Fossil fuel divestment must be backed by policy changes to be ‘meaningful,’ experts say

Media Credit: Alexander Welling | Assistant Photo Editor

Divestment experts said officials should consider implementing more sustainable practices if they are planning to pull funds out of the fossil fuel industry.

As tensions grow over GW’s fossil fuel investments, divestment experts say nixing the investments will have a marginal impact on the environment unless it is backed up by green policy changes.

University President Thomas LeBlanc revealed in a video last week that administrators have invested about 3 percent of GW’s endowment, about $53 million, in fossil fuel companies through funds. LeBlanc said in the video that officials are “working on getting rid of that, too” but walked his comments back at a Board of Trustees meeting Friday, declining to say whether he supported divestment in an interview.

LeBlanc said he supports Board Chair Grace Speights’ announcement to create a task force examining the environmental and social impacts of the Board’s decisions.

“I support the creation of the task force,” he said. “I think what Chair Speights is saying is the task force has to look at a lot of issues and hear from members of the community, and I don’t want to prejudge the outcome of that.”

The task force’s creation comes in the wake of protests by members of Sunrise GW – a student-led climate activism organization. The group interrupted a panel discussion Tuesday at the Regulatory Studies Center’s 10-year anniversary conference and led a march Wednesday to deliver a letter to LeBlanc calling on officials to divest from fossil fuels.

Divestment experts said GW’s level of involvement with fossil fuel companies is “on par” with other higher education institutions but added that moving away from those investments may be difficult.

John Jurewitz, a professor of economics at Pomona College, said holding 3 percent of investments in the industry is not “unusual,” and GW likely does not “heavily” invest in fossil fuels.

“In fact, it looks like they [hold] more or less than what you would expect in a diversified portfolio that just holds all U.S. companies more or less in proportion to their capitalization,” he said.

He said divesting completely from funds connected to the fossil fuel industry could be “difficult” if the University holds its fossil fuel investments through index funds, a portfolio of stocks and bonds that is representative of the market at large.

LeBlanc said in the video that emerged Saturday that GW’s fossil fuel investments are held through funds.

Jurewitz said officials could, instead of holding index funds, invest the University’s endowment in all the stocks listed in an index fund excluding those listed on the index fund’s sub-portfolio denoting energy-sector stocks, which are likely to contain fossil fuel companies.

He added that selling fossil fuel investments would likely not dramatically change the price of the funds, so the biggest effect of divesting would be to make a “political statement,” rather than a real economic or environmental one. Lobbying for environmentally friendly policies, like a cap-and-trade scheme or taxes on carbon emissions – two market-based policies to curb emissions – would have a more “meaningful” effect, he said.

“You can basically wash your hands and say, ‘I’m holier than thou – I don’t own any fossil fuel stock,’” he said. “But that’s all you’re getting unless you’re also supporting some kind of political efforts.”

More than 70 percent of students voted in favor of divestment in a 2015 SA referendum, but officials at the time said divestment is not part of GW’s investment strategy and added that they would prioritize maintaining a sustainable investment portfolio. Student leaders collaborated with the Board in 2018 to create a $2 million environmentally friendly investment fund.

Clair Brown, the director of the Center for Work, Technology and Society at the University of California, Berkeley, said the share of GW’s investments in the fossil fuel industry may be underreported depending on how the University’s investment managers “define” the fossil fuel industry.

She said that if GW invests in companies that refine, transport and extract fossil fuels in addition to corporations that hold oil, coal and natural gas reserves, the total sum of money the University invests in the industry could be closer to 5 to 6 percent of the endowment.

These investments, though not necessarily logged as fossil fuel investments, aid fossil fuel companies in furthering the destruction of the environment, Brown said.

“We shouldn’t be doing that – our financial investments in the fossil fuels are actually ensuring that we’re contributing to global warming and the climate crisis,” Brown said.

Brown said failure to divest from fossil fuels could result in negative “social and reputational” consequences for a university. She said universities that invest in fossil fuels generally face “pushback” in the form of protests from “upset” alumni and students.

“How could a university that’s supposedly educating tomorrow’s citizens and leaders actually invest in and finance the fossil fuel industry and global warming?” Brown said.

Wes Lauer, the director of the Environmental Science Program at Seattle University, said higher education institutions should divest from the fossil fuel industry to show students that officials are committed to protecting the future of the environment.

“Our primary mission as educational institutions is to facilitate a conversation about the issues, and if we’re not acting in a way that’s consistent with the broader social movements of the time, then that really damages our ability to reach students,” Lauer said.

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