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"Moral Cents: The Ethical and Financial

Case for Fossil Fuel Divestment at Arizona

State University"
Nick Di Taranto
In the mid-1980s, resistance to apartheid in South

Desmond Tutu noted, it could not have been

Africa reached critical mass, becoming one of the

achieved without the use of non-violent means,

most pressing international issues of the period. It

such as boycotts and divestment that encouraged

began when black South Africans protested the

their governments and other corporate actors to re-

1983 South African Constitution, which included

verse decades-long support for the Apartheid re-

racially segregated Parliaments. In response, the


South African government, Apartheid, sent thou-

The actions taken by the college students

sands of troops to quell the protests, as millions

against apartheid represented the first major divest-

around the world watched on television.

ment campaign. Divestment, which simply means

The events in South Africa galvanized

getting rid of unethical or morally ambiguous

college students across the United States to start

stocks, bonds or investments, has since grown to

campaigns and pressure their universities to di-

become a prominent strategy in the fight against

vest from companies directly related to the South

climate change.

African regime. The movement spread, with 55

Large institutions such as the Rockefeller

campuses eventually divesting, and more than 80

Brothers Fund, more than 30 U.S cities, and a

cities, 19 counties, and 25 states taking some

growing number of American Universities and reli-

form of binding economic action against compa-

gious institutions have taken the steps to divest

nies connected to the Apartheid.

from fossil fuels, but the movement requires more

While this campaign did not single handedly end Apartheid, South African Archbishop

participation to become an agent of social change.

To date, the nations largest university, Arizona

State University, has yet to divest its endowment from

Divestment: a grassroots campaign to combat the

fossil fuels.

climate crisis

Arizona State University takes climate change

For my Masters in History, I focus on environmental

seriously. The University has the nations first School

policy, so naturally, a global grassroots campaign

of Sustainability, established in 2006. Tens of millions

peaked my interest. Three numbers stuck with me2

of dollars fund tremendous amounts of research and

degrees Celsius, 565 gigatons, and 2,795 gigatons.

practical solutions to sustainability challenges in Ari-

These numbers form the foundation for the divest-

zona and around the world as part of President Crows

ment campaign and were first brought to prominence

New American University vision, while educating a

by environmental activist Bill McKibben three years

new generation of sustainability scholars and practitio- ago.


The first number comes from the 2009 CopenOne would expect that a leader in sustainability hagen Conference, where 167 countries recognized

would take the lead in divestment, but after research

the scientific view that the increase in global tem-

and multiple conversations with the ASU Foundation perature should be below two degrees Celsius. To
the organization that handles ASUs endowmentI

keep temperatures below that threshold, global car-

found that to not be the case and took it upon myself to bon emissions cannot exceed the second number, 565
understand and unwind the complexities that prevent

gigatons. The problem lies with the third number,

the Foundation from taking action against fossil fuel

2,797 gigatons, or the amount of carbon already con-


tained in proven fossil fuelcoal, oil, and gas

reserves worldwide. In other words, the carbon we

plan to burn short of any action to curb either its

tive assets worth more than $50 billion have

extraction or use.

pledged to drop their fossil fuel holdings.

My interest in divestment stems from McKibbens

Despite the overwhelming scientific evi-

passion, energy, and earnest activism, but there was

dence supporting anthropogenic climate change,

something more than that. The political process of-

few political solutions exist to curb carbon emis-

ten seems inaccessible and climate change is a

sions. Meanwhile, fossil fuel interests continue to

problem too wicked for individual action to have

spend large sums of money to fund climate denial

a meaningful impact. The divestment campaign

research, lobby policymakers, and explore options

seemed like something I could support and maybe

for extracting more oil, gas, and coal from the

make a difference. I began following campaigns

ground. In 2013, fossil fuel companies spent $213

around the nation and researching the arguments for

million dollars lobbying U.S. and European offi-

and against divestment to determine if it was a

cials, an OxFam International study reported. The

worthwhile cause for Arizona State University to

study also concluded that fossil fuel companies


spent nearly $700 billion on exploration and de-

Where does the New American University stand?:

velopment projects in 2012.

weighing divestment at ASU

To combat the influence of fossil fuel in-

Choosing to divest requires navigating an

terests, McKibbens non-profit,, called

institutional bureaucracy. Endowments consist of

for a grassroots movement to break the power of

money or other financial assets donated to a univer-

the top 200 fossil fuel companies100 oil and

sity or organization. Most often, donors gifts come

gas and 100 coal companiesby bankrupting

with strings attached, meaning the university must

them, not financially, but morally, and, in doing

use the donation to achieve an end goal designated

so, pressuring political officials and businesses to

by a donor. According to its 2014 Financial Audit,

take action that curbs emissions. Since 2012, pub-

the ASU Foundation manages $626 million in the

lic, private, and individual investors with collec-

New American Universitys endowment. The Foun-

dation consists of six voting board members, who

exists solely to support ASU. Then, after intro-

steer the overall strategies of the organizations

ducing myself, I proceeded with my questions.

investment policies. Approximately, fifty different

Ginny and Lisa explained that divestment could

firms make the actual investment decisions,

result in financial losses that prohibit the Univer-

though, each of whom invest in about 300 to 500

sity from meeting its fiduciary obligation to do-

companies based on their own investing strategies.

nors. Moreover, the Foundation focuses on achiev-

Initial attempts to learn how the Founda-

ing the best possible return on investment for do-

tion invests the Universitys endowment through

nors. Ginny noted that large oil and gas companies

financial reports provided vague answers: 40 per-

have the finances and ability to make large-scale

cent goes into global equities, 10 percent in global

changes in energy infrastructure, so divesting from

fixed incomes, 20 percent in private capital and so

those companies may actually undermine divest-

forth. Moreover, due to its status as an independent

ment campaigns goal of reducing carbon emis-

and private organization, the Foundation has no

sions. For instance, ASU collaborates with Shell in

legal obligation to make more information avail-

its Gamechanger Program. Yet, the theme this

able. So, I started contacting people at the Founda-

year implores students to come up with innovative

tion. I sent multiple e-mails that eventually led to a

ways to take oil out of the ground more efficiently;

meeting with Virginia DeSantoknown in the of-

meanwhile Shell and other oil and gas companies

fice as Ginnythe Foundations vice president

are abandoning their renewable energy investment

of finance, CFO, secretary and treasurer and Lisa


Jacobson, the assistant treasurer.

Ginny sat with a note-filled legal pad in

Well, OK, I thought, but how much of the

endowment is tied into fossil fuel companies? Nei-

front of her, which signaled she took me seriously,

ther Ginny nor Lisa knew. They cited the difficulty

and she started things off by introducing herself

of tracking hundreds of investments that that any

and explaining that the Foundation is an inde-

one of the fifty investment managers may trade on

pendent tax-exempt organization from ASU that

a given day. They explained the Foundation

would not likely disclose individual stock invest-

defined sustainable investment strategy and it cer-

ment information because some managers con-

tainly was not seriously considering divestment. It

tractually forbid that type of disclosure since it

remained unclear if, or how, those values guided

could risk weakening the investment managers

investment strategies.

competitive edge in investing.

When asked how the New American Uni-

The meeting lasted roughly 45 minutes.

Ginny wished me luck on finishing school, told me

versity values such as being socially embedded,

to e-mail her if I had any other questions, and

globally engaged, and aspiring to transform soci-

showed me out. On the walk home, I plugged in my

ety influenced investment strategies, Ginny ex-

earphones and began digesting the conversation.

plained that the Foundation has no policies in the

Ginny and Lisa answered my questions to the best

investment strategy that specifically includes or

of their ability and provided important context to

excludes any particular environmental, social or

how the ASU Foundation operates. Still, the lack of

governance concept. She mentioned, however,

specific answers nagged at me.

that the Foundation was considering setting up a

A few days later, I flew home to Philadelphia for

separate sustainable investment fund for inter-

Spring Break where I mulled over my next steps. I

ested donors to invest. The Foundation, also, re-

decided to look into some of the barriers to divest-

cently held a sustainable investing conference that

ment mentioned by Ginny to see if I could find po-

included 30 to 40 universities from across the

tential solutions. Google proved to hold a wealth of


information. To Ginnys first point about financial

She transitioned into explaining that the

loss, I found some studies that supported her

New American University values guided some of

claimalbeit funded by fossil fuel interestsbut

the ways the Foundation spent its revenue,

most put forth evidence that demonstrated that di-

through public outreach, scholarships and by re-

vestment makes financial sense.

ducing its carbon footprint from operations. Still

though, the Foundation had no clear or well-

Investment is about managing risk and the

concept of stranded assets makes investment in

fossil fuel investments dangerous. An Oxford University study defined stranded assets as assets that

yielded similar results.

I also discovered that on average, U.S. uni-

have suffered from unanticipated or premature

versities have only two to three percent of their

write-downs, devaluations or conversion to liabili-

endowment invested in fossil fuel companies.

ties. Coal, oil, and gas risk becoming stranded

Based on the average, ASU has between $12.52

assets due to potential regulatory policies that limit

million and $18.78 million invested in fossil fuels.

carbon emissions through a carbon tax, emissions

While that seems like a lot of money, it represents

trading program, or some other regulatory mecha-

only a drop in the bucket of the $12 trillion total

nism that internalize the cost of carbon pollution.

market capitalization of fossil fuel companies.

Carbon pricing schemes cover more than one-fifth

Last, I looked at divestment commitments at other

of global emissions, with the European Union and

universities and found a wide range of options.

23 U.S. states under some form of carbon regula-

Pitzer College, for example, committed to divest-

tion policy. A larger proportion of emissions will

ing 99% of its endowment from fossil fuels, while

likely come under regulation after the U.N climate

the University of Sydney created a plan to reduce

talks in Paris this December.

investments in fossil fuel companies by 20% over

Mainstream financial institutions provide

the next three years and then reassess its situation.

some of the most compelling evidence in favor of

divestment because it can result in financial gain.

Armed with this information I decided to

For instance, a research team from Standard and

take Ginnys offer for follow up questions and af-

Poor (S&P) modeled the performance over the

ter a few e-mail exchanges I headed back to the

past decade of the S&P 500 index stripped of its

ASU Foundation to meet Ginny, as well as Rick

fossil-fuel stocks. A $1 billion endowment in-

Shangraw, CEO of the Foundation.

vested in carbon-free S&P 500 companies would

Prior to his appointment as CEO in 2011,

have yielded an additional $119 million in profit

Shangraw served as the director of the Global In-

through 2013. Studies from other investment firms

stitute of Sustainability. He demonstrated both

knowledge of and engagement with sustainability

the Foundation toward sustainable investing. He

issues as he went through my questions in a

emphasized that the Foundation planned to provide

power point presentation he made for the meet-

new options for donors, such as a sustainable in-

ing, taking care to stop when I asked for further

vestment fund, whichalong with a sustainable

clarification, and expressing personal frustration

investment statementwill be voted on at the next

with the political apathy toward the climate crisis.

Investment Committee meeting.

I found that we shared an admiration for McKib-

Additionally, Shangraw mentioned the need

ben and his public outreach on climate change,

for groups like to reach out to donors to

although he was less enthusiastic about the target-

encourage them to push for sustainable options as

ing of University endowments. He seemed on my

an important step for moving this topic forward

side, and even if he disagreed, I liked him because

with similar investment organizations. Yet most of

he listened patiently to my perspective and took

the discussion focused very little on the endow-

care and consideration in explaining his.

ment. In Shangraws opinion, the endowment represented only one of the Universitys and the Founda-

Shangraw agreed that getting to a carbon

tions sustainability levers and he expressed the

free investment portfolio was a desirable goal, but

need for a more holistic approach to moving the

also a journey, one ASU had just begun. He gid-

needle on sustainable investing. While I never got

dily described a new investment opportunity or

the impression the Foundation was seriously con-

tool that tracks companies behavior for socially

sidering divestment, they made it clear that they

responsible indicators
such as human rights,
treatment of labor, and,
yes, carbon emissions.
Shangraw explained that
this tool could help move

were pursuing other sustainable investment strate-

mation, embedded socially and connected with


communities, to encourage innovation, and to ad-


vance global engagement.

The facts are simple and clear: humans are

ASU and the Foundation should commit to

changing the climate by releasing carbon dioxide

combating climate change through all its sustain-

and other greenhouse gases into the atmosphere

ability levers. While the University has a Carbon

and the main source of those emissions come from

Neutral Plan that covers many sustainable lev-

burning fossil fuels. To prevent the most catastro-

ers, investment strategies are notably missing.

phic impacts of climate change, we need to keep

Still, ASU and the Foundation do not operate in an

fossil fuels in the ground. Divestment campaigns

ideal world and as with other climate-related chal-

aim to pressure businesses, institutions, and or-

lenges and any large institution, solutions are often

ganizations into stopping the flow of finance to

more difficult to implement in the real world and

these companies, not to inflict financial harm, but

change will likely occur slower than one might

as a value statement: it is wrong to ruin the earths

hope. The Foundation is indeed moving in the

climate and therefore wrong to profit from it.

right direction, but it can do more.

If the ASU Foundation for A New Ameri-

To fully realize its goals and mission,

can Universitys sole purpose is benefitting the

ASU should divest from fossil fuels. First, the

University, then it should be held to the same val-

Foundation should assess the greenhouse gas emis-

ues and standards. Climate change is a social, eco-

sions embedded in its investment portfolio. Many

nomic, cultural, and political problem, pervasive at

companies already disclose emission information

the local, national, and international level, that is

due to EPA greenhouse gas reporting regulations

largely attributable to burning fossil fuels. Divest-

and the push for corporate social responsibility.

ment from fossil fuels and the message it sends

Next, ASU and the Foundation can discuss to what

could not fit more perfectly with the Universitys

extent they want to divest from fossil fuels. Again,

aspirations to become a force for societal transfor-

options abound as many universities and other in-

stitutions have already divested or partially divested from fossil fuels. Last, ASU and the Foundation can work
together with their current investment managers, or seek out new ones, to develop a low carbon investing strategy that does not jeopardize the Universitys fiduciary obligations. For instance, Morgan Stanley Capital and
other investment firms offer sustainable or low carbon investment strategies. Fossil fuel companies comprise
only 11 percent of the S&P 500 so divestment hardly restricts investment strategies.
The Universitys endowment is one quiver in the arrow, but when our society is dealing with a challenge as pervasive as climate change, it needs all the arrows available. When considering divestment, University and Foundation officials should reflect not on my words, but ASU President and Foundation board member Michael Crows: Do you replicate what exists, or do you design what you really need? ASU has already
changed the university model through its interdisciplinary approach and it is time that kind of reevaluation take
place concerning the Universitys endowment, to create what Mr. Crow calls the maximum societal impact.

End Notes
What is Fossil Fuel Divestment, Fossil Free, http:// (accessed February 1 2015). For a full list of commitments, see ibid, Divestment
Commitments. For Tutu quote, see Divesting From Injustice,
Guardian 13 June 2010.
(accessed April 1 2015).
See the School of Sustainability website at https://
The numbers come from Carbon Tracker Initiative, a project of
the non-profit Investor Watch. Its report has been utilized by
several large investment firms and banks, including Standard &
Poor and HSBC, to calculate risk to carbon exposure. The total
reserves do not include shale gas. See, Bill McKibben, Global
Warmings Terrifying New Math, Rolling Stone August 2 2012. (accessed March 3

See OxFam International, Food, Fossil Fuels, and Filthy Finance, 2

For the board of directors, see
Personal Correspondence with Virginia DeSanto, February 18,
2015. For figures on ASUs endowment, see Arizona State University Foundation for a New American University and Affiliates,
Consolidated Financial Statements and Additional Information
(July 30, 2014), 5.

For the Gamechanger Program., see http:// For more information on Shell and
other oil and gas companies withdrawal from renewable energy
sources, see Tom Bergin. Shell goes cold on wind, solar, hydrogen energy, Reuters 17 March 2009.
article/2009/03/17/us-shell-renewablesidUSTRE52G4SU20090317 (accessed March 28 2015); Terry Macalister, Shell accused of abandoning solar power buyers in the
developing world, Guardian 2 January 2010. http:// OxFam International, Food, Fossil Fuels, and Filthy Finance
solar-warranty-row (accessed Mach 28 2015); and Antonia Ju(October 17 2014, 4. The Figure adapted from European Climate hasz, Big Oils Big Lies About Alternative Energy, Rolling Stone
25 June 2013.
oils-big-lies-about-alternative-energy-20130625 (accessed
March 28 2015).

For an example of a often cited study purporting the financial risk involved with divestment see Daniel Fischel, Fossil
Fuel Divestment: A Costly and Ineffective Investment Strategy. The study was funded by the Independent Petroleum
Association of America.
stranded-assets/ (accessed March 20, 2015).
Sheila M Olmstead, Applying Market Principles, 220-221
and Henrik Selin and Stacey D. VanDeveer, Global Climate
Change: Beyond Kyoto, in Kraft and Vig, Environmental
Policy, 287-292. As of 2013, there are three regional cap and
trade programs. For example, ten Northeastern states created the Regional Green House Gas Initiative and in 2009,
and California launched a cap-and-trade program. See, Barry
Rabe, Racing to the Top, the Bottom, or the Middle of the
Pack? The Evolving State Government Role in Environmental
Protection, in Kraft and Vig, 32-49 and Ken Portney,
Sustainability in American Cities: A comprehensive look at
what cities are doing and why, in Daniel Mazmanian and
Michael Kraft, Toward Sustainable Communities, 232-236.
For carbon pricing scheme statistic, see Fabian, Support
low-carbon investment, 28.
For other examples, see MSCI ESG Research Team, Responding to the Call for Fossil-fuel Free Portfolios, December 2013
and IMPAX Asset Management, Beyond Fossil Fuels: The
Investment Case for Fossil Fuel Divestment, 2013. See Carbon Trackers website for a multitude of reports on the matter of unburnable carbon.
The S & P study was commissioned by the Associated Press.
See Tom Zeller Jr., Fossil Fuel Divestment: Smart Bet or
Losing Strategy, Forbes February 10 2015. (accessed March
24, 2015).
Atif Ansar , Ben Caldecott, James Tilbury, Stranded assets
and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?, Oxford
University Stranded Assets Programme at the University of
Oxfords Smith School of Enterprise and the Environment
(2013), 53-57, 66-67.
For Pitzer College divestment see Pat Morrison, Why Pitzer
College decided to quit carbon, Los Angeles Times October
21, 2014. (accessed
March 9 2015). For the University of Sydney, see Sydney
University announces plan to reduce fossil fuel invest-

ments, Australian Broadcasting Corporation.. February 8

(accessed March 9 2015).
Bill McKibben wrote the first book about climate change for
a general audience in 1989, The End of Nature.
Personal Correspondence with Rick Shangrew on March 24
This was taken with permission from the power point presentation made by Mr Shangrew for our meeting on March
24, 2015.
For examples, see MSCI ESG Research Team, Responding to
the Call for Fossil-fuel Free Portfolios, December 2013 and
IMPAX Asset Management, Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment, 2013. Also, see Carbon Trackers website for a multitude of reports on the matter of unburnable carbon as well as the US Forum for Sustainable and Responsible Investing website.
Tim Dickinson, The Logic of Divestment: Why We Have to
Kiss Off Big Carbon Now, Rolling Stone 14 January 2015.
(accessed March 14 2015).
Collin Macilwain, The Arizona Experiment, Nature Volume
446 No 26 (April 2007), 968.
President Crow uses this phrase often and is a core value of
the New American University. For examples, see Michael M.
Crow. Ed. A New American University Reader: Selected Writings On University Design And Related Topics (2011). The
Phrase appears in numerous articles within this text and
within other cited by Crow in the forward.