NEW YORK, NY, May 3, 2017 – On Monday, the Independent Petroleum Association of America issued a new report arguing that fossil fuel divestment is costly for students, pensioners, and stakeholders.
The report was released days after hundreds of thousands of people mobilized for the Peoples Climate March, and a week before thousands around the world will take part in the Global Divestment Mobilization. This mobilization is taking place across 39 countries, including through five events across New York, and is intensifying the demand for divestment from the fossil fuel companies most responsible for causing climate change. As Donald Trump stacks his cabinet with fossil fuel billionaires including Exxon’s own Rex Tillerson and industry puppet Scott Pruitt, communities are demonstrating resistance to the administration’s rollbacks on hard-won protections for people and our planet.
In the last few years, multiple reports from financial and legal experts, such as Corporate Knights, the Center for International Environmental Law, Trillium Asset Management, and Mercer, reveal that major university endowments and pension funds, such as those of Harvard University and New York State, have or will incur billions in losses from continued investments in fossil fuels.
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Amid a glut of supply, Exxon and many of its industry peers poured billions into the dangerous Alberta tar sands at the expense of the climate and their investors. Now oil majors, such as Exxon and Shell, are shedding fossil fuel assets, incurring billions in losses as the transition away from the carbon-intensive economy gets underway. ExxonMobil, whose executives have spent the last half a century sowing doubt about the company’s own climate research, has claimed these divested reserves cannot be considered economical under the Securities and Exchange Commission’s accounting rules. Investigations have revealed that Shell also knew about climate change in the early 1990s. The company’s CEO recently noted that one of the industry’s greatest obstacles today is waning public support. As coal companies declare bankruptcy and fossil fuel companies incur plummeting profits, low-income communities, communities of color, and workers bear the brunt of the industry’s failure.
To date, over 700 institutions and more than 58,000 individuals representing over $5.4 trillion in assets have committed to some level of divestment. Just last week, Harvard University announced it is “pausing” its investments in fossil fuels, and the historic Riverside Church in New York announced it is fully divesting. Additional commitments include Amalgamated Bank, the University of California system, the Norwegian Sovereign Wealth Fund, 25 percent of all UK universities, and institutions across more than 77 countries.
Mark Campanale Carbon Tracker Initiative Founder & Executive Director, said:
“There is clear evidence that past behaviour in markets won’t be repeated in the future. There is a transition going on and at some point, falling demand for oil will lead to long periods of low oil prices, lowering return on capital, and making the whole sector uneconomic.”
Katie McChesney, 350.org US Divestment Campaign Manager, said:
“This report shows the fossil fuel industry attempting to make its last stand, as it pours even further resources into promoting doubt and delay over action on climate change. Divestment doesn’t increase risk, it lowers it by insulating an investment portfolio from the volatile and dangerous fossil fuel sector. Just days before the massive Peoples Climate March, Harvard announced it will pause its investments in fossil fuels. If institutions truly support the future they’re preparing stakeholders for, they must heed the warnings of the thousands in next week’s Global Divestment Mobilization, and cut ties with the coal, oil and gas companies perpetuating climate impacts.”
Tom Sanzillo, Director of the Finance Institute for Energy Economics and Financial Analysis (IEEFA.Org), said:
“For the last five years Exxon Mobil the oil industry’s leader has lagged the Dow Jones Industrial Average dramatically. In its place other stocks like Apple and Microsoft have driven the returns of institutional investors large and small. The rest of the oil and gas industry have done worse. Professor Bessbinder’s paper fails to mention this material fact and that the entire coal industry has collapsed financially and cost investors billions. As a former manager of a large public pension fund I would never hire an academic for investment advice or to advise me in fee negotiations. The Professor’s paper lacks an understanding of the divestment question, knowledge of the internal workings of institutional investors and any appreciation of the interaction of market forces and public policy. “F” for missing the obvious, the fossil fuel industries are now less profitable than other stocks and face a negative financial outlook. Climate issues and structurally changing markets make past performance a very poor predictor of future profits.”
Denise Patel, DivestInvest Network Coordinator said,
“The IPAA’s assessment relies on alternative facts when the reality is that a transition away from fossil fuels is clearly underway. The scholarship on mounting financial risk for oil and gas companies continues to grow. Last week, Moody’s cited lower demand for oil and gas over time, changing consumer preferences, and disruptive technological shocks as material risks to oil and gas companies. The report also shows that consequent price volatility and rising pressure on margins and cash flows will lead to stranded assets. The once reliable returns of fossil fuel investments will soon be the riskiest investments in endowment and pension fund portfolios as historical returns are not necessarily indicators of future performance. The implications of holding onto that level of climate risk for university endowments and pension funds are high, and responsible fiduciaries should divest to protect students and pensioners.”