There has been an international movement led by 350.org, Bill McKibben, and student groups to encourage schools, universities, and educational institutions to divest their endowments of fossil fuel stocks. The decision of Stanford University on coal divestment should an inspiration for elite universities around the world.

Ben Caldecott of the Stranded Assets Programme at the University of Oxford has argued that universities should engage in fossil fuel divestment:

University endowments in the US have 2–3 per cent of their assets committed to fossil fuel stocks, while the proportion in the UK is higher with an average of 5 per cent largely because the FTSE has a greater proportion of fossil fuel companies. Public pension funds, likewise, have 2–5 per cent of their assets invested in fossil fuel related public equities.

Caldecott recognised that the financial impact would be limited: ‘In recent research we have completed at the University of Oxford’s Smith School of Enterprise and the Environment, we find that the direct impacts of fossil fuel divestment on equity or debt are likely to be limited’. He noted that ‘The maximum possible capital that might be divested by university endowments and public pension funds from the fossil fuel companies represents a relatively small pool of funds.’ Nonetheless, ‘even if the direct impacts of divestment outflows are meagre in the short term, our research shows that a campaign can create long-term impact on the value of target firms through a process of stigmatisation’. Caldecott commented: ‘The outcome of this stigmatisation process, which the fossil fuel divestment campaign has triggered, poses a far-reaching threat to fossil fuel companies and the vast energy value chain.’

Merchants of Doubt by Naomi Oreskes and Erik Conway

The historian of science, Professor Naomi Oreskes – one of the co-authors of Merchants of Doubt and The Collapse of Western Civilisation – has made an articulate case for why universities should engage in fossil fuel divestment. In a piece with her daughter Clara Belitz, a university freshman at Bowdoin College, Naomi Oreskes stressed: ‘There are many compelling reasons for universities to divest themselves of investment in the fossil fuel industry – including and especially the physical and potentially irreversible effects of climate change to which university endowments essentially contribute.’

Naomi Oreskes and Clara Belitz were particularly concerned that the Merchants of Doubt had been undermining the mission of universities: ‘Universities exist to foster knowledge, learning and understanding, and the fossil-fuel industry has worked systematically over the past 20 years to undermine that work.’ The pair observed: ‘While giving money to support research, fossil-fuel companies also spend money to undermine its results, both directly through misleading advertising and indirectly by supporting think-tanks, trade organizations and other “third party allies” who are continuing to promote disinformation and doubt.’ Oreskes and Belitz were particularly incensed by the attacks by the fossil fuel industry against scientific institutions, and scientists: ‘The fossil-fuel corporations have participated in disinformation campaigns designed to undermine the scientific information that demonstrates the severity of the problem we face, including ugly and unprincipled personal attacks on climate scientists.’

In this context, Oreskes and Belitz considered the policy option of fossil fuel divestment was an attractive one: ‘Divestment relies on a traditional social remedy: the remedy of public denouncement and shaming’. The pair emphasized that such a measure would protect the independence and integrity of universities: ‘At least our institutions will not be complicit in the industry’s actions.’ Oreskes and Belitz emphasized that there was a need to change the approach of institutions: ‘If business as usual has given us dangerous climate change, then we need to change the way we do business.’

Stanford University, Hoover Tower, Wikimedia

Universities who lead the way on fossil fuel divestment have had significant reputational gains.

The student-run organisation Fossil Free Stanford lobbied Stanford University to engage in fossil fuel divestment. The group observed that ‘Students at Stanford and young people around the world recognize that climate change poses an unprecedented threat to our future’. The students noted that it was a question of values:

Stanford University was founded to ‘promote the public welfare by exercising an influence on behalf of humanity and civilization.’ Stanford considers environmental sustainability to be a core value. Hundreds of our engineers, scientists, policy experts, and economists are working to better understand and combat climate change. However, at the same time, our endowment is invested in the very fuels causing this crisis. We are tacitly supporting companies that use their enormous wealth and power to perpetuate climate change denial and inaction.

Fossil Free Stanford urged: ‘With the vast financial and social capital we leverage, Stanford has a unique opportunity to drive real action on climate change by divesting from the fossil fuel industry.’ The group recommended: ‘Doing so will not only be a sound financial decision for our institution’s portfolio, it will promote the well-being of current and future graduating classes, who deserve a future that is not defined by climate chaos.’

In May 2014, Stanford University made an important announcement about fossil fuel divestment. Upon recommendation from Stanford’s Advisory Panel on Investment Responsibility and Licensing, the Board of Trustees recommended that Stanford University will not make direct investments in coal mining companies. Stanford President John Hennessy commented on the decision:

Stanford has a responsibility as a global citizen to promote sustainability for our planet, and we work intensively to do so through our research, our educational programs and our campus operations. The university’s review has concluded that coal is one of the most carbon-intensive methods of energy generation and that other sources can be readily substituted for it. Moving away from coal in the investment context is a small, but constructive, step while work continues, at Stanford and elsewhere, to develop broadly viable sustainable energy solutions for the future.

The decision by Stanford University is landmark one – especially given the reputation of the university, and the massive size of its endowment, standing at 18.7 billion dollars. The decision received international attention. It should also be recognised that the decision was just focused upon coal. Stanford University does not yet have a comprehensive fossil fuel divestment policy.

Stanford Divests: Student-Led Movement Forces Elite School to Pull Its Money From Coal Companies https://www.youtube.com/watch?v=73XaBcI4LOo

Michael Penuelas from Fossil Free Stanford commented upon the successful action, stressing how it involved the combination of staff and faculty in a common effort:

We had recently an election on campus where over 2,700 students voted in favor of divestment. We’ve had hundreds of faculty, quite — you know, quite literally, almost 200 now, send expressions of support to our campaign, because they know that this is something that they can do, and they know that institutional action right now is what needs to happen to create concrete change in our country in terms of a positive direction for climate action, but also just to create this bigger space for dialogue, because our institutions have names, and they need to be part of that.

This account highlights the powerful impact of collective action by students and the faculty, and the importance of referenda in respect of democratic decision-making.

Fossil Free Stanford hailed the decision of Stanford University: ‘Stanford’s decision is a clear testament to the power of the student movement for divestment and the broader movement to combat climate change.’ The group remained concerned about the impact of coal:

This decision is also another powerful illustration that America is waking up to the reality that continued large-scale combustion of coal is incompatible with a sustainable future. Coal is the single largest source of worldwide energy-related carbon dioxide emissions. Here in the US, particulate pollution from coal-fired power plants causes an estimated 13,000 premature deaths every year.

Fossil Free Stanford noted: ‘While we celebrate Stanford’s decision to divest, we recognize that the battle to protect our climate is far from over.’ The group recognised that ‘Stanford’s coal divestment alone will not be enough turn the tide on climate change.’ Fossil Free Stanford hoped that there would be greater action by educational institutions on fossil free divestment: ‘We call on university administrators across the nation to follow Stanford’s lead and begin the process of divestment.’

Sierra Club, Cool Schools

In the wake of its ethical divestment decision, Stanford University has been highly rated in the Sierra Club’s Cool Schools rankings. Reed McManus from the Sierra Club observed: ‘Universities are under particular scrutiny, since they’re most likely to be leading research on climate change and clean energy technology.’ He noted: ‘Activists hope Stanford’s move will create a domino effect: Given time and momentum, the Fossil Free movement could be as successful as the apartheid-divestment efforts of the early 1980s, when at least 155 colleges partially or fully divested themselves of stocks linked to South Africa, helping pressure the country’s government to dismantle apartheid.’ Nonetheless, McManus wondered whether Stanford University could do more to publicise its decision: ‘Even Stanford is missing an opportunity to capitalize on its high-profile divestment move, refusing interviews and referring reporters to its published announcement.’

Climate leader and former Vice-President Al Gore lauded Stanford University, observing: ‘Congrats to Stanford on divesting from coal & to students who made it happen. I hope Harvard, & others, will follow.’ In a piece with David Blood, he highlighted the ‘rising discontent with the negative consequences associated with carbon pollution’. Gore commented: ‘Notably, Stanford University earlier this year announced it will divest publicly listed coal mining companies from its $19bn endowment, citing, like other fiduciaries as of late, the substantial environmental and social injury caused by coal as the justification for its decision.’ He maintained: ‘The momentum behind divestment campaigns and other forms of protest against coal highlight that burning fossil fuels without regard for the consequences will not be tolerated much longer.’

Bill McKibben – a founder of 350.org – hailed the decision of Stanford University:

Stanford, on the edge of Silicon Valley, is at the forefront of the 21st century economy; it’s very fitting, then, that they’ve chosen to cut their ties to the 18th century technology of digging up black rocks and burning them. Since it’s a global institution it knows the havoc that climate change creates around our planet; other forward-looking and internationally-minded institutions will follow I’m sure.

350.org Divestment Campaign Manager Jay Carmona encouraged Stanford University to go further: ‘We’re looking forward to the day Stanford builds on this step and fully divests from fossil fuels.’ Carmona hoped: ‘Now that one of the biggest endowments on earth has acknowledged that it can’t keep investing in climate change, others can follow’.

It remains to be seen whether leading universities — including those in the United States, Canada, the United Kingdom, Europe, Australia, and New Zealand — will follow the gold standard of Stanford University, and adopt modern policies in respect of ethical investment, social responsibility, and fossil fuel divestment.

Dr Matthew Rimmer is an Australian Research Council Future Fellow, working on Intellectual Property and Climate Change. He is an associate professor at the ANU College of Law, and an associate director of the Australian Centre for Intellectual Property in Agriculture (ACIPA). He holds a BA (Hons) and a University Medal in literature, and a LLB (Hons) from the Australian National University, and a PhD (Law) from the University of New South Wales. He is a member of the ANU Climate Change Institute. Dr Rimmer is the author of Digital Copyright and the Consumer Revolution: Hands off my iPod, Intellectual Property and Biotechnology: Biological Inventions, and Intellectual Property and Climate Change: Inventing Clean Technologies. He is an editor of Patent Law and Biological Inventions, Incentives for Global Public Health: Patent Law and Access to Essential Medicines, and Intellectual Property and Emerging Technologies: The New Biology. Rimmer has published widely on copyright law and information technology, patent law and biotechnology, access to medicines, clean technologies, and traditional knowledge. His work is archived at SSRN Abstracts and Bepress Selected Works.

Matthew Rimmer, ‘Fossil Free Stanford: Universities, Climate Ethics, and Fossil Fuel Divestment’, Medium, 25 August 2014, https://medium.com/@DrRimmer/fossil-free-stanford-universities-climate-ethics-and-fossil-fuel-divestment-5bc4dc1b590a