Divestment has become pointless

According to the federal government, 87 percent of the United States’ energy comes from fossil fuels.

In three weeks the University Senate ­­— Loyola’s shared governance body with faculty, staff and students — will convene to discuss the possibility of divesting university stocks in fossil fuel companies. This initiative has been building for at least the past two years and so far has gone nowhere. Divesting from fossil fuels is still a bad idea.

I have covered my objections to the initiative in The Phoenix in the past. My arguments boil down to two main points: First, divestment would harm the greater economy; second, divestment is a premature policy goal because alternative energy resources aren’t ready to replace fossil fuels. There is now a third point: Dropping our investments would remove any leverage we have to change the industry.

Owning stocks is relatively straightforward. To purchase a stock is literally to purchase part of the company. Stockholders are, in a sense, co-owners of the corporation in which they are invested. In practical terms, this means stockholders get a say in how a corporation is run. Thus, when Loyola invests in fossil fuel companies, it also gets leverage over the company and has the opportunity to direct the company toward more sustainable technology, such as electric cars or solar power.

Removing Loyola’s voice — and thus its leverage — from fossil fuel companies will actually have a negative effect, not a positive one. Taking away leverage, from Loyola and other divested institutions, will allow the fossil fuel corporations to double down on fossil fuel production, instead of being nudged and encouraged from the inside to invest more in sustainable research. To use an analogy, the president is more willing to listen to those in his inner circle (the cabinet) and will block out everyone else (congressional opponents).

What divestment proponents miss is the fact that the renewable energy sector is not even close to being able to replace fossil fuels. Furthermore, researching improvement to renewable energy takes time and requires resources that would be undermined by a premature turn toward unreliable renewable energy. It is better to invest in renewable research with the profits gained by fossil fuels than to invest in research when the fossil fuel industry is already dismantled.

Contrary to the line of thought of divestment proponents, immediate divestment will not speed up a transition to renewable energy for the simple reason that renewables are not at a level to replace traditional fuels. This is a simple fact and the statistics show it. The U.S. Energy Information Agency –– an arm of the federal government –– reports that only 13 percent of energy produced in the U.S. came from renewable resources in 2013. With such a large disparity between fossil fuels and renewables, divestment is the wrong goal at the wrong time.

Which brings me to the point that is largely missed: What’s the point of divestment anyway? The movement’s lofty goals get lost the more it is examined. First, fossil fuels won’t go away, no matter who divests, whether Loyola divests or not. Secondly, there will be a slower transition to renewables if leverage cannot be exerted from stakeholders. And creating a “socially just” investment portfolio is merely an illusion –– after all, how is it “just” to pass off supposedly immoral fossil fuel stocks to someone else?

So really, what’s the point of divestment?


Dominic Lynch is Opinion Editor.

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