At a New York event for Climate Week on September 22, the nonprofit Wallace Global Fund announced that a group of foundations, endowments, religious institutions and other organizations representing more than $50 billion in assets had pledged to divest from fossil fuels and invest in clean energy. Archbishop Desmond Tutu gave a televised address; the veteran civil rights leader called climate change the greatest human rights challenge of our time.
In her college days, Wallace fund executive director Ellen Dorsey, who has a Ph.D. in political science from the University of Pittsburgh and was senior program officer with the Heinz Endowments before assuming her current post in 2008, took part in the effort to get institutions to pull out of companies doing business with apartheid South Africa. At the Washington-based fund, founded by former U.S. vice president and 1948 Progressive Party presidential candidate Henry Wallace, shes helping spearhead the Divest-Invest movement.
The 200 largest oil and gas companies already have more carbon deposits than they can safely burn, according to U.K. nonprofit Carbon Tracker, yet theyre spending some $670 billion annually to seek new sources. Environmentalists are raising the alarm over these so-called stranded carbon assets and the investment risk they pose. Dorsey, 52, spoke to Senior Writer Imogen Rose-Smith about investors role in the fight against climate change (see also Climate Change and the Years of Investing Dangerously).
How did you come to be so involved in the environmental movement?
Im a recovering academic. I started the human rights and environmental group at Amnesty International, and I sensed that the environmental crisis was driving human rights. Climate change influences everything from geopolitical conflicts to a profound crisis in the ability of governments to meet their citizens needs for food and water and access to natural resources. We must address this as a matter of protecting civilizations and individuals basic human rights.
What is the Wallace Global Funds role in Divest-Invest?
In the wake of the failure at [the 2009 United Nations Climate Change Conference in] Copenhagen and the collapse of climate talks in the U.S. Senate, focus needed to shift to the fossil fuel industry itself. The inability to move policy meant that the climate fight needed to be driven by civil institutions. We had a great opportunity to learn from the divestment strategies of the antiapartheid movement while recognizing that this situation is different. We are a supporter of and a participant in Divest-Invest a supporter in terms of helping, with our grant making, many of the organizations that are involved. We ourselves as an institution have divested and are investing over 10 percent of our [$165 million] portfolio in climate solutions.
How should institutional investors respond to the threat of climate change?
Institutional investors have an ethical and a financial risk associated with staying invested in fossil fuels. And they have an opportunity one would say also an obligation to invest in climate solutions. Those who are invested are going to benefit most as the transition occurs.
The new commitments to divest from fossil fuels and invest in climate solutions, as well as the over $50 billion in assets and 181 institutions to date that have committed to Divest-Invest, demonstrate that this movement has gone mainstream. It is changing the debate about climate change and the financial risks associated with staying in fossil fuels as well as the benefits associated with moving into investment solutions (see also Climate Change and the Fossil Fuel Divestment Movement).
What do you say to the many institutional investors that are still against fossil fuel divestment?
Institutions that have committed to divest and invest have positive experiences with the performance of their portfolios. My foundation is one example. We have done extremely well in the market over the last several years weve been out of fossil fuels. I would point to those institutions that got out of coal early. Coal has dropped 50 percent [since 2010], while the S&P 500 has increased 47 percent. Coal is only the beginning, and the other fossil fuels will mirror that same trajectory.
Are investors who advocate for shareholder engagement with the fossil fuel industry necessarily at odds with the Divest-Invest agenda?
The question has to be asked: What is your endgame, and is the time frame commensurate with the science? It is important to ask the fossil fuel companies to disclose their stranded-asset risk. That has been done. Now it is critical for the shareholders to ask the question about capital expenditure. They need to ask companies, Why are you wasting this money looking for new and more costly sources of carbon that can never be burned and will irrevocably wreck the planet? Why are you not returning this money to us or spending it on the transition? If companies refuse to address the capex issue, then any institution has a responsibility to divest.
Follow Imogen Rose-Smith on Twitter at @imogennyc.