could the students supported by companies dealing with fossil fuels lose their bursaries?
A. The implications for UCT will depend on the extent of its investments in fossil fuels (see above), and on the extent of the opportunities it may discover in sustainable energy. This is a serious campaign, not just a gesture or another petition. Our call is not for an overnight withdrawal, but for winding down investments over five years, which should give ample time for adjusting to any unwanted consequences, such as loss of bursaries. What is certain, and must be balanced against a few students possibly losing bursaries, is that on current trends every current UCT undergraduate is highly likely to experience severe direct and indirect (economic) effects from climate change in their lifetimes.
Q. How will this actually hurt fossil fuel companies? Won’t their stocks just be bought up by other investors? Isn’t this all just symbolic and empty gestures?
A. [By Naomi Klein] ‘The criticism overlooks the deeper power and potential of these campaigns. At their core, all are taking aim at the moral legitimacy of fossil fuel companies and the profits that flow from them. This movement is saying that it is unethical to be associated with an industry whose business model is based on knowingly destabilising the planet’s life support systems.
‘Every time a new institution or brand decides to cut its ties, every time the divestment argument is publicly made, it reinforces the idea that fossil fuel profits are illegitimate – that “these are now rogue industries”, in the words of author Bill McKibben. And it is this illegitimacy that has the potential to break the stalemate in meaningful climate action. Because if those profits are illegitimate, and this industry is rogue, it brings us a step closer to the principle that has been sorely missing from the collective climate response so far: the polluter pays.”
A. It’s difficult to measure, but we also have anecdotal evidence from people in the investment community that divestment is making investors think twice about new investment in fossil fuels. Obviously, it’s incredibly difficult to measure things that people are not doing.
A. Some investors argue that shareholder engagement is a more responsible approach. Unfortunately, there is no evidence that shareholder engagement is persuading fossil fuel companies to abandon their core business model, which is what is now needed. That said, shareholder engagement can be part of a broad-spectrum approach, but divestment can give shareholder engagement teeth. We would argue that where shareholder engagement is preferred, it should be based on strictly measurable timelines and objectives.
Q. Surely a fossil free or responsible investing approach will lead to reduced returns? How can you expect the university to properly fund students’ education if your campaign cuts their income?
A. If we were talking about a choice between investment in child labour or reduced returns, most people would opt for the ethical option. The moral case for divestment to address climate change is no less stark. The several universities that have already divested have obviously already concluded that this risk is minimal or worth taking. But in fact, there is also evidence that investments returns from socially responsible investments are in many instances superior to the returns from conventionally weighted portfolios.
For many more questions and answers, please see this FAQ prepared by students at the University of Wisconsin.