University presidents once spoke their conscience on matters of great public importance. In the early 1950s, many protested the loyalty oaths that required faculty members to forswear membership in the Communist Party. One of the most courageous critics of McCarthyism was Nathan Pusey, first as president of Lawrence College in Senator Joseph McCarthy’s hometown of Appleton, Wisconsin, then as president of Harvard. In the 1960s, some university presidents openly opposed the war in Vietnam. Even at the cost of donor support, Yale president Kingman Brewster Jr. publicly contested the war and decried the inequities in the draft. He permitted protest demonstrations and skillfully kept the Yale campus open and relatively calm.
In the 1980s, a protest movement arose on American campuses as students—and some campus presidents—argued that it was immoral for universities to own stock in companies doing business in apartheid South Africa. Although Harvard president Derek Bok refused to support divestment over apartheid, Harvard eventually did sell most of its South Africa–related stock—and Bok did endorse the sale of stock in tobacco companies.
Today, university presidents and the institutions they lead confront a moral choice over a crisis that threatens human health and society on a far greater scale than either tobacco or apartheid: climate change. As Elizabeth Kolbert wrote in Field Notes From a Catastrophe, “It may seem impossible to imagine that a technologically advanced society could choose, in essence, to destroy itself, but that is what we are now in the process of doing.” In the last few years, students have begun urging their colleges and universities to divest from fossil fuel companies (FFCs), whose products are driving climate change. Two of the first university presidents to respond, Drew Gilpin Faust of Harvard and Christina Paxson of Brown, this fall placed themselves and their institutions on the wrong side of science and of history by rejecting divestment.
I believe that presidents Faust and Paxson were wrong, gravely wrong, not only in the broadest sense—because their choice harms humanity—but because they failed in their narrow duty to protect their institutions and their present and future students.
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Both presidents argue, as Faust puts it, that it is an “inconsistency” to “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….” Yes, this is a dilemma that each person and each organization faces. We have no choice but to be embedded in a carbon economy, yet science tells us unequivocally that carbon emissions threaten our future and that of our institutions. Ohio State University climatologist Lonnie Thompson warns that “virtually all of us are now convinced that global warming poses a clear and present danger to civilization.” Retired NASA scientist James Hansen tells us that “coal is the single greatest threat to civilization and all life on our planet.” Sea level rises due to melting ice sheets, Hansen says, hang “like the sword of Damocles over our children and grandchildren.”
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The influential Stern Report from 2006 cautions that the damage from man-made climate change could be on the scale of “the great wars and the economic depression of the first half of the 20th century.” That warning, sobering as it is, vastly underestimates the danger: those wars and the Great Depression occurred at different times and were not accompanied by record-setting sea level rises, storm surges, heat waves, floods, droughts and hurricanes. Neither world war reached into every corner of the globe, and, thankfully, each one ended far short of a decade. According to the National Oceanic and Atmospheric Administration, the effects of climate change will not end “for more than 1,000 years after carbon dioxide emissions are completely stopped.”
Climate change threatens to return the world to the Dark Ages, or worse. As Oberlin College professor David Orr put it, “Whatever your cause, it’s a lost cause on a dying planet.” Which is more inconsistent: for a university to divest from FFCs while remaining embedded in a carbon economy in other ways, or to profit from products that threaten the university’s own future, that of its alumni and even civilization itself?
Universities in this country are already suffering the effects of a changing climate. The American Association of University Professors reports that Hurricane Katrina caused “undoubtedly the most serious disruption of American higher education in the nation’s history.” Hurricane Sandy closed dozens of colleges and universities and, according to CNN, affected an estimated 1.2 million students. Hurricane Irene caused many colleges and universities—including Brown and Harvard—to cancel campus events or close temporarily. Scientists believe that warmer oceans likely strengthened Irene, Katrina and Sandy, as well as Typhoon Haiyan in the Philippines more recently. Those storms and a multitude of other recent extreme weather events offer an ominous portent of what life in the coming greenhouse world will be like.
Climate change is a special threat in the Northeast, home to Harvard and Brown. Global sea levels are already rising at the fastest rate on record—but according to the US Geological Survey, along the East Coast from North Carolina to New England, the sea levels are climbing at three to four times the global average. As one report put it, “if sea levels rise just 2.5 feet, it could take little more than a Nor’easter to put much of the Back Bay, East Boston, South Boston, Chelsea, Cambridge, and elsewhere underwater, including much of Logan International Airport and the financial district.”
Sometime in the next century, sea levels will have risen six feet (judging by the present trajectory), and water will lap at the foot of Harvard’s buildings. In Providence, Rhode Island, home to Brown University, the city waterfront will be submerged, flooding the Rhode Island School of Design and the Brown University Continuing Education site. Then the sea level will keep on rising. The Center for Climate Systems Research estimates that climate change will expose 2.75 billion people worldwide to the effects of sea level rise and other coastal threats. The largest mass migration in history may develop as people flee the doomed seacoast and attempt to relocate to higher ground.
Under such conditions, people will have no choice but to focus on survival; education and culture will be luxuries few can afford. Think of life in New Orleans after Hurricane Katrina. The storm caused Loyola and Tulane universities to close for months and damaged each of the city’s academic institutions. Imagine the fate of New Orleans and its institutions had Katrina rolled in on seas six feet higher.
Climate change imperils institutions of higher education in two particular ways. First, it threatens the very purpose of education. Academic institutions prepare students for the world and its professions as they are understood based on past experience. But climate change is already making past experience irrelevant. Colleges and universities are training this generation of students for a world that, given the present trajectory of climate change, will not survive. Many students have figured this out, and they are angry.
The second threat is to the purpose of a university endowment: to support an institution’s mission in perpetuity. Brown’s policy statement is typical: “The University’s goals are to provide stable support from the endowment each year to the budget and to preserve the long-term value of the endowment to provide support for future generations….” But if stock markets collapse—and it is hard to see how they would not in the face of a ceaseless set of global catastrophes—the value of university endowments will plummet. This makes it absurd to claim that students in the 2080s, say, will benefit from their institutions’ endowments to the same relative extent as today’s students. Climate change will make a mockery of intergenerational equity.
Presidents Faust and Paxson ultimately justify their decision by saying, in effect, that divestment from FFCs would do little or no good. Faust believes, for example, that there are “more effective ways to address climate change,” favoring “engagement over withdrawal.” The language echoes the Reagan administration’s policy of “constructive engagement”: trying through quiet conversation to persuade the white minority government of South Africa to change its ways. But in that case, constructive engagement failed. As an article in Foreign Affairs summed up, “Having been offered many carrots by the United States over a period of four-and-a-half years…the South African authorities had simply made a carrot stew and eaten it.” The analogy is not perfect, and constructive engagement may have worked in other instances. But as of now, FFCs have no reason to pay attention to universities, which are minor shareholders in their giant industry. Indeed, these companies have funded campaigns to discredit and ridicule the research of university scientists. Between 1988 and 2006, ExxonMobil provided more than half a million dollars to the Heartland Institute. Last year, the institute ran large billboards comparing those who accept climate science to Charles Manson, the Unabomber and Osama bin Laden.
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Acting alone, an individual academic institution will have little influence. But if, as happened with apartheid, scores of colleges and universities were to divest, Big Oil, Big Coal and the nation would have to pay attention.
Paxson says that “divestiture [from coal companies] would convey only a nebulous statement—that coal is harmful…. [A] symbolic statement of divestiture would not elucidate the complex scientific and policy issues surrounding coal and climate change and…would run counter to Brown’s mission of communicating knowledge.” But divestment could have far more than a symbolic effect, as it plainly did in helping to end apartheid. By divesting, Brown would endorse and transmit the scientific knowledge that fossil fuels are dangerous. What could be more important to communicate?
Brown’s own Advisory Committee on Corporate Responsibility in Investment Policies told Paxson that coal companies “perpetrate grave, indeed egregious, social harm, and there is no possible way to square our profiting from such harm with the values and principles of the University.” Yet Paxson rejected divestment.
When Brown and Harvard divested from tobacco companies, neither was under the illusion that the action would affect smoking rates or Big Tobacco itself. Rather, the universities divested because they did not want “to be associated with companies whose products create a substantial and unjustifiable risk of harm to other human beings,” as Harvard’s then-president Bok explained. Brown said that it divested from tobacco because the action could have “significant symbolic value.” Brown and Harvard stood on principle then; why not now? Never has a threat been so grave, so potentially widespread and long-lasting, as climate change. If protecting civilization is not a principle worth standing up for, what is?
To be sure, divestment is not an issue that campus presidents may decide on their own. They must also speak for trustees, many of whom come from corporate America and are more likely to resist the idea that decisions about the endowment ought to be made for other than financial reasons. In campus debates over apartheid, students and faculty led, and trustees eventually followed. Had Faust and Paxson endorsed divestment, they would have had to weather criticism from some board members and alumni as well as the fossil fuel industry. But many others—including environmentalists, concerned citizens and, eventually, members of the establishment—would have admired their courage.
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Some have claimed that divestment from the FFCs would lead to immediate and damaging cuts in campus budgets. It is hard to understand why that should be so. When a university sells stock, it has the same amount of cash as the market value of the stock at the time of sale, minus transaction costs (estimated at 0.4 percent in a study of South African divestment). Skilled university investment managers can use that cash to buy other promising stocks. Divestment would phase in over several years, reducing any potential effect on annual budgets. And, in any case, universities tend to have only a small percentage of their highly diversified portfolios in FFCs.
During the apartheid divestment debate, many trustees worried that divesting might lower the long-run endowment return. This concern was reasonable, since some of the American companies doing business in South Africa—including Chevron, Citicorp, Control Data, Ford, General Electric, General Motors and IBM—were regarded as blue-chip stocks, the bulwark of a sound portfolio. But those fears proved unfounded: a 1986 study reported that, based on “historical returns since 1959,” the South Africa–free portfolio, “diluted with Treasury bills to bring its risk in line with the [New York Stock Exchange], would have outperformed the NYSE by 0.187 per cent annually.”
Would selling stock in FFCs harm long-run endowment returns? One way to judge is to look at recent stock market performance. Suppose that ten years ago, a university had invested $1 billion in a “fossil free” portfolio. Today that investment would be worth $2.26 billion, while the S&P 500 pool of stocks, which includes FFCs, would be worth $2.14 billion. A study by Deutsche Bank found that investment funds using environmental, social and governance factors have performed as well or better than other funds.
Though FFCs have yielded no better than average returns in the recent past, might they be superior investments in the decades ahead? Many experts doubt it. These companies are valued primarily on the basis of their reserves: the amount of extractable oil, coal and gas they have discovered but have yet to exploit. But once the effects of burning carbon have become intolerable, whatever reserves the FFCs have in the ground will stay there. These “stranded assets” will come off the corporate books, and the value and stock price of those FFCs that have failed to develop other businesses will fall. A report by Oxford University’s Stranded Assets Program lists several other factors that threaten the value of FFCs, including water scarcity, new government regulations such as carbon pricing and air pollution restrictions, rising competition from clean technology, and legal challenges. Add to that list the techniques that must increasingly be used as oil becomes harder to extract—techniques like fracking and steam injection, which consume large amounts of energy and water and damage the environment.
The Economist headlined its recent article on the subject “Yesterday’s Fuel: The world’s thirst for oil could be nearing a peak. That is bad news for producers, excellent for everyone else.” No one can predict how the stock market will perform, but there appears to be no particular financial reason to hold stock in FFCs.
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A nationwide divestment movement will arise despite the decisions of presidents Faust and Paxson—it is inevitable. Remember that even though American students had no personal stake in South Africa, their determined protests shook many campuses and helped to end apartheid. Students, parents, alumni and all of us have not only an altruistic interest in combating climate change, but our own self-interest and that of our children and grandchildren. University presidents may declare the consideration of divestiture over, as Paxson did, but that will not make it so. Just the opposite: as the effects of climate change become ever more dire, college students and their parents and supporters will ratchet up their protests until divestment from FFCs becomes the most contentious issue in American campus history. Some institutions will decide to divest early in order to stand on principle. College of the Atlantic, Green Mountain College, San Francisco State University and Unity College are among those that have already done so. Others will reject divestment initially, only to adopt it later. But delay is not a neutral act. Scientists believe that we have one or two decades at most in which to act to limit global warming to the 3.6°F (2°C) already in the pipeline. But as Justin Gillis of The New York Times recently pointed out, that target “would still mean vast ecological and economic damage.” To delay action that might help prevent the worst effects of climate change has the same consequences as the denial of climate change science.
Divestment now allows universities and their presidents and trustees to take a principled stand on the greatest threat in human history while there is still time to make a difference.
When, a few decades hence, our grandchildren judge today’s colleges and universities, do we want them to say, “They knew the most, yet chose to do nothing?”
