Fossil fuel divestment is a moral imperative, a political strategy, and a prudent financial choice.
Fossil fuel divestment is the shifting of investments from fossil fuels, which make up approximately 6% of UBC's endowment, to alternative investments.
Morally, it is wrong to directly bet against our future by investing in industries where 80% of carbon reserves must stay in the ground to avoid the most catastrophic impacts of climate change. That is, to have a reasonable chance of limiting global warming to the internationally agreed upon 2°C. It is morally wrong to support, though our investments, an industry that continues to use its financial resources and lobbying power to undermine fair and needed climate policy.
Politically, divestment challenges the social license of fossil fuel companies to continue expanding the scale of fossil fuel extraction and to continue lobbying against climate policy. Divestment changes social norms and helps build political support for economy-wide solutions, like carbon pricing or appropriate regulations, that are needed reduce all of our emissions and tackle this global tragedy of the commons.
Financially, divestment protects UBC’s endowment from the risks of a "carbon bubble.” As the governor of the Bank of England, Mark Carney, has warned, the "vast majority of reserves are unburnable” if we are to achieve our 2°C commitment. This poses a grave financial risk to investments in the fossil fuel industry whose bottom line, and stock prices, would be significantly affected by society getting serious about addressing climate change. And getting serious is what we need.
The UBC divestment campaign is part of a growing global movement. Over 500 institutions representing over $3.4 trillion in assets have already committed to divest.
What we're calling for
"We call on UBC to immediately forgo further investments in fossil fuel companies, and to divest from all existing fossil fuel holdings within five years."
Fossil free funds already exist and offer equivalent returns to those including fossil fuels. The five year time period allows UBC to responsibly reinvest from the top 200 publicly traded fossil fuel companies to alternative investments that fund managers recommend.
The carbon reserves of these 200 companies alone are almost 5 times greater than the maximum amount of carbon humanity can release if we are to have an 80% or better chance of keeping the rise in average global temperature within 2C.
What does this mean for Canada? We need to reduce our carbon emissions by a minimum of 30% in the next 15 years, and by close to 100% by 2070. If we allocate the remaining carbon budget equally - giving people in lower income nations the right to emit carbon emissions as much as we do, as many think is fair - then Canada needs to reduce its emissions to 0 by 2030. Business as usual investing is no longer enough.
If these reserves cannot be burned, then remaining invested in the full scale of the fossil fuel industry - as UBC is - exposes our endowment to this risk of "stranded assets."
The list of 200 companies is compiled by Fossil Free Indexes and is used by most divestment campaigns.
Divestment at UBC
The divestment campaign was started by students from UBCC350 in 2013. In under three years we've had thousands of face to face conversations with students and faculty, organized a petition receiving over a thousand student signatures, and have spent days procrastinating on our essays in order to research climate change, divestment, and ensure we've got our facts straight.
As a result of our efforts 6786 UBC students (76.9% of voters) voted in support of the following 2014 AMS referendum question:
- Whereas the University of British Columbia has demonstrated a strong commitment to environmental sustainability, and whereas it is unconscionable to fund our education with investments in fossil fuels that threaten our future on this planet, UBC should immediately forgo further investments in fossil fuel companies, and divest from all existing fossil fuel holdings within five years. Do you call on the Alma Mater Society to make all reasonable efforts to urge UBC to divest from fossil fuels?
Divestment is now official policy of the UBC Alma Mater Society!
- AMS Policy: "UBC should take all possible measures to forgo future investments in fossil fuel companies and divest from all existing fossil fuel holdings within five years"
In February 2015 the faculty joined UBC students by voting 62% in favour of divestment in their own University-wide referendum, and 228 signed our open letter.
With two major campus constituencies in support of divestment the AMS and UBCC350 submitted a proposal to the UBC Board of Governors. We hoped this proposal would start a discussion and collaboration with the Board about UBC's investments, their role in climate change, and divestment.
The UBC Board of Governors' Response
The UBC Board of Governors' response to divestment has been a fundamentally inadequate and flawed process.
The Board's decision to reject our divestment proposal was based on an alarmingly wrong interpretation of their own legal mandate, a set of illogical and nearly impossible to satisfy criteria, and resulted in the creation of a deeply flawed "Sustainable Future Fund."
The Board's lack of consultation and consideration of evidence is embarrassing compared to the thorough consideration of divestment undertaken by other Canadian Universities.
The many shortcomings were addressed in our open letter to the Board that we released prior to the Board's final vote against divestment.
Because of this significant failure of fair process by the Board, we do not accept the rejection of our proposal. It is notable and commendable that none of the student representatives on the Board - those most facing the consequences of climate change - voted against the divestment proposal, and all spoke out about this governance failure.
The UBC community deserves an open, transparent, timely, and evidence-based consideration of divestment. Indeed, that is the minimum standard to which students and faculty are entitled after two university wide referendum votes in favour of divestment.
The Board's "ill-informed understanding of the university’s legal obligations"
The Board has repeatedly claimed that divestment “would not be consistent with the board’s fiduciary obligation to endowment donors.”
That this is wrong is most clearly demonstrated through what two UBC law professors, including a former University Counsel and Vice President External and Legal Affairs, wrote in the Ubyssey.
"underlying this decision [to reject divestment] is a misleading and ill-informed understanding of the university’s legal obligations with respect to its endowment funds. This misrepresentation of the university’s legal obligations only serves to enhance the mounting transparency and accountability issues currently facing the board."
The Board's interpretation of fiduciary duty appears to contradict a legal opinion obtained by the University of Toronto President’s Advisory Committee on Divestment as well as previous research from UBC's Allard School of Law.
Illogical and nearly impossible to satisfy criteria
The Board's "Responsible Investment Policy" was curiously released shortly after divestment proponents first asked UBC to consider the issue. It sets out 5 criteria which at face value are not unreasonable. However, the fine print requires a level of proof that is nearly impossible to satisfy. For example the Policy specifies that:
- Divestment from a sector should not facilitate investment opportunities for less responsible investors.
- This misunderstands how markets function. Selling stocks, whether for divestment or during routine management of the endowment, facilitates an investment opportunity for a less responsible investor. Imagine applying this criteria to an extreme investment, such as an arms company selling weapons to ISIS. Would UBC really argue that the existence of less responsible investors would stop them from divesting such a company?
- Reasonable evidence that divestment is an effective way to achieve the desired outcome. This would be most compelling if divestment changes the behaviour of an offending company or industry.
- This is not what divestment aims to achieve. It's not about incremental improvements in the operation of a coal company; it's ultimately about policy changes that reduce the use of fossil fuels by all of us.
- Absence of alternative policies that are as effective at a lower cost, or more effective at the same cost.
- Asking us to prove that divestment is the most effective policy at addressing climate change is, frankly, completely bizarre. Divestment should be undertaken if it is judged to be morally right, effective, and reasonable, not only if it is proved to be the most cost-effective policy in existence. We would love to see UBC attempt a benefit-cost analysis on political strategies like divestment. Good luck with that, UBC.
- The choice to divest should be demonstrably superior to our engagement.
- The UBC administration must be more optimistic than we are, since we don't hold out much hope that politely asking coal companies to shut down their operations will be effective. UBC should be undertaking both engagement and divestment where appropriate. Right now, they are doing neither. Asking us to prove that divestment is superior misses the point.
Failure to undertake any fair process
The UBC Board's consideration of divestment consisted of taking a single divestment proposal and excluding all other evidence for divestment, handing it to a lawyer, and asking if we'd satisfied the Board's illogical criteria. We think this was a sham intended to reach a pre-determined conclusion - to reject divestment.
The Committee refused to meet with us at any point in their deliberations, despite our repeated requests (including on 21 May 2015; 3 June 2015; 16 June 2015; 22 June 2015; 25 September 2015).
The day before the Finance Committee held its first public meeting on divestment - the first time we were allowed to address the Board - they accidentally released the wrong agenda. This revealed the recommendation was to "not support the Fossil Fuels Divestment proposal, as it is not consistent with the University’s fiduciary responsibility."
Not only did the Board get one of its central mandates - fiduciary responsibility - wrong, it tried to pass off a meeting with a foregone conclusion as "consultation."
The deeply flawed "Sustainable Future Fund"
By creating a $10 million "Sustainable Future Fund" from a $1.4 billion endowment the Board has recognized they now have a $1.39 billion dollar "Unsustainable Future Fund."
We would like to remind the Board that 0.7% of the endowment is not a passing grade at UBC.
The tiny Sustainable Future Fund itself has serious problems and may include coal investments as being "low carbon." We explain how UBC does this and address the fund here.
Globe and Mail, February 15 2016, UBC board of governors rejects proposal to divest from fossil fuels
Globe and Mail, October 1 2015, UBC urged to lead on fossil-fuel divestment
CBC News, February 15 2016, UBC board of governors votes against divestment from fossil fuel industry
Vancouver Sun, February 1 2016, UBC board to vote on fossil fuel divestment
The Tyee, February 16 2016 UBC Rejects Divestment against 'Expressed Will' of Students and Faculty, Says Campaigner
Vancouver Magazine, February 26 2016, The Van Mag follow-up: Divest UBC’s Alex Hemingway
Vancouver Magazine, February 23 2016, The Van Mag Q and A: UBC’s Philip Steenkamp on divestment
Huffington Post, February 15 2016 University of British Columbia Votes To Keep Fossil Fuel Investments
CKNW AM 980 Radio, February 15 2016 BC’s board of governors vote not to divest from fossil fuel investments
Ubyssey, March 15 2016, UBC divestment decision based on perplexing understanding of legal obligations
Macleans, April 17 2014, UBC policy addresses fossil fuel ‘divestment’
National Observer, February 3rd, 2016, UBC Finance Committee rejects fossil fuel divestment
Vancouver Sun, October 22nd, 2014 Opinion: Fossil-fuel divestment urged at UBC
Vancouver Sun, January 27, 2016 Opinion: The growing cost of UBC’s fossil fuel gambit
Vancouver Observer, February 6, 2015UBC economics prof: I am voting yes to divest fossil fuels
CTV News Canada AM: Universities Divesting Fossil Fuels