As future leaders, we all have a responsibility to do what we can to advocate for solutions to climate change. With approximately $3 billion invested, the University of California system is in a powerful position to influence the fossil fuel industry as an important shareholder. When one divests on moral or ideological grounds, one guarantees that the assets will be controlled and managed by a new party that cares less about the ideas and morals that led to the divestment. In the United States, the boards of directors of public corporations have a fiduciary responsibility to seek profits for the common shareholders. If the owners (shareholders) of the fossil fuel industry do not care about climate change, the companies are legally obligated to similarly not care. Rather than divest, the UC system should exercise its role as a prominent shareholder to pressure fossil fuel companies to adopt more forward-looking policies to address climate change.
Previous divestment efforts have proved largely ineffective as a strategy to curtail undesirable practices among corporations. In the past, there was a national effort to divest from the tobacco industry due to the known public health consequences of tobacco consumption. Aside from negative publicity, divestment efforts were largely inconsequential. In fact, depressing an industry’s stock prices due to large-scale divestment tends to boost the return on equity available to the remaining shareholders through more effective share buybacks and dividend reinvestment; Philip Morris (now Altria) was one of the highest returning stocks of the past 50 years. The real success of the anti-tobacco movement in the United States, aside from public smoking bans, arose from targeted health advocacy to disseminate information on the negative health effects of smoking.
The energy industry contains some of the world’s most highly qualified scientists, skilled workers and engineers who work on the most challenging problems of our generation. The mission of the energy sector is to efficiently and safely implement proven technologies in pursuit of affordable energy. For the first time, we are beginning to see renewable energy emerge as a viable large-scale commercial option. Our generation is accustomed to rapid progress and is understandably frustrated by the snail’s pace of the energy sector. However, the energy grid is comprised of hundreds of billions of dollars of existing infrastructure and has been developed for over a hundred years; it is not amenable to rapid change.
Moreover, as an educated student body, we must carefully articulate what it is we hope to achieve and view the energy sector with long-term objectives. For instance, the Obama administration opposed the expansion of many activities such as the use of Canadian oil sands, coal power generation and oil exploration in the Arctic Ocean because these activities have a relatively high environmental impact. On the other hand, the Obama administration strongly encouraged the expansion of hydraulic fracturing, or “fracking,” as a transitional technology to the renewable age. In fact, the United States’ carbon emissions declined by 12 percent from 2005 to 2015, due to the increased use of natural gas over coal for power generation.
A recent article in the Daily Nexus claimed that Chancellor Henry T. Yang has endorsed Fossil Free UCSB in its calls for divestment. His statement has been misconstrued; he did offer his support to the activists, but he did not explicitly endorse a divestment from fossil fuel industries.
“I stand by our students who have been sitting in calling for fossil fuel divestment this past week and support their aims … In the coming week, I look forward to working with my fellow chancellors in support of a thorough and transparent discussion on divestment from fossil fuels as part of the UC’s approach to combating the climate crisis.”
It is encouraging to see an administrator engaged with the student body, although his response leaves much to be desired. As a highly qualified engineer and scientist, Chancellor Yang could use this opportunity as a teaching moment to provide more direction to the activists. Under President Donald J. Trump, research institutions and regulatory agencies are under assault, and now more than ever we need common-sense actions on climate change. Above all, I commend the organizers of Fossil Free UCSB for their impressive achievement and successful display of civil disobedience, but I suggest a more constructive approach. Lobby for new policy to clarify the UC system’s relationship with fossil fuel industries, and engage the regents to commit strongly to climate advocacy in their capacity as shareholders. This includes advocating for increased funding of renewable energy initiatives and fundamental research at our universities and national laboratories, improved regulatory oversight for fracking wastewater disposal and other pollutants and a “revenue-neutral” tax on carbon emissions.
Even if it otherwise makes sense to divest, the chancellors must consider the impact divestment is likely to have on our community. The UC system has a responsibility to its students and to the California taxpayers to effectively manage its resources in pursuit of its strategic mission. Divestment on moral grounds reduces the universe of potential investments, and this can only decrease the returns available to the overall portfolio. Can the chancellors demonstrate that the opportunity cost of divesting from fossil fuels does not significantly impact the growth of our system’s endowment or the quality of our institution?
Nathan Prisco is a second-year graduate student in the Department of Chemical Engineering at UCSB. Prior to graduate school, he worked as a pollution control engineer for a coal power company in Beijing, China.