Divestment: a financial argument
Letter to the Editor | Friday, February 13, 2015
You’ve probably heard of the word “divestment” floating around campus, whether it was from classes, Facebook or a GreeND member knocking at your door about a petition. Maybe you haven’t heard the word at all. If that’s the case, it is important to understand what the word “divestment” means because it is a growing campaign not only at Notre Dame, but also nationwide.
Divestment is the opposite of investment — it is the act of removing the University’s endowment from companies involved in the production of fossil fuels. As part of the We Are Nine campaign, we are asking to withdraw the endowment from the top 200 fossil fuel companies (by size of coal, oil and gas reserves) and reallocate the money in more environmentally and socially responsible companies. This means that any new investments will be immediately frozen and any direct ownership or commingled funds in such companies will be divested over a five-year period.
Environmental implications aside, one must ask if divestment is a wise choice from a purely financial standpoint. The answer is a resounding YES. The main reasons are as follows:
- Investment is a long-term commitment, but fossil fuels are in limited supply. This makes it an economically irresponsible investment and violates fiduciary responsibility.
- Strict regulatory controls from the EPA have forced the demand for coal to go down, negatively affecting power stations and mining companies.
- If more than 20 percent of all fossil fuel reserves are burned, the costs of repairing the resulting global damage will enormously exceed the benefit of funding fossil fuel companies.
- If the government takes action to keep 80 percent of fossil fuels in the ground, fossil fuel investments will becomes worthless, creating stranded assets.
- Although it is unclear how much Notre Dame invests in fossil fuels, the worst-case scenario (for removing investments from the top 200 fossil fuel companies) would likely decreases the endowment by 0.075 percent. And, if the University were to divest from the top “Filthy 15” fossil fuel companies, there would be only a 0.0002 percent decrease. This translates to $19,600 from a 9.8 billion dollar endowment.
Divestment has been successful in the past. In a protest against apartheid in South Africa, 155 universities divested from South African corporate collaboration by 1988, in addition to over 90 cities, 26 states and 22 countries. The movement dramatically affected the country’s international economy and caused considerable economic plight, contributing to the system’s ultimate removal. Fossil fuel divestment has already occurred in a number of cities, religious organizations and large universities such as Stanford University. The University of Dayton divested in the summer of 2014 from all fossil fuel companies, a decision that was lead by the Board of Trustees. In proudly becoming the first Catholic university to divest, the University of Dayton encourages other Catholics to respond to the growing necessity for the care of creation.
From a Catholic standpoint, divestment is the ethically appropriate decision, in accordance with Care for God’s Creation, a theme of Catholic Social Teaching. From an environmental standpoint, divestment is as necessary as it is urgent, and a powerful tool in spreading awareness. And finally, from a financial standpoint, divestment is both secure and responsible. Taking this into account, the We Are Nine campaign strongly encourages the University of Notre Dame to realize the importance of divesting from fossil fuels.
The views expressed in this Letter to the Editor are those of the author and not necessarily those of The Observer.