Letter to the Editor: “The Divestment Penalty”? Less Reliable Than You’d Think
May 2, 2016
As members of NYU Divest, we encourage the airing of opposing viewpoints. That said, we are disappointed with the approach taken in a recent article in Washington Square News: “Divestment: More Controversial than You Think.” The article sets out to report on dissenting campus voices, which perhaps relieves it of the need to “provide both sides of the story.” However, misleading statements do not belong in WSN’s News section, where readers expect minimal or tempered bias.
The article originally stated as fact that “divesting from fossil fuels will cause a decrease in the university’s endowment.” At the time of publishing, it relied solely on a study by Bradford Cornell titled “The Divestment Penalty,” which was produced in concert with Divestmentfacts.com. This website was recently erected by the Independent Petroleum Association of America, which outfits itself as “the leading, national upstream trade association representing oil and natural gas producers that drill 95 percent of the nation’s oil and natural gas wells.”
Divestmentfacts.com has worked to misrepresent and belittle students in the fossil fuel divestment movement. Relying solely on this PR campaign for information, without considering the wealth of reputable research on returns to carbon-free portfolios and other divestment strategies, undermines the article’s credibility.
Cornell’s study cannot be used as standalone evidence against fossil fuel divestment. It bases its predictions on fossil fuel performance from the last 50 years, which is not a sufficiently robust indicator of future performance for any industry. This especially applies to an industry that faces increasing government regulation and competition with renewables, and which in coming years must suffer extensive limits to extraction if our planet is to remain minimally livable.
The fact that an oil association would incur the costs necessary to regularly maintain and update Divestmentfacts.com attests to the significance of divestment in the minds of fossil fuel companies. Though some of the students interviewed in this piece doubt the effectiveness of divestment in addressing climate change, the prospect of divestment rightfully frightens fossil fuel companies because it signals our institution’s commitment to the swift decarbonization of our economy, our political system and our lifestyles.
NYU Divest is committed to affordability at NYU, and understands that a healthy endowment is, among other factors, important for financial aid. There is evidence that fossil fuel divestment would improve affordability rather than hindering it.
Our university’s Divestment Working Group reported that divestment from direct holdings in fossil fuels would not incur a significant returns penalty. Many prominent financial institutions, such as the Bank of England, have warned that fossil fuels are a risky investment. Fossil fuel stocks are likely greatly overvalued because the reserves they include as assets are vulnerable to climate policy. Additionally, recent performance of fossil fuel investments has not been encouraging. A recent report from Corporate Knights found that the New York State Pension fund lost $5.3 billion dollars in the last three years by retaining investments in the top 200 coal, oil and gas companies. A strong argument can be made that NYU’s endowment exposes itself to considerable risk by continuing to invest in fossil fuels.
Our campaign discusses the financial dimensions of fossil fuel divestment on a regular basis and has provided the University Senate and the Board of Trustees with diverse and sophisticated research demonstrating that divestment makes financial sense. In response to this article, we are now working to compile the aforementioned research on our website so that the entire NYU community can access it. In the meantime, readers can refer to our Faculty Open Letter or to Columbia Divest’s page for research on the financial impact of divestment.
Divestment affirms and deepens the positive steps that NYU is already taking in reducing its emissions, producing important research in every discipline and educating the next generation of climate leaders. We do not accept the false dichotomy, which exists in the aforementioned article and elsewhere, between these two fields of action.
Stocking up on nicotine gum does nothing to cure an addiction if the addict plans on purchasing more and more cigarettes every day. Likewise, to transform the global energy mix, aggregating investments in renewables is not enough: enormous amounts of capital must be diverted away from dirty energy. So far, governments are not getting the memo. They are spending $550 billion a year to subsidize fossil fuels. This is inefficient, unfair and frankly terrifying. Today, taking climate change seriously means ending financial support for polluters, merchants of doubt and obstructionists and ultimately phasing out their operations. It would be naive to settle for a solution which excludes this future-facing, system-oriented step.
We ask that climate change and divestment issues, like all issues, be given well-researched consideration in future discussions both in our university and in its student publications.
Lola Jusidman and Olivia Rich are members of NYU Divest.