Op Ed: You Only Divest Once

Singh calls to accompany divestment activism with a wariness that comes from acknowledging historical lessons of socially responsible divestment and investment...

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By Kirat Singh via the Cornell Daily Sun, 2/5/13

Last week’s excellent dialogue in these pages on the question of Cornell divesting from fossil fuels has motivated me to jump on the bandwagon. Cornell and its peer institutions are indeed well-positioned to affect the tenor of the climate debate. Initially, an “obvious” move in my mind, divestment now appears to be a potent tool that advocates should use carefully. I want to emphasize that the concerns I am about to highlight are not cases against divestment activism. Rather, they are calls to accompany it with a wariness that comes from acknowledging historical lessons of socially responsible divestment and investment.

Calls to divest from polluting industries or brutal regimes fall into two broad categories. The first are those that appeal to a purely normative, ethical standard that says we cannot support the injustices we might be facilitating. The second variety are those that also try to usher in a new economy or regime. The first sort admittedly has a lower burden, a simple appeal to Cornell’s Trustees to pull Cornell money out of oil, coal and gas firms would fall into this category. The advocates of such a move, however, still need to engage in a thorough and honest assessment of the counterfactual. It would not do, for instance, if Cornell divesting from listed American fossil fuel entities increases reliance on foreign drilling fields where weaker regulatory capacities lead to even more environmental damage. The second brand of divestment is more interesting to examine because it also attempts to bring positive reform. The United States’ universities have been part of such an attempt before when a divestment campaign was launched against the Apartheid regime in South Africa.

The degree of involvement was by no means uniform. U.C. Berkeley pulled out investments worth more than $3 billion and earned a specific commendation from Nelson Mandela. According to an old report from The Harvard Crimson, Harvard needed a specific appeal by Archbishop Desmond Tutu to get on the right side of history before it began divesting. The case of Columbia is particularly instructive for climate activists today. Columbia’s divestment from South Africa was only one part, albeit a crucial one, of a deeper movement that involved a year of sit-ins, teach-ins and peaceful demonstrations, often outside Board of Trustees meetings. Cornell students and faculty also held protests in favor of divesting from South Africa. However, the University’s response was less enthusiastic. If the fossil fuel divestment movement is to strive for something beyond the healthy consciences of its advocates, it has to look to Columbia in the 80’s as an example.

A simultaneous emphasis on broader environmental literacy and consciousness is not just desirable; it is necessary. Disinvestment can be a powerful tool, but it is a single-use device. A 1999 study by Ivo Welch and Paul Wazzan argued that even in the South African case, where the disinvestment consensus was far stronger, there was barely any direct financial pressure on firms doing business with the regime. Selling sprees by large entities temporarily depressed stock prices but “socially indifferent” investors soon stepped in to take advantage of the undervalued assets. Critically, for the broader cause, there was little you could do once you had divested because you lost all future leverage by doing so. Divestment provided a one-shot opportunity to attract media and public attention to the cause and to boost morale among supporters. In the South African case, the publicity served the campaign well. Had the opportunity been wasted, even Berkeley’s massive withdrawal would have only provided a gigantic buying opportunity for investors unconcerned about the Apartheid regime.

Key differences between the fossil fuel and anti-Apartheid divestment movements make the former admittedly harder to popularize. The difference is not one of the prevalence of financial self-interest — the same debates over the true goals of University endowments and pension funds that problematize fossil fuel divestment today occurred in the 1980s as well. The first important difference is the theater of action. Although small American investors in the involved firms were affected to some degree by anti-Apartheid divestment, the impact of fossil fuel divestment on American citizens is likely to be more direct and pronounced. The increasing economic importance of domestic energy production from shale-gas exploitation only exacerbates opposition to the movement. Second, in the South African case, American divestment aimed to export a legislatively-mandated right — racial equality — to South Africa rather than promote a new value domestically. This, I would argue, produced constructive incentives for American corporate actors to back divestment. A set of principles demanding equal treatment of employees irrespective of race, called the Sullivan Principles, became prominent in the rhetoric of anti-Apartheid activists in Washington. The Principles had been crafted by the Rev. Dr. Leon Sullivan, a board member at General Motors. GM was also, by many accounts, the largest employer of blacks in South Africa. Once Sullivan had succeeded in enforcing the principles within GM, it had a ripple effect among other American firms that risked being labeled discriminatory and complicit with the United States if they abstained from adopting the Sullivan Principles in their South African operations.

These barriers help explain the headwinds being faced by divestment advocates today. Despite the scientific consensus, many minds are yet to be convinced that the short-term financial tradeoff is worth making. To do that, it is essential that divestment be only one in a bouquet of many moves pursued by climate activists at Cornell and beyond.

Kirat Singh is a junior in the College of Arts and Sciences. He may be reached at ksingh@cornellsun.com. Evaluating the Discontents appears alternate Tuesdays this semester.

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