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July 2, 2015

Influential Oxford report from 2013 says a lot about divestment – but doesn’t say to divest

Last month, The New York Times published a fairly balanced report taking a closer look at what fossil-fuel divestment proponents are actually trying to accomplish with their campaigns, stipulating at the start that the effort isn’t really about trying to affect the valuations of the companies being targeted.

Of course, not all divestment activists concede this basic point – by admitting they have no power (or even ambition) to impact companies’ financial position, they open themselves up to a “Right, then what’s the point?” type of criticism. But, for most rational observers, that ship left port a long time ago. Not only doesn’t divestment result in the removal of a single molecule of carbon dioxide (or any other GHG) from the atmosphere, it doesn’t inflict any discernable financial harm upon companies that are the object of the campaign. That part’s settled.

So, if divestment can’t achieve either of those ends, what exactly can it do, again? To hear activists tell it, divestment is about reframing the way that the general public views producers of energy – attaching a stigma to those companies in a way that injures their ability to participate in the political and regulatory review process, which will eventually create additional space for politicians to pass legislation aimed at further restricting the development and use of fossil fuels.

On its own, this Rube-Goldbergian defense of divestment would be a tough concept to sell – an elevator pitch shouldn’t require multiple elevators, as they say. But a report produced in 2013 by the University of Oxford’s “Stranded Asset Programme” has frequently been used as the Q.E.D. reply to all those with the temerity to question whether divestment actually has any meaningful purpose. And so it was called upon once again most recently in The New York Times, where the report was cited as a blueprint for how divestment can be used to stigmatize energy producers. The Times even declared it the “most exhaustive study” ever conducted on the value of divestment.

But you know the really interesting thing about that report? Notwithstanding the fact that it was produced by researchers who support divestment, and whose work was financed in full by groups that support divestment too, the paper itself stops short of advocating for full divestment, citing a number of reasons that – credit where credit is due – actually make a lot of sense. We’ll get to all those in just a bit.

Before we do, though, here’s a section of the Oxford report that we believe really warrants special attention:

“If during the stigmatisation process, campaigners are able to create the expectation that the government might legislate to levy a carbon tax, which would have the effect of depressing demand, then they will materially increase the uncertainty surrounding the future cash flows of fossil fuel companies.” (p. 14)

This, right here, is the piece of the “stranded assets” and divestment (co-)argument that too often gets swept under the rug – the part where we’re actually told in specific terms which climate policies we should expect world governments to implement if activists are successful in stigmatizing the energy sector. According to Oxford, the goal of divestment … is to pass a carbon tax. The fact that most of the largest, non-state-owned oil and gas companies in the world already support implementation of a carbon tax (no need to stigmatize them, it’s already their official policy) is an irony that, apparently, has been lost on everyone.

Meanwhile, the report also points out that the companies being targeted by divestment activists are actually “minor players compared to the national oil companies, such as Saudi Aramco or Iran’s NIOC.” The chart below, found in the Oxford report, puts this neatly into context:


The report identifies this factor as one of the primary reasons that divestment qua tool-to-strand-fossil-fuel-assets is unlikely to be successful. No wonder, then, that one of the coauthors of the Oxford report, Atif Ansar, admitted to the New York Times that, “[d]ivestment in itself is neither here nor there. On its own, it’s not going to generate any real impact.”

Perhaps that’s why the authors of the Oxford report actually recommend against full divestment.  As the report concludes:

Divestment is the most drastic instrument in an investor’s corporate engagement toolkit. Communication with management of the target firm might be more effective in influencing corporate behaviour than divestment. Encourage investors to engage with fossil fuel companies to change corporate decision-making.

Finally, what should we make of the activists’ contention – which they say is corroborated by the Oxford study — that the divestment effort is the “fastest growing” movement in history? Well, the Oxford paper doesn’t actually say anything like that, but it does reference the decision by a handful of small liberal art schools (none with significant endowments) to divest as evidence of momentum behind the campaign:


Of course, none other than Naomi Klein, one of the leaders of the divestment effort, referred to these pledges in 2013 as “provisional victories” and that “[t]]here are still all kinds of details to work out to toughen up these pledges.” Three years later, the number of schools that have decided to divest hasn’t grown much at all. In fact, Oxford itself rejected full divestment. As for those schools that have gone down that road, Bloomberg recently found they are mostly “empty gestures.” Of course, since the report was released, a number of leading schools across the country have rejected divestment, including Harvard, Yale, the University of California, and even Bill McKibben’s own school, Middlebury College.

Not included in the report, however, is the number of environmental groups that have not divested. As Klein also wrote, “I am proud to have been part of the group at 350.org that worked with students and other partners to develop the Fossil Free campaign. But I now realize that an important target is missing from the list: the environmental organizations themselves.” Klein, however, failed to mention that her own funders, the Rockefeller Brothers Fund, have not fully divested either. If groups supporting the divestment cause aren’t divesting themselves, how serious and credible can the movement actually be?

In the end, the Oxford study provides plenty of good information about the divestment movement and makes for a good, informative read. While activists have done a great job of cherry-picking sections of the report they like, and presenting them to reporters as evidence that serious researchers from serious schools see value in divestment, the actual text of the report itself tells a slightly different story.