Life After Divestment: On Stanford’s Decision To Reject FFS’s Demands

Stanford’s decision not to divest from the fossil fuel industry should not be viewed as a loss for Fossil Free Stanford. Rather, it can be an opportunity to refocus efforts on more productive means to combat climate change.

On Monday, Stanford’s Board of Trustees, unsurprisingly, decided not to divest from the fossil fuel industry. Their decision followed renewed efforts by Fossil Free Stanford (FFS) this academic year to pressure our endowment to divest, including a week-long sit-in outside of President Hennessy’s office in the Main Quad in the fall and a recent campaign encouraging undergraduate seniors and recent alumni to withhold donations.

The Review has discussed on several occasions the rhetoric and effectiveness of FFS’s campaigns. First, we argued that divestment as a political strategy has no economic consequence for companies using fossil fuels, and is a symbolic gesture at best. In response, FFS leaders changed their rhetoric, agreeing that “divestment is not a tactic to economically cripple the fossil fuel industry” and instead focused on affecting global policy by pressuring Stanford to divest before the Paris climate talks.

In February, when FFS proudly declared that the university would divest from the fossil fuel industry, we contended that, if Stanford does indeed divest, it would not be because of FFS’s efforts. Instead, Stanford might divest because of the poor economic state of the fossil fuel industry. While my analysis of the fossil fuel industry turned out to be incorrect – oil prices have stabilized since I last commented – my underlying assumptions remain plausible. Stanford’s endowment has a fiduciary duty to the university. Though Stanford’s trustees sometimes include social considerations in their investment decisions, they would not divest, first because of fossil fuels’ role in our global economy, and second because fossil fuel companies are once again becoming attractive investment opportunities. This prediction seems to have been accurate.

My past criticism of Fossil Free Stanford was not intended to antagonize the organization or the communities it represents. FFS have identified a pressing problem and have worked hard to change what they view as unsustainable industry practices. I criticized their efforts because they are premised on false conceptions of the global economy and political processes, which detracts from their broader goal: curtailing climate change and bringing about environmental justice. According to the press release, the Board of Trustees agrees:

The endowment invests broadly in economic activity around the world. Divestment is rare, and consideration of it is reserved for specific cases in which, among other things, the demonstrated social injury by a company substantially outweighs any social benefits it provides… Regarding the fossil fuel industry more broadly, APIRL [the Advisory Panel on Investment Responsibility and Licensing] concluded that it could not evaluate whether the social injury caused by the fossil fuel industry outweighs the social benefit it provides, and therefore did not recommend divestment.

The Board has aptly noted that the ethics of the fossil fuel industry are more nuanced than Fossil Free Stanford has portrayed them. Fossil fuels are, for better or for worse, a crucial part of the global economy and the “economic activity” that Stanford invests in. Regrettably, fossil fuels have also contributed heavily to climate change. APIRL, the Board of Trustees, and the endowment realize this but have refrained from making ethical claims about social benefit and social injury. FFS, on the other hand, has premised its entire existence on its demonization of the fossil fuel industry. As a result, their official positions have been negative and proscriptive – telling the university what not to do – rather than prescriptive, positive, and offering of potential solutions. I have yet to see any substantive, positive claims that FFS makes to combat climate change, such as advocating for energy research, working for solar and wind businesses, and providing financial capital to alternative energy companies.

It’s not as if there haven’t been opportunities to do so. As outlined in the press release, Stanford has an extraordinary record of investment in clean energy, from research to making campus buildings more energy-efficient, as Y2E2 in the engineering quad demonstrates. Even in our endowment itself, where some might argue financial concerns take precedence over moral concerns, our university has tried to invest ethically:

Stanford Management Company works with its investment partners to identify and support industry best practices that, in addition to positively impacting investment results, may pay significant environmental dividends. For instance, methane is recognized as a particularly damaging form of carbon emission. By seeking to work with its investment partners on best practices in limiting the release of methane in the production and transmission of natural gas, Stanford Management Company hopes to improve both investment and environmental outcomes.

My hope is that FFS will not see the university’s decision as a loss. Rather, they should reflect on what matters in this collective fight. The means to substantive change is not simply demanding that relevant social institutions comply with a list of demands. Instead, there are a number of avenues by which FFS can productively add to Stanford’s effort to combatting climate change.

For the policy-minded, there is the Steyer-Taylor Center for Energy Policy and Finance. For the economically-minded, there are numerous private sector opportunities that develop or invest in clean energy and technology. For the academically-minded, our university is one of the best places in the world to study energy engineering. Following the Board’s decision, FFS can develop a more complete view of the world’s economic and political institutions and evaluate other, perhaps more fruitful, avenues to fight climate change.