The call for endowed non-profits, such as universities, churches, and public pension funds, to sell–“divest” themselves—of investments in oil, gas and coal has reached a crescendo. This call comes from many of the most respected voices in our academic and church communities. They cite ecology and morality, making unimpeachable arguments on the need to slow climate change and save the Earth for future generations. However, they fail to show a good command of economics.
Corporations selling “sin stocks”—alcohol, tobacco, gambling etc.—on average, sell at a discount, meaning they provide bigger returns/dividends on capital than other stocks. Divestment would put fossil fuel companies in this “sin stock” category, with Exxon-Mobil being the largest. Widespread divestment of Exxon-Mobil would lead to a small decline in its price, making it an even more attractive investment for those seeking income or building portfolio value through reinvestment of dividends. And consumption of refinery products and concomitant pollution would not be affected.
We’re seeking effective ways to reduce hydrocarbon consumption, but all are politically difficult. They mean raising the cost of gas at the pump and reducing costs to consumers of alternative fuels and energy. Higher taxes on the one, subsidies for the other. Besides ending the multibillion dollar subsidies still received by fossil fuel companies, we want tougher regulation of their production, transmission and consumption. I would argue that remaining as stockholders represented on corporate boards, and using proxy services to mobilize like-minded stockholders, we can press for redirection of more investment to solar and wind power.
Should we support divestment of fossil fuel companies? Don Quixote, in an early era of energy technology, offered a noble but feckless example in taking on windmills. Pontius Pilate’s example would suggest we wash our hands of the multi-trillion dollar fossil fuel industry, which still heats and powers most of the world. Let’s make a better strategic choice: Like Rosa Parks, let’s stay on the bus, speak up, and support action that works!
Harry Montgomery, Williamstown