Last week Christian Parenti asked how dumping oil stocks is supposed to hurt the enemy, since they seem to have all the working capital they could ever need to continue what they mainly do: exploration, extraction, refining , with a side order of obstructive politicking, media manipulation and astro-turfing.
He also suggests that the divestment campaign ignores the role of government, its framing is flawed and it disregards the realities of markets. So it must be merely symbolic, right? Parenti’s reasoning is entirely linear and entirely literal. And he is probably also mouthing the same objections voiced at the dawn of the anti-apartheid divestment campaign.
So could he be right?
Is the divestment campaign merely symbolic?
What Parenti overlooks is that government has been ignoring the urgency of climate change for decades. The only thing that has or is likely to matter in shifting the course of the current Titanic of state policy is grass roots organizing. In that regard, the campaign is neither ignoring state power nor relying solely on it. The divestment meme is a creative and dynamic response as capable of igniting mass action as any other initiative. And its reach includes state power at all degrees of scale.
But let’s consider the landscape of possibility here. There are 4.56 billion shares of Exxon Mobil outstanding. Virtually none of those are restricted. 99% can be sold at any time, by any holder. Forty seven percent (2.13 billion) are held by institutions. Those holdings may be in the form of mutual fund shares held in pension funds, 401Ks, retirement systems. Endowments may hold shares outright, but they also are likely to be holding these stocks indirectly in the form of mutual funds. The rest of the shares are in individual hands.
Individual sales will not likely make much of an actual difference to Exxon. But we are talking about much more than one company anyway. Were the divestment campaign to focus exclusively on oil, coal and natural gas companies, I doubt the effect would amount to anything close to what is imagined by 350.org.
However, if the campaign were to be extended to the entire fossil fuel energy sector, including exploration, drilling, refining, pipeline companies, oil rig contractors and associated frackers, including all the state owned companies held in dozens of international equity funds, that might be another story.
Looking at a sample of Vanguard and Fidelity equity funds alone, the industry standard “energy sector” holdings range from 5-12% in each. In dollar terms, this ranges from low millions of dollars invested to upwards of several billion in the giant funds such as Vanguard Wellington.
For a church, a municipality or a business to divest from the entire energy sector in a mutual fund has more meaning to the fund managers than it does to any single fossil fuel company. It is not the direct dollar impact to any bottom line that’s most important here. When there are thousands of entities and individuals doing the same thing, either demanding fossil fuel-free mutual funds and/or leaving entirely in favor of socially responsible investment vehicles, that begins to look like a movement for Wall Street to reform itself.
The pressure on the fossil fuel industry to review its business model will not then come from individual investors. It will come from institutional holders.
Exposure to Climate Risk
On what basis does that scenario make a difference? Since Harvard students just voted 3-1 for the endowment to divest from fossil fuels, only to be brushed off, one has to wonder whether simple votes such as these, regardless of how many there may be, are actually too simplistic and easily dismissed.
But they are a start. More compelling arguments must and shall be developed. The divestment campaign is not the flavor of the week. It’s a long-term grass roots organizing meme. And if Parenti saw it that way, he might not be so concerned about whether it is “correct” in every respect.
One of the primary issues is risk. More and more companies are analyzing their portfolios for climate risk. And clearly, despite the regard fossil fuels companies enjoy for being a safe bet for growth, the fact is they are some of the riskiest stocks one can possibly own, precisely because their growth is limited. On business practices alone -- overstating reserves, covering up spills, denying or suppressing the human effects of fossil fuel pollution (particularly fracking), promoting outrageous and highly questionable figures on shale gas potential, these companies engage in risk behaviors that should make any investor wince, even before the question of causing global warming is even broached.
Whether the divestment campaign is ever perceived as anything more than symbolic depends on its success. Framing the fossil fuel industry as a risk-laden venture is about reality becoming perception, which is even more real. It is about more than engaging the segment of the population that is already alarmed, but about focusing the merely concerned and clarifying the skeptical.
The Cause of Global Warming
For anyone, especially an endowment such as Harvard’s, to simply claim that divestment “goes too far” suggests that clarity is lacking in the institutional understanding of how climate change is driven. For a university or a corporate entity to market its green practices, enhance its brand by asserting itself as pro-active in any number of ways they may be addressing climate change and to also hold stocks in fossil fuel companies is akin to saying “yes, climate change is certainly real, but we’re not really sure how it’s happening. “ It’s the ultimate greenwash. Even worse, it’s an admission that Harvard itself can be muted and rendered impotent by its own institutional inertia. Divestment connects the dots from science to action in a larger context than mere individual remedies. It’s about accountability.
The Tragedy of the Commons
On a more philosophical level, divestment is an opportunity to resurrect the moral dilemma articulated in a classic Science magazine article written by Garrett Hardin back in 1968, “The Tragedy of the Commons.”
The individual benefits as an individual from his ability to deny the truth even though society as a whole, of which he is a part, suffers. Education can counteract the natural tendency to do the wrong thing, but the inexorable succession of generations requires that the basis for this knowledge be constantly refreshed.As long as individuals retain the freedom and inclination to act in their own self-interest, the collective will eventually suffer the consequences. To paraphrase him now, we might say that as long as we act as individuals rather than collectively, the course of the fossil fuel agenda will not be altered. If we are talking about addiction, sure, we could all drive less. And we should. At the same time, let’s push the pusher off the Street. The divestment campaign, as other efforts that have galvanized and ignited mass action, has the potential to be an educating tool that refreshes our sense of alignment between self and collective interest in a way that is long overdue.