In this episode, we cover the basics of fossil fuel divestment: the money lingo you need to know, the impact that divestment can make, the history and origins of the divestment movement, and more. We also break down some common arguments against the push for divestment so that you can be prepared to advocate for divestment at your school/institution. If you're new to divestment, this is the perfect episode to get started in the divestment movement!
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Hosts/Reporters: Katherine Li and Matthew Brune
Writers/Producers: Helene Gu, Franny Lee, Matthew Brune, Emily Nagamoto
Audio Editor: Franny Lee
Music: Cali by WataR, carefree by WataR
TRANSCRIPT:
KATHERINE:
Hello, everyone, my name is Katherine.
MATTHEW:
And I'm Matthew,
KATHERINE:
and welcome to another episode of Operation climate.
MATTHEW:
Today we're gonna talk money. And I'll give you one guess as to what we'll discuss. It's something Nelson Mandela college students in climate change have in common.
KATHERINE:
The college life of Nelson Mandela and how that has affected climate change.
MATTHEW:
I was gonna say prison, but that's a good guess. But really, it's divestment.
KATHERINE:
Today we are going to be talking about fossil fuel divestment, which is a growing topic on college campuses right now.
MATTHEW:
Now, you may be wondering what Nelson Mandela has to do with divestment, but we're here to break it down.
KATHERINE:
Today, his college students may have a little bit of knowledge on what apartheid was. But to give you some background context, apartheid was basically legislative practices in South Africa that promoted segregation and other racist policies from the 40s to the 90s. There was a lot of outrage around the world about this. And decades ago, when this was happening, there were students on college campuses that were protesting this apartheid. They were activists fighting for equality, and they did so intelligently
MATTHEW:
because the pressure from the students resulted in true anti apartheid action. Many universities under the social pressure divested from their financial holdings in South Africa and those who actively supported apartheid, you pull the plug on the money, and you are able to send a message.
KATHERINE:
Yeah, so Duke University was one of these universities that took part in this and the Board of Trustees voted 21 to three in May of 1986. To sell holdings in South Africa. If apartheid persisted by January 1987, the ultimatum was thrown forward, joining many others across the world.
MATTHEW:
And it was a testament to the success of activism as a whole. Nelson Mandela was released from prison in 1990. And a new constitution was written in 1994, ending the legislative and political entity of what we know as apartheid.
KATHERINE:
Now, how does this relate to divestment? Why does this matter to you and I right now, so it matters because it worked. People around the globe identified a problem and took action which directly resulted in improvement. Again, we find ourselves with another issue. climate change and human caused climate change to be specific.
MATTHEW:
But now we have an activist handbook, a blueprint for divestment from this anti apartheid movement, and we have a chance to enact this in the fight for a sustainable environmental future. work has already begun on college campuses across the US and even within fossil fuel company boards themselves. Welcome to the new age of fossil fuel divestment.
KATHERINE:
I personally didn't even know fossil fuel divestment was talking about financial things until I started working on this podcast series. But I guess it has something to do with stocks. Is that correct?
MATTHEW:
Yes, yes. To talk about divestment, we first have to know what investment is right. So the investors like you and me, or banks, universities, nonprofits, religious organizations, they're the ones putting money into some venture. Thus, it's important to target them when planning our action, for divestment. They invest through stocks, mutual funds, real estate, and we'll go deeper into the specifics of what universities invest in, in our episode two,
KATHERINE:
just to break it down even further, these organizations invest money, because investing means they want to get a return out of it, right. That's why they're putting all this money into stocks.
MATTHEW:
Yeah, you want to make your money work for you. So you invest it in something else, so that you don't have to do the work, but you get returns on that investment for the value that you bring to that organization.
KATHERINE:
Okay, that makes sense. And so colleges also take part in this. So take a second now, while you're listening to this podcast and Google your colleges endowment fund. It does surprise you was a huge because a lot of colleges have massive endowments.
MATTHEW:
I mean, if you're at Harvard, the college endowment in 2021, is around $53.2 billion, which would put it out about number 22, I believe on the world's billionaire list. So these are huge entities. And these are huge sums of money that colleges hold and invest in the market in the stock market and various stocks in various enterprises so that they get that return on investment of some percent of your 8% a year the pandemic was huge because the stock market crashed at the beginning and it came back later. So the stock market went up by a lot Duke University itself, its endowment increased by 56% in the last year, but typically endowments work were based on this large sum of money, you get some sort of interest off that just like you would if you were putting it into a savings account and have more risk and return more. That's how the university funds itself. That's how it does its day to day, if you have $8 billion in the stock market, you're making a certain amount, some millions of dollars, so that you can actually enact all of the campus activities that you want to go through.
KATHERINE:
So to break it down even further. For people like me who don't know anything about the financial world. How exactly do you get money from investment? What is the process? Like? How do you know if what you're putting your money into will get you money out of it?
MATTHEW:
Typically, whenever you put money into an account, let's start with your savings account, right? That's a really low risk account. So you put it in there, the bank really likes you having the money with them, right, they're able to give that out to other people. And they say we'll give you a little bit back, right point zero 1% in your savings account, something that is really small, where they just say, hey, we appreciate you holding your money with us. Now, within the stock market companies issue shares, if you buy a stock in a company, you own a really, really, really small part of that company, and you fund them. So they're able to do all their business operations that they want. So over time, if their business is successful, the value of the money that you gave them increases because they're a better business. That's how you can get return on your investment over time.
KATHERINE:
Okay, so it's like a business deal. You're helping the company fund itself, and then the company to thank you, they give you part of their revenue from the product to you.
MATTHEW:
It's just like Shark Tank, right? You go in you pitch the sharks, right? And they invest in you because they believe in you. And they're not going to give you $500,000 Just because they like you, they're going to give you that money because they think they can get more than that. $500,000 back into their pocket.
KATHERINE:
Hmm. What's your favorite shark tank products?
MATTHEW:
Oh, gosh, I think it's, I'm just looking around at the acoustic tile in here. And I'm, I'm thinking about the scrub daddy, the little the scrub daddy little sponge. And it was it was fascinating. He comes on the show, he brings it out. It's this tiny little sponge, you're not going to sell a sponge for $20. Are you going to make a profit on that? But he did. And it's very successful, and it's gone very far. And he's gotten a lot of publicity out of Shark Tank and made the shark who invested a lot a lot of money.
KATHERINE:
Oh my gosh, I love scrub daddy. So anyways, how does this relate to fossil fuels? Now that we've talked about what investment is, fossil fuel divestment would then mean to take your money out from the holdings that are associated with fossil fuels, whether that's stocks or other forms of monetary support?
MATTHEW:
It's also important to clarify that this divestment is more than simply pulling your money away from these companies, right? That's only a part of the solution. It's about kind of creating a social shift in the public's perspective on fossil fuels, just like with apartheid, if you're going to pull your money out, you're pulling your support from that social issue.
KATHERINE:
Definitely. So the goal then of fossil fuel divestment is to undermine the mission of fossil fuel companies showing the general public the harmful effects of emissions showing that companies do not have the consumers best interests in mind, despite there being a clear link between fossil fuel use and climate change. And companies have downplayed this fact or done greenwashing. So then is the ultimate goal of divestment to stop using fossil fuels for good.
MATTHEW:
It's not to stop them for good. It's to raise awareness to pull this money out so that we have this social identity that we're not going to support the continuation of fossil fuels, right. So this is not stopping them. Once you pull the money out these fossil fuels companies are going to go bankrupt. No, that's not how it works. They're gonna continue doing their operations, but it creates a social shift using monetary values to say, Okay, this isn't right. And let's pursue a different path as we go forward.
KATHERINE:
But then that social shift also helps us transition to a clean energy economy, is that right?
MATTHEW:
If more money is being put into clean energy, then new money is being put into fossil fuel industry, then that's where the support will come from. I personally am invested in clean energy, and it doesn't make as much money as the fossil fuels did over the past few months. But I'm going to hold on to that for 2030 years, because in my mind, I believe that over time, the clean energy sector will be better than the fossil fuel sector. And that's shown to be proven. I mean, Exxon Mobil has had a very poor stock performance versus the s&p 500. It's been performing worse than if you just put your money in a standard fund and just let it sit. If you're going to be the shark on Shark Tank and you invest in Exxon over time, this decline that we're seeing may happen that Exxon Has the risk that you're going to lose most of your money on that investment. So are these investments smart? Right now is the question.
KATHERINE:
Okay, so then how does divestment affect investors and the stock market?
MATTHEW:
That's a great question. And I'm not going to say that I have this answer for this. But I have some ideas. If you pull out the money from the company, right, and other people that hold shares or hold a pieces of that company, they're like, why are they pulling out of that? Why are they taking their money away from this company? What do they know that I don't. And so then if you have this kind of chain reaction a lot and a lot, and a lot of people pull out their money all at the same time, then the value of that company goes down a little bit, the stock market as a whole wouldn't go down. Because now the energy sector has made up a very small percentage of the total stock market, there's a lot of risk of it going way up or way down at any point, because it comprises such a small piece of the full financial sector right now.
KATHERINE:
Oh, my gosh, so this phenomenon is similar to what happened with the whole Gamestop thing?
MATTHEW:
Yeah, exactly. I participate in the Gamestop thing I wrote about it. Wow, the the part of the financial revolution of the small guys, right. So this does make sense where Gamestop was predicted to go down, it was predicted that their stock price would go down. And a lot of big people with a lot of money. Were betting on that. And so everyone said, Hey, no, we want to save GameStop. But we all know GameStop. from our childhood, yes, they didn't give us the money for our games that we wanted to for the resale price. But we said, hey, we don't think that's true, let's inflate the price by buying up a lot of stock. And it put those big guys out of a lot of money. So similarly here, if people bet on that stock market going down over time, and the trend is that it follows it, then people who bet on the downfall of fossil fuels will make money by saying that fossil fuels will go down.
KATHERINE:
However, don't invest in fossil fuels to like, prove us wrong,
MATTHEW:
fossil fuels is not going to behave like GameStop. It's a long standing company. These are things that grow at very slow rates or decline at very slow rates. They're not as volatile as GameStop.
KATHERINE:
Good to hear fossil fuels are on their way down. Okay, so the goal of fossil fuel divestment is not to stop all fossil fuel use because we need energy. It's our way of life. But the goal of divestment is to address the current issue of increasing fossil fuel usage to try and mitigate the effects of climate change. There are some myths out there that might make people skeptical of supporting the divestment movement. So myth one, as stocks go down, like if you take your money out of fossil fuel stocks, what stopping those stocks from being bought by other investors, yes, so
MATTHEW:
that's what we talked about with the social shift. Even if that stock price goes down, it creates an opportunity. So if someone thinks that the stock price is $30, right now, and divestment brings it down to $15, and you want to buy it at $15, because you think it'll go back to 30. That's something that you might decide to do. But if the whole social shift is moving away from investing in fossil fuels, then not a lot of people would be willing to take that bet that it'll go back up to 30. So even if this price decreases, we may not see people buying up those shares at low prices, because they think it's only going to go down further.
KATHERINE:
Yeah, so that ties into the other myth that makes people wary of divesting is that investors will lose money from divesting. But like you said, Matthew, fossil fuel prices are already on their way down, they're already decreasing. So even if they do go up again, the instability of those prices is not ideal if you want to make money.
MATTHEW:
Yeah. And we're thinking over the long term, right? These University endowments have the billions and billions of dollars. They're not going anywhere, anytime soon. And so if you look 2030 years in the future, will there be fossil fuels? If we do take this chance to go Net Zero to actually have a sustainable plan in the future? Will there even be fossil fuels in 30 years to invest in? Right? So that's the question that a lot of universities have to start asking themselves and are asking themselves because of student pressure.
KATHERINE:
Yeah, and even if divestment doesn't lessen the impact of fossil fuels right now, it at least makes a huge impact because it has an enormous political statement associated with it shown to fossil fuel companies that people are standing up to them. And we as a collective society, care about climate change and want to mitigate climate change.
MATTHEW:
Yeah, and on an even smaller sense than that it happens at colleges, too, right? If you have the support of students and faculty and alumni and people on the board, then it may be more successful. But let's dive in a little bit more about what divestment means specifically for the investors that we classify as colleges so how much do colleges actually rely on fossil fuel money.
KATHERINE:
So this is going to differ in different places, because certain states, including Texas, and Alaska have huge oil industries and other states downs. But in those states, there's going to be a lot more people who have ties with these fossil fuel industries.
MATTHEW:
Yeah, right. I mean, if you are going to school in the University of Texas System, and your father is employed by the fossil fuel industry, or somebody that you know, as their livelihood depended on this, then are you going to be the first one to be the activist to say, down with the fossil fuels? Right, like, take your money away from these companies? Because then that's taking away money from people that you know, and that's part of the societal structure,
KATHERINE:
right? Yeah. So it's a difficult question if divestment is always possible, like Matthew said, colleges can be really deep in fossil fuels. A lot of people who control the endowment can have ties to Exxon British Petroleum, and they donate a lot of money. But even if the divestment movement is stuck for a long time, there can still be other changes that happen because of the push for divestment, such as you know, installing solar panels, other climate action. Now, how about other schools that aren't as deeply invested in fossil fuels then is divestment possible?
MATTHEW:
It's definitely possible because you have such small pieces invested? Yes, of course, this is going to be tied to that societal shift that we're talking about, right? Where if you have a society that is in support of fossil fuels, then that may be something where that takes a little bit more convincing, that may take more time to raise up divestment movement. But on the kind of the larger scale, when you're looking at a college endowment, no college is going to be 100% invested in fossil fuels, right? It's going to be something in 10%, or single digit percentages that's invested in this industry that could potentially be moved to other sectors.
KATHERINE:
So then moving on to thinking about the support for divestment on college campuses. And what that landscape is like support from student activists is a really, really important component of the divestment movement, because this translates to pressure on the administration and pressure on the people who control the endowment funds. And yeah, a strong voice is needed. Lots of schools like Harvard, Yale, UT, Austin and Duke, we all have divestment movements that are going on right now.
MATTHEW:
And the support from students means that you have a culture a societal shift that's against this fossil fuel movement. And to think about it alumni were students once faculty are here to support students within their education. And students are here to figure out what they want to do with their lives and do things that you're passionate about. And one of those could be divestment from fossil fuels. If it's within divestment at your own college, whether that's divestment past your college degree, whatever it may be. There's a focus on academia and students to make their impact on the world.
KATHERINE:
Yes, definitely. So Harvard recently announced that they have divested from fossil fuels. Yay. That was just their direct investments, though. Direct Investments are assets that are not managed by external third party asset managers. So Harvard announced its full direct divestment away from fossil fuels. And first, its direct investment in fossil fuels was less than 2% of the endowment. But even then, strong support from students, faculty and alumni were all needed to get them to fully divest. In some actions that you might have seen on the news included the Harvard Yale football game when a bunch of student activist stormed the football field and protested Harvard and Yale stakes in the fossil fuel industry. It was really cool, made a lot of big news headlines. And then in 2020, faculty discussed and voted 179 to 20 in support of divestment. Then that same year, alumni also voted for pro divestment members to the Board of Overseers. So there are moves being made, stuff is happening.
MATTHEW:
It's very encouraging to see this happen on a college campus so quickly to right, these actions are happening in quick succession. But this movement actually has been building for quite some time.
KATHERINE:
Yeah, so the actions that you see on the news may seem like they happen really quickly, but they have years and years and years of organizing behind them. Students at Harvard had been pushing for divestment since 2012. It was like a full almost 10 years before Harvard said that they would divest. In 2013, Harvard President Faust said that Harvard wouldn't divest. So one of the motivations for continuing the divestment movement even after the university president said that they wouldn't we're seeing other schools divest. You know, you don't want to be the last school to divest right, because that just makes you look bad.
MATTHEW:
Yeah, we see it with companies right now. Right, everyone's making their net zero plan and consumers are making decisions based on Oh, well, is this company sustainable or not? How soon is it until students start making college decisions? Partly leaving in mind that, oh, is this school going to be divested or not? Are they dedicated to reducing their investment in fossil fuels, and that's where I'm going to take my academic talents. Maybe that may be a factor in five or 10 years.
KATHERINE:
divestment can take a lot of time, but right now there is growing momentum for it.
MATTHEW:
There's a movement and there's something to get behind. Because like we've said, with apartheid, there's something that's been proven to work. There's something that's currently working right now. And if you bring this pressure with the students, groups that you're in, those student groups will then impact faculty, and then the alumni that you talk to your parents, your friends, it creates an entire culture that shifts away from the investment in fossil fuels. And the idea that fossil fuels are profitable over the long term.
KATHERINE:
Yeah, so wait, imagine that. I'm Thanos right now. divestment is inevitable. Boom. Yes,
MATTHEW:
they're on a big explosion, the world collapses.
KATHERINE:
No, the world will collapse. If we don't get this. The world erupts into like beautiful butterflies in nature.
MATTHEW:
I was envisioning volcanoes spewing and climate change happening and all these things that are inevitable without divestment right? Yeah, yes.
KATHERINE:
Okay. Anyways, we hope you enjoyed this episode. Make sure to tune in to our other episodes on fossil fuel divestment, you'll be ready and prepared to get involved in the divestment movement on your college campus. Thanks so much for tuning into this episode. Make sure to subscribe on Spotify, Apple podcasts or wherever you get your podcasts to make sure you stay updated about future episodes, head to our website at bit.ly/operationclimatepodcast for a full transcript of this episode, and for links that you can explore to learn more about this topic that we covered today. To also keep updated with us follow us on our socials. We are @Operationclimate on Instagram, @opclimate on Twitter and @Operationclimate on Tik Tok. And we want to hear from you. So give us a rating and review on Spotify and Apple podcasts. That would be so so amazing. And we value your feedback a lot. We want to keep on creating high quality content for you guys. So please go and do that. And yeah, hope to see you next time. Bye