Tag Archives: Divestment

It’s (Still) Time to Talk About Divestment

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The following article2 was published in the May 2016 edition of Frankly Speaking by two Oliners (and now alumni), Aaron Greiner and Izzy Harrison. They were part of a group of students who ultimately presented a proposal for fossil fuel divestment to the Board of Trustees in the spring of 2018. The conversation about divestment, mediated by Patty Gallagher (formerly the CFO), ended with students being told to wait until a new president settled into Olin.

Divesting Olin

By Aaron Greiner and Izzy Harrison on behalf of GROW

So, What is Divestment?

According to Wikipedia, “Divesting is the act of removing stocks from a portfolio based on mainly ethical, non-financial objections to certain business activities of a corporation.” One of the first times that divestment was used as a means to promote a social change was during apartheid, the extreme system of racial segregation, in South Africa. Companies, universities, organizations, local governments,  and individuals took their money out of apartheid-affiliated businesses and are partially credited with helping to dismantle the system.

Today, there is a new divestment movement. Five hundred and seven institutions and 3.4 trillion dollars have been divested from the oil and gas industries. The goal of this movement is to put financial pressure on the largest contributors to climate change and other environmental disasters in an effort to get them to behave in a more socially and environmentally responsible manner.  Sixty-one colleges have already divested in some meaningful way, and we hope Olin will join the movement.

Why Should Olin Divest?

Olin was founded on the principle of making the world a better place. Fossil fuels are unsustainable (they will run out), and are the single greatest contributors to climate change, so we believe it is against Olin’s founding principles to support fossil fuel companies  We believe that continuing to profit from the destruction of the environment through knowingly investing our money in companies that are accelerating the pace of climate change is fundamentally against Olin’s core values.

The scientific consensus is clear and overwhelming; we cannot safely burn even half of global fossil fuel reserves without dangerously warming the planet with disastrous effects1. Furthermore, as the market inevitably shifts towards more renewable energy sources, we believe an innovative institution such as Olin should be on the forefront of this change. 

We believe progressive action towards divestment will be a sound decision for the wellbeing of Olin’s alumni and current and future students. We deserve the opportunity to graduate with a future unimpaired by climate chaos.

What Have We Done so Far?

A little over a year ago, we started meeting with our CFO Patty Gallagher and Chair of the Investment Committee Doug Kahn to explore what it might look like if Olin were to divest. They were incredibly receptive, and we formed a close partnership. Over the past year, we have had many meetings and are making positive progress towards a solution that we can all get behind. In addition, we had a meeting with the investment firm that manages Olin’s money to get a sense from them about what divestment could look like while, of course, keeping the best financial interests of the school in mind. 

We are very fortunate that we are at a place like Olin where we can have meetings like this, and our collaborative approach has had positive results. The Investment Committee has begun to have discussions about the topic of divestment. We will continue to work with Doug and Patty to advance the conversation towards a mutually acceptable resolution.

Before we move forward, we want to be confident that this is something that Faculty, Staff, Board Members, and Students, can all get behind.  We are looking forward to continuing the progress in the fall and hope to keep the community updated.

It has been over four years since the article above was published. Since then, divestment from the 2003 holders of the most carbon reserves has been soundly rejected. Now, the Board is considering incorporating environmental, social, and governance (ESG) factors in our investment strategy. While a step in the right direction, this is essentially the bare minimum and is becoming, or has already become, standard practice4,5. This minimal acknowledgement of social and environmental realities casts them as mere externalities impacting our financial viability. Treating social and environmental issues as distinct and separable from economic issues in this way neglects the interconnectedness of the three. Olin, by continuing to profit on the climate crisis, is abjectly failing in its purported mission “to do good for humankind.” Olin is certainly not a leader among academic institutions in operational sustainability, nor in a holistic view of engineering. It’s time for Olin to recognize the contradiction of espousing leadership in integrating ethics into engineering while failing to take the action that so many of our peers (including Wellesley) already have.

Since the original article was published in 2016, the following U.S. schools have made commitments to divestment:

Interested in continuing Olin’s divestment movement? Questions, comments, or concerns?

Reach out!

gtighe@olin.edu

Fossil Fuels and Olin

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As alumni we were excited last May to read about the efforts of several students to engage the administration and work towards divestment. If Olin divests we would be in good company, joining other schools like BU, Stanford, Yale, RISD, UMass, and over 500 institutions with total assets of over $3.4 trillion dollars. But important questions need to be answered. Is divestment a sound financial decision? Is it an effective way to accomplish anything?
I hope to make it clear that investing in fossil fuels is almost certainly an unsound financial decision. Fossil fuel companies live and die by a measure called the reserve replacement ratio, which is the ratio of proven fuel reserves added to a company’s reserve base to the amount of fuel removed from these reserves (the amount of fuels produced). A ratio above 100% means that a company is adding as much or more than it’s using, and so will stay stable or grow. A ratio less than 100% means that the company will eventually run out of reserves and die. Dropping below that 100% mark can be disastrous for the value of a company’s stock. In summary, an accurate reserve replacement ratio is a huge determiner of the value of a fossil fuel company’s stock.
Scientifically speaking, it is clear that if we want to meet global warming targets set out in international agreements like the Paris agreement then there is a limit on how much CO2 we can emit, a so-called carbon budget. Current projections suggest a budget of around 800 GtCO2 (gigatons carbon dioxide) to have a 66% chance of staying below warming of 2°C (closer to 500 GtCO2 for an 80% chance), the current agreed-upon target. At the same time, proven reserves (which go into the calculation of reserve replacement ratio and thus the value of fossil fuel companies) are estimated to represent around 2,800 GtCO2 in potential emissions, or around 3-4 times the carbon budget (5-6 times for 80% chance). In other words, in order to meet current globally agreed warming targets, about 66-75% of what fossil fuel companies are valued by needs to remain in the ground, becoming so-called stranded assets. This suggests a market value for these companies that is far, far below the current market valuation, making continued investment in this bubble a very risky proposition.
Unless, that is, you believe that these companies will be able to dig up and burn all of these reserves, which would pretty much guarantee warming >2°C, with unpredictable but potentially catastrophic consequences. It is likely that this scenario would be exceedingly bad for global markets, and thus making an investment in this scenario is a very poor long-term investment for a school that, I assume, wishes to still be around for the later half of the century.
On the moral side, we are already seeing the negative effects of CO2 emission driven climate change in lives and livelihoods, from superstorms to increased droughts, fires, floods, famines, and war. The fossil fuel companies themselves are associated with large-scale destruction of ecosystems (think BP oil spill and tar sands) and blatant racism in the placement of fossil fuel infrastructure (think rerouting of the Dakota Access Pipeline through Native American land because of concerns about the impacts on predominantly white communities). Since the profits of these companies don’t account for these many externalities, Olin’s profiting off of these companies is tantamount stealing from everyone, including its students, who are and will continue to live their lives in this world affected by climate change.
A desire to “Better the World” is baked into Olin’s Vision and Mission, but these risky investments put that mission in jeopardy. Either the carbon bubble pops and Olin loses a lot of money again (recall what happened last time), or all of that fuel is burned and a better future is exceedingly unlikely. No matter what your belief or preferred argument I hope that I have made it clear that these investments are a threat to Olin’s mission and should be removed as quickly as possible.

Divesting Olin

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Divesting Olin
By Aaron Greiner and Izzy Harrison on behalf of GROW

So, What is Divestment?
According to Wikipedia, “Divesting is the act of removing stocks from a portfolio based on mainly ethical, non-financial objections to certain business activities of a corporation.” One of the first times that divestment was used as a means to promote a social change was during apartheid, the extreme system of racial segregation, in South Africa. Companies, universities, organizations, local governments, and individuals took their money out of apartheid-affiliated businesses and are partially credited with helping to dismantle the system.
Today, there is a new divestment movement. Five hundred and seven institutions and 3.4 trillion dollars have been divested from the oil and gas industries. The goal of this movement is to put financial pressure on the largest contributors to climate change and other environmental disasters in an effort to get them to behave in a more socially and environmentally responsible manner. Sixty-one colleges have already divested in some meaningful way, and we hope Olin will join the movement.

Why Should Olin Divest?
Olin was founded on the principle of making the world a better place. Fossil fuels are unsustainable (they will run out), and are the single greatest contributors to climate change, so we believe it is against Olin’s founding principles to support fossil fuel companies We believe that continuing to profit from the destruction of the environment through knowingly investing our money in companies that are accelerating the pace of climate change is fundamentally against Olin’s core values.
The scientific consensus is clear and overwhelming; we cannot safely burn even half of global fossil fuel reserves without dangerously warming the planet with disastrous effects. Furthermore, as the market inevitably shifts towards more renewable energy sources, we believe an innovative institution such as Olin should be on the forefront of this change.
We believe progressive action towards divestment will be a sound decision for the wellbeing of Olin’s alumni and current and future students. We deserve the opportunity to graduate with a future unimpaired by climate chaos.

What Have We Done so Far?
A little over a year ago, we started meeting with our CFO Patty Gallagher and Chair of the Investment Committee Doug Kahn to explore what it might look like if Olin were to divest. They were incredibly receptive, and we formed a close partnership. Over the past year, we have had many meetings and are making positive progress towards a solution that we can all get behind. In addition, we had a meeting with the investment firm that manages Olin’s money to get a sense from them about what divestment could look like while, of course, keeping the best financial interests of the school in mind.
We are very fortunate that we are at a place like Olin where we can have meetings like this, and our collaborative approach has had positive results. The Investment Committee has begun to have discussions about the topic of divestment. We will continue to work with Doug and Patty to advance the conversation towards a mutually acceptable resolution.
Before we move forward, we want to be confident that this is something that Faculty, Staff, Board Members, and Students, can all get behind. We are looking forward to continuing the progress in the fall and hope to keep the community updated.

Want to get Involved, or have Questions/Concerns?
Shoot us an Email!
Izzy@students.olin.edu
Aaron.Greiner@students.olin.edu