A growing movement centred around academic institutions in the US is pushing for pension disinvestment from fossil fuel companies. The argument holds that quazi-public investment in an industry that may imperil the environment and our collective future runs counter to the public good orientation that such institutes of higher learning provide, i.e., “we” shouldn’t be investing in and profiting from organizations that harm “us”.
In their own words (see more at http://math.350.org )
“it just doesn’t make sense for universities to invest in a system that will leave their students no livable planet to use their degrees on, or for pension funds to invest in corporations that will ruin the world we plan to retire in.”
I have no qualms whatsoever with the moral basis of such decisions. I’ve taken similar investment decisions with holdings whose operations I disagreed with. The question I’d like to explore is whether disinvestment is effective in changing what some may define as unwanted behaviour, and if this can’t be proven as effective, what alternatives might exist.
Is it effective?
The most referenced comparison to such campaigns is the 1980s disinvestment campaign against Apartheid South Africa, and its effect on the then-ruling P.W. Botha government. Unfortunately, and despite oft-repeated claims, the campaigns role in ending the apartheid era is far from clear. We do know that by the end of the 1980s, 90 cities, 22 counties and 26 states had taken some action to divest from South African based companies. Moreover, 55 universities and colleges either partially or fully divested. According to the Los Angeles Times (Jan 19, 1987), by the end of 1986, 245 institutions had adopted policies that would “affect” over $260 billion of capital. What is meant by the term “affect” is unclear, and a look at state pension disinvestment shows only $14 billion in actual announced removals. Moreover, given FDI levels in South Africa at the time, the actual figure is much more likely to be at the bottom of the $14-260 billion spectrum. This is supported by the research of author Richard Knight who finds that over $25 billion RAND was withdrawn from the country between 1984 and 1988, which at then-prevailing exchange rates amounts to roughly $15 million USD.