Stanford to Divest Endowment of Coal Companies

by Greg Pollowitz

There’s a growing movement to get universities to divest from fossil-fuel companies, and although Stanford is not the first to do so, it is the biggest name so far. Via the Stanford Report:

Acting on a recommendation of Stanford’s Advisory Panel on Investment Responsibility and Licensing, the Board of Trustees announced that Stanford will not make direct investments in coal mining companies. The move reflects the availability of alternate energy sources with lower greenhouse gas emissions than coal.

Stanford University will not make direct investments of endowment funds in publicly traded companies whose principal business is the mining of coal for use in energy generation, the Stanford Board of Trustees decided today.

In taking the action, the trustees endorsed the recommendation of the university’s Advisory Panel on Investment Responsibility and Licensing (APIRL). This panel, which includes representatives of students, faculty, staff and alumni, conducted an extensive review over the last several months of the social and environmental implications of investment in fossil fuel companies.

Stanford, however, is divesting only from coal companies and not from the entire fossil-fuel industry. Why? Because they don’t see “green energy” as a viable solution yet:

In its review, the APIRL acknowledged the findings of the U.N. Intergovernmental Panel on Climate Change regarding the role of fossil fuels in contributing to changes in the global climate system. The APIRL also noted that the use of coal for electricity production generates higher greenhouse gas emissions per unit of energy generated than other fossil fuels, such as natural gas, and that alternatives to coal are sufficiently available.

Replacing other fossil fuels with renewable energy sources also is a desirable goal, the APIRL said, but fewer alternatives are readily available for these other energy sources on the massive scale that will be required to replace them broadly in the global economy.

In effect, Stanford is admitting the importance of fossil fuels while making a wholly symbolic move to divest from coal. Environmentalists shouldn’t cheer this move, but weep over it. As David Harsanyi notes today, and this move by Stanford confirms: ”The climate debate is over, and the environmentalists lost.”

Harvard was petitioned last year to make a similar move with their endowment, and rejected any sort of divestment from any energy company. Here’s the explanation of that decision by Harvard’s president, Drew Faust. Some excerpts:

Climate change represents one of the world’s most consequential challenges.  I very much respect the concern and commitment shown by the many members of our community who are working to confront this problem.  I, as well as members of our Corporation Committee on Shareholder Responsibility, have benefited from a number of conversations in recent months with students who advocate divestment from fossil fuel companies.  While I share their belief in the importance of addressing climate change, I do not believe, nor do my colleagues on the Corporation, that university divestment from the fossil fuel industry is warranted or wise.

And. . .

Because I am deeply concerned about climate change, I also feel compelled to ask whether a focus on divestment does not in fact distract us from more effective measures, better aligned with our institutional capacities.  Universities own a very small fraction of the market capitalization of fossil fuel companies.  If we and others were to sell our shares, those shares would no doubt find other willing buyers.  Divestment is likely to have negligible financial impact on the affected companies.  And such a strategy would diminish the influence or voice we might have with this industry.  Divestment pits concerned citizens and institutions against companies that have enormous capacity and responsibility to promote progress toward a more sustainable future. 

I also find a troubling inconsistency in the notion that, as an investor, we should boycott a whole class of companies at the same time that, as individuals and as a community, we are extensively relying on those companies’ products and services for so much of what we do every day.  Given our pervasive dependence on these companies for the energy to heat and light our buildings, to fuel our transportation, and to run our computers and appliances, it is hard for me to reconcile that reliance with a refusal to countenance any relationship with these companies through our investments.

Good for Harvard.

Stanford (kinda, sorta) avoided the hypocrisy argument by limiting its divestment to coal as California only gets 1 percent of electricity from coal compared with 12 percent in Massachusetts. But California and Massachusetts are remarkably similar — 59 percent and 63 percent, respectively — in regard to electricity from natural gas.

Of note, Stanford did not divest from any companies involved with fracking.

Maybe because one of its top academics, Dr. Mark Zoback, in an often-quoted expert on fracking who is a vocal, dedicated supporter of a “decarbonized energy future,” but sees fracking as necessary to accomplish this. For example, Zoback gave this interview to the Los Angeles Times

California is considering a moratorium on fracking.

I’m usually against such moratoriums. Many people believe that everything we do to impede oil and gas development will be a step toward a decarbonized energy future. I’m very committed to a decarbonized energy future, but you have to recognize our dependence on hydrocarbons.

We need a well-thought-out energy policy that allows a transition to a decarbonized energy future, that respects the need for economic growth not only in this country but around the world. We have to double the size of the energy system [and yet] reduce its impact on the environment; we have to respect national security.

That’s very daunting, and moratoria just say this is bad, let’s stop doing it. Moratoria tend to make a political statement, but I’m not sure we need political statements. We need good science, good engineering, good regulations and good enforcement.

And Zoback is the go-to guy to debunk alarmist claims that fracking causes earthquakes.

Fracking-related earthquakes were reported in Oklahoma, and Ohio now requires seismic monitoring. Does fracking cause earthquakes?

There have been well-documented cases around the country where wastewater injection [post-fracking] has triggered slip on preexisting geologic faults that would have produced an earthquake someday anyway. You need to avoid injection into potentially active faults. Pretty straightforward, but if you don’t think about this ahead of time, you won’t do it. There have been a handful of cases, mostly in northernmost British Columbia, where hydraulic fracking itself has triggered earthquakes. It does the oil and gas industry no benefit to pressurize a preexisting fault.

We can manage this risk. I don’t want to minimize the potential for things to go wrong, but you need [to] see what’s being proposed and draw a conclusion about what’s safe and what isn’t. In our Deepwater Horizon report, we refer to an engineering [risk] principle, ALARP, “as low as reasonably possible.” The fear of fracking is being used as a scare tactic. There are environmental impacts, and our job is to do everything possible to minimize them, not just scare the public.

It’s hard to argue that Stanford should acquiesce to alarmism and punish the entire fossil-fuel industry when the settled science generated at Stanford sees the fossil-fuel industry, including fracking, as necessary to acheive a reduction in world-wide carbon emissions. 

 

 

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