Fossil Free MU Official Response to Glyn Davis' Statement that the University will not Divest
University of Melbourne Vice-Chancellor Glyn Davis recently released a statement in this newspaper regarding its fossil fuel investments. This came in response to our campaign, Fossil Free Melbourne University, which is calling on the University to stop investing in companies whose primary business is the extraction, exploration, processing and transportation of fossil fuels.
While the statement never explicitly declined the call to divest, we can only gather, from the excuses offered, that this was its intention.
This response reveals the absence of a serious commitment to the environmental rhetoric put forward by the University and a failure to recognise the profound ties between financial decisions and their destructive consequences for the environment. Moreover, the assertions made in the statement around financial risk, which form the basis of the University’s decision not to divest, do not accurately reflect recent findings in this field.
Work done by UK-based think tank Carbon Tracker and Oxford University’s Smith School highlight that fossil fuel assets are at grave risk of becoming stranded, given the necessity to keep fossil fuels in the ground to maintain a safe climate. Through legislation that limits emissions, the growth of renewables and social and political pressure, these reserves will be kept in the ground. What this means for the fossil fuel industry is that their assets are overvalued and we are sitting on a speculative carbon bubble unless we start to account for these risks in our financial system and act accordingly.
Not only are fossil fuels assets increasingly risky, a point not fully explored in Professor Davis’ statement, but the arguments put forward around needing to continue to invest in fossil fuels to maintain profitability are not in keeping with the facts. Last month, the Australia Institute, in collaboration with Investment Management Firm Aperio Group, released a paper demonstrating that ASX fossil-free portfolios come with a 0.001 (negligible) performance impact. There is a wealth of evidence that shows that socially responsible investment portfolios do not suffer performance penalties. We know that this evidence is available to the University’s Investment Management Committee, which makes us especially disappointed about the superficial level of engagement at which they have chosen to approach the issue.
Furthermore, we think it is extremely problematic to frame divestment in a way that pitches “financial responsibility” against social and envionmental responsibility, as though these outcomes can be disentangled. We know that carbon investments can only ever be short-term. If we want to avoid global warming of beyond 2°C, we must act in this decade and we cannot burn (and thus buy or sell) most of the carbon we can access. Fossil fuel investments are still profitable because investors and the fossil fuel industry continue to bet against climate change. When the University chooses to ignore this, it is complicit in that bet.
We recognise that changing its portfolio will initially require the University to do additional work. This is work that needs to be done to fulfil its commitment to sustainability. The cost of divestment now is small, especially when shouldered by large institutions, compared to the devastating costs of climate change impacts that will be shouldered by individuals and communities.
The statement lists the University’s impressive sustainability credentials. While this work is important, we don’t see its relevance to the issue of divestment. It doesn’t make sense to use the work being done towards solutions on the one hand as an excuse for the damage enacted on the other.
We call on the University to approach climate change with the seriousness it deserves. We sincerely hope the University will reconsider its decision not to divest, both from the perspective of financial risk and its responsibility to future generations.
Fossil Free Melbourne University, April 2014