Investing in a sustainable future: climate change and the university

The world’s future has not been looking good for a while, and now it is fully visible. According to a study published by NASA, in the next half of this century droughts in American south-west and central plains could last 30 to 40 years at a time. Similarly, a recent UN report outlines how, within a decade, 2.9 billion people in 48 nations will experience chronic water scarcity and food shortages. The effects of water shortage are already visible in Sao Paolo, Brazil, which is running the risk of becoming the first megacity to run out of water. Add to this the increasing human population – estimated to peak at nine billion in 2100 – and it seems that in the future more humans will be living with less, on a hotter, drier planet. Once again we are reminded of the devastating impacts climate change will have. But why insist on talking about future consequences, when the impact can be measured right now?

The latest Intergovernmental Panel on Climate Change report makes it clear: the burning of fossil fuels is causing the planet to warm dramatically. Already 400,000 deaths have been attributed to climate change, as reduced food and water supply, more frequent extreme weather events and the spread of diseases begin to take their toll. If we exceed a four degree Celsius rise, which we are on track to do, we will face dramatic social, economic, and health consequences. Urgent reductions of global fossil fuel emissions would insure against the worst of these.

Already, divestment campaigns are working to mitigate the worst of global warming. Stanford University and the Australian National University have led successful divestment campaigns. The World Council of Churches, which represents half a billion Christians, has pledged to divest and last year the Norwegian Sovereign Fund, the world’s largest sovereign wealth fund, removed 32 coal mining companies from its portfolio. Finally, Glasgow University has committed to divest from fossil fuels in October. Internationally speaking, assets worth $50 billion have already been divested, which, according to a study conducted by the University of Oxford, makes it the fastest growing divestment campaign ever.

While the University of Edinburgh is one of the largest charities in the UK, it is not required to reinvest all of its profits back into the university. Endowments, or donations given to the university by graduates, are often placed into an investment portfolio to ensure they continually earn a return. Endowments can be allocated to very specific university functions, or to fund bursaries, events, and infrastructure. In the case of Edinburgh, a committee that invests in fairly risk-free stocks and mutual funds handles it. The aim is to generate a steady return for the portfolio, which from 2012-13 earned a return of 21 per cent on £284 million. That means the portfolio earned £60 million by just sitting on profitable ventures. Edinburgh’s endowment fund is the third largest in the UK, after Oxford and Cambridge. The portfolio is split up between currency funds and a who’s-who list of Fortune 500 companies. Several companies on the list have been accused of having an insatiable appetite for profit, with little consideration going towards Earth’s long-term sustainability.

Divestment momentum is now lapping at the shores of the Clyde. On Monday of last week, The University of Edinburgh’s People and Planet submitted their brief to the university, a 30-page document outlining why the university should divest from fossil fuels. If the campaign is successful, it will not be the first time that students have changed their university’s investment behaviour. After arguments were made about the university’s role as a major centre of medical research, the university accepted a proposal of disinvestment from the tobacco industry in 2004. Again, after ethical arguments were raised in 2013, the university moved £1.2m from a company engaged in the construction of US drones. The university’s social responsibility policy states that a particular company should be reviewed for divestment if, “on the basis of clear evidence… [the company is] so far removed from the University’s core values as to give grounds for serious concern”. This concern can only be raised by a representative body such as EUSA, or by “a recognised trade union.”

Recently, in a piece published by The Guardian that was compiled by People and Planet, 50 academics voiced support for divestment from fossil fuels. 2014/15 is the year Edinburgh will officially open the review of their investment policy. But, in three out of four meetings, all that has been produced has been “refinements of research and analysis.” When asked about how the university could develop a plan to divest from fossil fuels, Director of Social Responsibility Dave Gorman said the university is currently leading “a review process that brings together student and staff representatives, academic experts and financial advisors to give the Court a clear set of options on how we could act on fossil fuels”. With continuing support on the student and academic front, this year might be a historic one for the University of Edinburgh.

Indeed, the university has been called upon before to uphold its mission statement to “make a significant, sustainable and socially responsible contribution to Scotland, the UK and the world, promoting health, economic growth and cultural wellbeing”. What of the world’s wellbeing? Why is divestment so important anyway? Ultimately, divesting from any company makes a statement, and for a major international academic institution to reject the bloated returns earned by the world’s largest, least sustainable industries is a big statement. Investments of over three million pounds each, such as in Edinburgh’s endowment portfolio, are what fund the expansion and continuing actions of companies like Shell, Monsanto, BHP, and Rio Tinto. These companies pose serious, direct risks to the environment.

According to the Association of Chartered Certified Accountants (ACCA), if we are to remain within safe temperature levels, around two-thirds of the current proven coal, oil and gas reserves must stay in the ground. Yet, as noted by ACCA, these reserves are currently recognised in the accounts of listed companies and contribute to their stock market valuations. Buying into a company’s stock, no matter how enticing the money seems, is ultimately buying them further access to fossil fuels, at the expense of a stable climate. In some cases, buying a share in these companies sells them someone else’s future.

 

Now, let’s consider some of the companies the University of Edinburgh has invested in. We have focused on four companies to consider whether they may be targets for investigation, if not divestment, by the University of Edinburgh. The importance of divestment is illustrated perfectly by Assaad Razzouk, who is the CEO of Sindicatum, an award-winning alternative energy company. Razzouk opened his talk at the 2015 Edinburgh TEDx conference with a call to arms: to make a resounding impact on our relationship to the Earth, we need to change how we combat climate change. In order to do that, we need to divest from fossil fuels. Razzouk made it clear that committing to sustainability will be a fruitless venture if we continue to indirectly fund the companies we are fighting. Furthermore, fossil fuel and energy companies are notoriously bad at disclosing environmental concerns to their shareholders. A report undertaken by Ceres, a Boston coalition of investors, graded only five out of 50 environmental disclosures by energy companies as “good”. A majority of 34 reports received “poor or no disclosure” ratings.

Royal Dutch Shell

According to a Freedom of Information request in 2013, the University of Edinburgh has shares in Royal Dutch Shell worth £3,812,430. On paper, this may seem like a good investment. However, benefits have come at an environmental and social cost.

In Nigeria, Shell’s activities have led to serious environmental damage after pipelines owned by the company became old and corroded. The resulting oil spills have killed off vegetation, spoiled waterways and destroyed local economies. Shell has acknowledged its responsibility for maintaining the pipelines but denied any responsibility for environmental damage. Clashes between Shell, Niger-Delta communities and Amnesty International have claimed international attention since the 1990s, when a prominent environmental activist was executed by Niger’s then-military dictatorship.

Nigerian activists have accused Shell of human rights violations, including summary execution, crimes against humanity, torture, inhumane treatment and arbitrary arrest and detention. Although Shell has paid a US$15.5m legal settlement in 2009, the company has not accepted any liability over the allegations against it.

However, documents released by WikiLeaks in 2009 demonstrate that Shell made regular payments to the Nigerian military in order to prevent protests. These documents were not used in the court case but they revealed, as Shell’s top executive in Nigeria admitted, that Shell had inserted staff into all the main ministries of the Nigerian government and knew “everything that was being done in those ministries”. The same executive also stated that the Nigerian government had forgotten about the extent of Shell’s infiltration.

According to a Guardian article from 2010, a spokesman for the state-owned Nigerian National Petroleum Corporation, said: “Shell does not control the government of Nigeria and has never controlled the government of Nigeria. This cable is the mere interpretation of one individual. It is absolutely untrue, an absolute falsehood and utterly misleading. It is an attempt to demean the government and we will not stand for that. I don’t think anybody will lose sleep over it.”

BHP

In 2013, the University had stocks of the multinational BHP Billiton worth £3,449,790. The Australian and Anglo-Dutch outfit is the largest mining company in the world, with ventures in Australia, Chile, Colombia, Algeria, Brazil, Canada, Guinea, Indonesia, the United Kingdom and the United States, to name a few.  Its operations include the extraction of iron ore, copper, natural gas and gold.

Until 2002, BHP Billiton also had projects in Papua New Guinea. Before BHP merged with Billiton in 2001, BHP had been engaged in a venture in Papua New Guinea since the 1980s, specifically in the Ok Tedi mine. Ok Tedi was opened in the 80s to extract copper and gold from the remote Fubilan mountain top near the borders between Papua New Guinea and East Timor. Before mining operations, Mount Fubilan was a copper mountain with a gold cap. By 2004, 8,896,577 tonnes of copper concentrate had been mined. In 1985-1990, 47,642 tonnes of gold bullion were produced. In 1999 BHP admitted that the project was the cause of “major environmental damage”. 80 million tonnes of contaminated tailings and overburden were annually discharged into the river system. As a result, chemicals from the tailings killed or contaminated fish, which came to harm those animals and humans who survived. The dumping changed the riverbed; flooding caused by the raised riverbed left a thick layer of contaminated mud on the flood plain where the plantations of taro, bananas and sago palm grow – staples of the local diet.

About 1300 square kilometres were damaged in this way. However, until 2013, BHP Billiton escaped legal prosecution for environmental damages after legislation passed by the then-Papua New Guinean government provided BHP Billiton with legal immunity. This was only revised in 2013 by the incumbent Prime Minister of Papua New Guinea: “The government in 2001 made a very bad decision in granting immunity to a corporate giant, preventing its own people from exercising their right under law to sue for permanent damages done to their environment and their livelihood”, Prime Minister Peter O’Neill told parliament. This was a momentous achievement, though too late for the environment of the affected area. On top of a mountain and upstream, these activities had a devastating societal and ecological impact. If you type “Mount Fubilan” into Google Earth, you can see the open-cut mine and its impacts, which carries downriver for miles.

Rio Tinto

Edinburgh also invested £3,213,023 in Rio Tinto. Rio Tinto delivers consistent profits and dividends to its shareholders, and is a successful mining company that operates in over 40 countries. Rep Risk, a group which specialises in examining firms for their environmental and ethical performance, has listed Rio Tinto as one of its “10 most controversial companies” multiple times. Most of these criticisms stem from Rio Tinto’s diffusion of corporate responsibility. It is a company that has its headquarters in London, but hires labour in some of the most remote regions of the globe, and is often hit with accusations of human-rights violations along the way. Over the past 30 years, over 100,000 litres of uranium-contaminated water have leaked from their Ranger Uranium Mine into Aboriginal wetlands sanctioned by UNESCO. Rio Tinto’s mines, much like BHP, can be viewed from Google Earth, since there are distinctive mud-coloured veins that leak from riverheads that the mines dump their waste in. These rivers can be directly contrasted with those nearby, which feature no discolouration as they travel down from the mountains. In 2009, Rep Risk attributed significant community displacement to Rio Tinto, who drained scarce water sources and damaged ecosystems in their Escondida mine in Chile, which they operate in conjuction with BHP.

Monsanto

Monsanto has been a magnet for controversy ever since it introduced Roundup to farmers in 1970. A particularly effective pesticide, Roundup contains glyphosate, which was invented by Monsanto, and has a low toxicity for animals and humans.To some it is the arch-nemesis of natural, organic plant growth. To US farmers, however, it ensures large, successful crop yields.  Monsanto have also recently introduced genetically modified seeds that are resistant to herbicides. One environmental issue with Monsanto stems from the byproducts of developing genetically modified seeds. Brofiscin Quarry in Wales, a privately owned site of scientific interest, was deemed “the most contaminated place in Britain” by The Guardian, after Monsanto used it as a chemical dump for over a decade. Monsanto-modified crops are not grown anywhere in the UK or in Europe.

The biggest concern with Monsanto, however, is not their direct environmental impact, which is not currently measurable, but their political impact. The company is a prominent lobbyist, which donates significant amounts of money and energy to the UK and US governments to further its own agenda. As part of Obama’s second-term stimulus act, Monsanto worked directly with the government to introduce Section 735, which “strips federal courts of the authority to halt the sale and propagation of genetically modified seeds and crops if concerns about health risks arise during safety tests”. GM plants do not raise inherent health warnings, but denying the federal court the power to regulate a private company that directly interferes with our food is problematic. Interestingly enough, Monsanto is the only investment in the university’s portfolio that does not make financial sense. This year, Monsanto’s earnings have fallen 34 per cent, with a net loss of 11 per cent against the S&P 500 index.

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