Editorial: Why UBC’s Board of Governors was right to vote against divestment

No, it wasn’t a popular decision—but it was the right one

Hyperbole isn’t exactly a stranger to the campuses of Canada’s post-secondary institutions. Indeed, one could argue that said campuses are hyperbole’s natural (and most logical) habitat. As such, it should come as no surprise to hear it being directed towards UBC’s Board of Governors after it voted against a proposal that would have seen it divest from fossil fuels. As Alex Hemingway, a PhD candidate and Divest UBC campaigner (who I interviewed on Friday) said after the vote’s results were announced, “By refusing to stop investing in the companies that own these reserves, UBC is sending the message that they’re just not concerned about climate change.”Well, not quite. Now, caveat emptor: I have a bias on this issue. As anyone with a keyboard and a working knowledge of how to use Google will be able to find out, I used to be the editor of a magazine that covered the oil and gas sector. And while I said and did things while I was there (most notably, arguing that Stephen Harper was the energy sector’s biggest problem and that NDP Premier Rachel Notley wasn’t) that caused Ezra Levant to describe it as “an anti-oil propaganda rag,” I suspect that won’t prevent some people from writing me off as an industry shill here. Fair enough.But for those who don’t view this issue strictly through the prism of their ideological commitments, I have a few things to say about why I think UBC’s Board of Governors did the right thing last week. First and foremost among them is the fact that divestment is more about words than deeds, and I’m not a fan of political posturing that does more to flatter its practitioners than produce meaningful outcomes. Divestment is a kissing cousin of Occupy Wall Street, in that both are political movements full of sound, fury, and high-minded sloganeering—and, yes, good intentions—but which fail to fully engage with the reality of the situation they claim to be addressing. And the reality of the situation with respect to divestment from fossil fuels is this: It would do nothing to curb emissions or impact climate change.According to UBC’s Philip Steenkamp, the university’s endowment fund has less than $100 million invested in fossil fuel stocks right now. And while that might sound like a large figure to some, in the context of the capital markets on which those shares are traded that’s a rounding error on a rounding error. Even if you pooled all of the endowment funds of every university on earth, they’d only hold somewhere in the neigbhourhood of $20 billion in fossil fuel stocks—a sizeable figure, to be sure, but not one that would materially impact the valuations of those stocks. As a Bloomberg News Energy Finance white paper noted in the fall of 2014, BlackRock—the giant fund manager that sells exchange-traded funds to millions of Canadians—controls approximately $140 billion in just its 25 largest holdings.Then there are the untold billions in capital controlled by sovereign wealth funds around the world, as well as institutional investors like the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan Board, and the California Public Employees’ Retirement System. If there’s money to be made in owning shares of fossil fuel companies, you can bet (and you should) that there will be buyers for them. And while it’s tempting to conclude that there isn’t any money to be made any more in owning those shares, given where the price of most major commodities is right now, that’s a call that should be left to the fund managers who are getting paid to allocate that capital.Speaking of which, remember the campaign that sought to have major institutions divest from tobacco stocks from the late 1990s? Well, here’s the thing: the shares of those tobacco companies didn’t suffer in the slightest. Since the divestment campaign targeting them began, the shares of publicly traded tobacco companies have outperformed the broader market—and, in the cases of Lorillard, Reynolds American, and British American Tobacco, by a healthy margin. As William MacAskill wrote in the New Yorker last fall, “As long as there are economic incentives to invest in a certain stock, there will be individuals and groups—most of whom are not under any pressure to act in a socially responsible way—willing to jump on the opportunity. These people will undo the good that socially conscious investors are trying to do.”But let’s imagine, just for a moment, that somehow a coordinated decision to divest from fossil fuel companies could meaningfully impact their share price, and that this in turn impacted their ability to do business. What would that do to global carbon emissions? Well, it might actually increase them. That’s because their production would simply be replaced by companies operating in other parts of the world, parts that don’t operate with the same legal and environmental constraints—however inadequate you might think those are—as we do in North America. Approximately 80 percent of the world’s fossil fuel resources are located in political jurisdictions where state-owned enterprises run the show, and they operate under far less scrutiny than their publicly-traded peers. I look forward to the day when we burn as little fossil fuel as possible, but I promise you that we won’t get there any faster by empowering companies like Saudi Aramco, Sinopec, and Petrobras.There is, of course, the argument that even if divestment achieved nothing from a practical perspective it would still amount to an important symbolic statement. Perhaps. But as the New Yorker’s MacAskill noted in his piece on the politics of divestment, campaigns like the one that’s raged at UBC over the last couple of years involve enormous amounts of political and personal energy—energies that could be directed towards more productive purposes. “Above all,” he said, “divestment campaigns risk distracting from more directly effective activities. If the environmentalist community focuses its time on divestment campaigns, they are left with less time for their other programs. This means less time spent lobbying for carbon taxes, or encouraging people to adopt life styles with lower carbon footprints, or calling on universities to boycott energy providers that rely on fossil fuels.”So, to those on campus who have pledged to continue the fight for divestment in the wake of the vote by the Board of Governors last week, I’d encourage you to direct those energies towards areas where they might yield some real returns. Yes, you can continue to rage against the machine, and I know that there are few things more intoxicating than the feeling of righteous (and unalloyed) indignation. But I also know that, like most intoxicating substances, it can also lead to an unpleasant hangover.Max Fawcett is the editor-in-chief of Vancouver Magazine