LETTERS

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April 9, 2013

Divest in the future

Halting investment in firms that harm the climate would be in line with UChicago’s liberal academic tradition.

The SG ballot (voting is open from Tuesday to Thursday of fourth week) will likely contain a referendum calling for the University to divest from, or sell its stock in, oil, gas, and coal companies. Due to the lack of climate leadership in Washington, it is crucial for independent institutions and individuals to lead the way on this grave economic, political, and social issue. Given the valuable contributions UChicago scientists have made to climate and paleoclimate studies, divestment is especially appropriate and important at the University of Chicago.

Scientists have reached the consensus that human emissions are directly contributing to increasingly violent climate events. Hurricane Katrina and Hurricane Sandy are domestic examples of a much longer and more severe global list. Organizations including the American Geophysical Union, the US National Academy of Sciences, and the Intergovernmental Panel on Climate Change have officially stated that human action will cause warming that is “disruptive, reducing global agricultural productivity, causing widespread loss of biodiversity, and—if sustained over centuries—melting much of the Greenland ice sheet with ensuing rise in sea level of several meters.” All these organizations have called for a more proactive approach.

World leaders have agreed on a cap for a global temperature increase of 2 degrees Celsius. To meet this constraint, however, we must curb our carbon emissions more drastically than any official plans currently mandate. Estimates for how much carbon we can still release range between 250 Gt (gigatons) and 500 Gt of carbon, and proven reserves total around 750 Gt. Thus, even the most liberal estimates available state that we cannot burn even a third of all remaining fossil fuel reserves. This cap is necessary in order to avert even greater instability, but it will be the largest financial write-down of assets in human history.

So, it is no surprise that fossil fuel companies are fighting to convince politicians that adopting renewable sources of energy is unfeasible and unnecessary. According to OpenSecrets.org, the Energy/Natural Resources industry, which is dominated by oil and gas interests, contributed $138,705,629 in the 2011–2012 election cycle. In return, the oil, coal, and gas industries received $70.2 billion in subsidies and tax breaks between 2002 and 2008, dwarfing renewable subsidies of $12.2 billion over the same period. Meanwhile, President Obama looks poised to approve the Keystone XL oil pipeline, which former NASA climate scientist James Hansen called “game over for the climate.”

Through its investments, UChicago is currently linking its academic reputation to companies such as Arch Coal, in which it had invested millions since 2011. This company has been held liable for millions in fines for environmental damage caused by mountaintop removal mining. While our researchers are reporting on the dangers of fossil fuel use, we are still maintaining a financial affiliation to the companies responsible for activities that damage the environment. Not only do oil, gas, and coal companies break apart communities by undermining their physical foundations, clean air and water—their business model now threatens me and everyone I know.

Divestment would sever these ties and, if more of the 256 colleges with divestment efforts join, help remove the social legitimacy that these companies do not deserve. Thirty years ago, students helped expose South African apartheid by demanding University divestment from companies operating there. International scrutiny made apartheid increasingly costly for South Africa and contributed to its fall. A mass movement around climate change is sorely needed, and UChicago’s involvement might help tip the balance.

The financial cost to the University would be negligible. The benefit in fossil fuel investments is chiefly the reduced variation from diversification rather than any merit in the investments themselves. However, the Aperio Group, which specializes in screened investments, measured the impact on variability of excluding the fossil fuel industry. The corresponding theoretical return penalty is 0.0034 percentage points. Given our 2012 endowment value of $6.57 billion, this corresponds to around $225,000 in sacrificed return, or measurement error. Moreover, this calculation is done “all else equal”; since the fossil fuel industry’s assets could in essence become worthless, or it could operate in a world rocked by climate change, there is substantial uncertainty.

Ultimately, divestment will benefit today’s young people, including UChicago students. Americans age 25 and younger will live to see disasters that make Hurricane Sandy seem tame. A divested University would speak for itself and for those with less power than us: the Philippine village wrecked by Typhoon Bopha, the family in South Africa whose well has dried, and the Pennsylvania town where local water supplies have been contaminated by hydraulic fracturing. The University of Chicago has a proud liberal history, from early coeducation to freedom from anti-Semitic racial quotas to awarding the first doctorate earned by a black woman in the United States. Divestment from fossil fuel companies is a new opportunity for the University of Chicago to distinguish itself as a university that is conscious of scientific realities and their humanitarian concerns.

Paul Kim is a third-year in the College majoring in mathematics. 

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