the case for fossil fuel divestment at mount allison … · 2015-03-02 · the case for fossil fuel...

THE CASE FOR FOSSIL FUEL DIVESTMENT AT

MOUNT ALLISON UNIVERSITY

A REPORT BY DIVEST MTA JANUARY 2015

The Case for Fossil Fuel Divestment at Mount Allison University | Divest MTA

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Contributors (ordered as in text): Emma Jackson, Lauren Latour, Gabrielle Steeves, Alex Lepianka, Taylor Creaser, Morgan McGinn, and Zoe Luba.

The following report was collaboratively written by members of Divest

Mount Allison and submitted to the Investment Committee of Mount

Allison University’s Board of Regents. The objective of this report is to

open dialogue on the potential for fossil fuel divestment at Mount

Allison University.

As a leader in shaping the minds of the next generation, we believe

that it is no longer morally tenable for Mount Allison University to

invest in the very industry that is compromising our futures and those

of future students.

We are prepared to take bold action on climate change and we are

asking Mount Allison to do the same.


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Dear Regents and Committee Members, On September 21st, 2014, seven Mount Allison students, including myself, left an apartment in Brooklyn, New York with banners in our backpacks and poorly chosen shoes on our feet. We caught the subway to Manhattan, bound for Columbus Circle. Within minutes, an older woman came and sat beside me, “I think you’re going where I’m going,” she said. A Presbyterian Minister and members of his congregation soon joined us, followed by a group of Brooklyn high schoolers, and a pack of Harvard University students. By the time we had reached Manhattan, we were surrounded by people of all ages from across North America and around the world. In every direction, people were clothed in the signs and slogans of the climate justice movement. Packed together, we moved towards the exits of the station and spilled out onto the closed side streets of New York City. That afternoon, ahead of the UN Climate Summit, we joined 400,000 others in New York City, and hundreds of thousands more in over 2,500 solidarity events around the world, to demand action on climate change. We were seven students among 50,000, marching under a banner that read “Our Future. Our Choice.” But the reality is that taking action on climate change at the institutional level isn’t our choice, at least not yet. While our generation is confronted with the greatest challenge that the world has arguably ever faced, the institutional power to enact change continues to fall beyond our reach. At Mount Allison University, this power rests with you. We know that cutting ties with the fossil fuel industry cannot wait until we are occupying the positions that you currently hold. Already, climate change is wreaking havoc around the world, compromising the futures that we, as students, are working towards within the walls of this university. I cannot begin to explain how it feels to spend sleepless nights working to gain an education for a future that is, at this very moment, being pulled out from beneath me. But beyond this powerlessness, the worst part is in knowing that the very institution that is helping me build my future is ultimately profiting from its demise.

When we left New York City on September 21st, we left having made a promise to 400,000 others. That day people from around the world vowed to take bold action on climate change through whatever means at their disposal. Now, we are upholding that promise, and we ask only that you help us in doing so.

Yours,

Emma Jackson B.A Honours Geography


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TABLE OF CONTENTS Executive Summary………………………………………………………………………………… 5-6 Introduction………………………………………………………………………………………… 6-8 What We Are Asking For…………………………………………………………………………. 8-9 The Moral Imperative to Act……………………………………………………………………… 9-10 Divestment as a Tool for Social Change…………………………………………………………. 10-13 South African Apartheid…………………………………………………………………... 10-12 Tobacco……………………………………………………………………………………. 12-13 The Economic Case for Divestment……………………………………………………………… 13-18 The Carbon Bubble………………………………………………………………………. 13-16 Alternative Investments…………………………………………………………………… 16-18 Direct Impacts of Divestment……………………………………………………………………. 19-23 Fossil Fuel Companies…………………………………………………………………… 19-20 Climate Change………………………………………………………………………….. 20-21 Consumption and Behaviour Trends…………………………………………………… 22-23 Public Policy……………………………………………………………………………… 23 Positive Impacts for Mount Allison University…………………………………………………. 24-27 Our Reputation…………………………………………………………………………… 24-25 Returns……………………………………………………………………………………. 25-26 Recruitment & Retention..……………………………………………………………….. 26-27 Conclusion………………………………………………………………………………………… 27-29 Appendix List of Top 200 Publicly Traded Coal Companies……………………………………… 30-32 List of Top 200 Publicly Traded Oil and Gas Companies……………………………… 33-35


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EXECUTIVE SUMMARY

• Extreme weather events around the world make it clear that climate change is no longer a future threat, but a clear and present danger that is already affecting the world’s most marginalized communities. The best scientific estimates available—supported by international environmental agreements—call for keeping global warming below a 2° Celsius rise in temperature above pre-industrial levels. If this is to be accomplished, the scientific community asserts that we can only afford to emit another 565 gigatons of carbon dioxide. However, despite these dire warnings, the fossil fuel industry has 2,765 gigatons of carbon in their known reserves, and is continuing to invest hundreds of billions of dollars each year in the search for more.

• The fossil fuel divestment movement has emerged to directly challenge the unsustainable business model of the top 200 fossil fuel companies and the power these corporations continue to exert over our democracy and our economy. History shows us that divestment is capable of directly contributing to the social, political, and economic change we so desperately need. In the late 1980s, college campuses and communities across North America called upon their institutions to divest from the apartheid government of South Africa. Eventually, a total of 167 universities and colleges withdraw their holdings from the companies that were propping up the regime. In doing so, they not only applied direct economic pressure, but also revealed the immorality of the apartheid regime. Similarly, divestment from the tobacco industry focused on the ethical disconnect of profiting from activity that stands to harm society’s wellbeing.

• As a post-secondary institution, Mount Allison University occupies a notable position of privilege and with this, it holds a unique set of moral responsibilities. Already, climate change is revealing itself to be one of the greatest social justice issues of our time. Its impacts continue to fall disproportionately on the world’s most marginalized groups, and the direct activities of fossil fuel companies continue to infringe on the treaty rights of indigenous peoples and on the human rights of frontline communities. Mount Allison University has an obligation to act on behalf of those who, around the world, do not have the power to do so.

• Fossil fuel divestment stands not only as a product of a moral imperative, but also as a future-oriented financial decision. As many have argued, our capital markets are misaligned as the result of misleading financial reporting and myopic estimates of future operating environments. In other words, divestment may come as a call from shareholders wary of arrogant capital expenditure and inadequate market evaluations of the true risks faced by the fossil fuels industry. To look critically at the investments made in such an untenable industry is to realize that we exist in a carbon bubble, where our market systems systemically fail to address the risks and costs of doing business


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in an age defined by the maturity of climate policy frameworks and the maturity of sustainable energy. Furthermore, investors must begin to take into account the growing body of evidence that validates divested portfolios as sensible investment decisions, with insubstantial short-run effects on returns. Faced with trillions of dollars worth of revenue standing to be lost, even institutional investors indifferent to the moral implications of their actions must realize that divestment may be supported at length on fiduciary grounds.

• Divestment from fossil fuels holds the potential to directly impact the business plans of fossil fuel companies, the speed at which climate change unfolds, the consumption behaviour of individuals, and the environmental policies of governments at all levels. Mount Allison University’s divestment from the top 200 fossil fuel companies can directly challenge the social license upon which the continued operations and exploratory efforts of these companies depend. Furthermore, in placing the ‘business-as-usual’ model of this industry at risk, fossil fuel divestment can catalyze the renewable energy transition that our planet requires. Finally, if Mount Allison were to transition to a fossil-free endowment fund, the university would become a key actor in shaping public perception of the oil and gas industry, both at the national and international level. This shift in public perception would be reflected in the votes of citizens, requiring governments at all levels to finally take bold action on climate change.

• As an institution of prestige, with a history of setting precedent, the returns that Mount Allison University will enjoy upon divesting its endowment from the fossil fuel industry go beyond those already outlined. Arguments have been made that are fiduciary, social, and moral in nature; but a final call for divestment can be made at a uniquely local level. Mount Allison stands to set another first—to push forward in a way that will uphold our reputation as an institutional leader, and to reaffirm itself as an institution that not only enshrines the values that bring about social change, but is capable of acting for the greater good.

INTRODUCTION

There is widespread recognition that immediate action must be taken to address the monumental

threat of climate change. However, despite scientists calling attention to the urgency of the climate crisis,

both Canada and the global community have thus far failed to take sufficient action to address both its

causes and consequences. As students, we recognize that climate change is the issue of our generation

and that the action we take today will impact not only the future of this generation, but also those of

generations to come. Climate change continues to be powered by a fossil fuel industry that is committed

to extracting all of the oil, gas, and coal reserves at its disposal, while also determined to discover new

carbon reserves that the planet cannot afford to burn.


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The vast majority of the scientific community calls for keeping 80% of known fossil fuel reserves

in the ground in order to stay within the “safe” limit of a 2 degree Celsius rise in global temperatures.1

However, despite this dire warning, fossil fuel companies continue to spend billions of dollars on the

exploration and development of new reserves. In 2013, the top 200 fossil fuel companies spent $674

billion dollars exploring for new reserves.2 However, these multinational corporations were not acting

alone. According to the International Energy Agency, the fossil fuel sector receives subsidies of $500

billion dollars per year, six times the incentives that are provided for the development of renewable

energy sources. Without further reform, the Agency expects such subsidies to reach $660 billion by

2020.3 In the face of current threats to climate stability, this subsidized industry continues to obfuscate

climate science and distort the media’s portrayal of the facts, while simultaneously working to weaken

and dismantle climate mitigation policies.

In understanding these troubling realities, an unprecedented global movement has emerged

calling upon institutions to divest their holdings from the fossil fuel industry. The logic behind the fossil

fuel divestment movement is simple: if it is wrong to wreck the climate, then it is wrong to profit from that

wreckage. Already in Canada, over 30 divestment campaigns have been launched across the country,

joining over 400 active campaigns that are urging universities, cities, and religious institutions to commit

to fossil fuel divestment.4 Collectively, these campaigns are based on the premise that our global energy

system requires a rapid transformation, and that continued investment in the companies that are actively

working against this transition is no longer morally tenable. We know that working within shareholder

channels will not actuate the change that is urgently needed. The business model of the top 200 publicly

traded fossil fuel companies is based on expending the carbon reserves that our climate cannot afford to

burn. Then, to bring about that fundamental change, divestment from those companies must be a course

of action.

1 Intergovernmental Panel on Climate Change (IPCC). “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects.” Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)]. 2014. Accessed 22 December, 2014. 2 “Unburnable Carbon – Are the World’s Financial Markets Carrying a Carbon Bubble?.” Carbon Tracker Initiative. 2012. Accessed 20 December 2014, http://www.carbontracker.org/wpcontent/uploads/downloads/2012/08/Unburnable-Carbon Full1.pdf 3 “IEA Analysis of Fossil-Fuel Subsidies Presentation.” The International Energy Agency. http://www.iea.org/media/weowebsite/energysubsidies/ff_subsidies_slides.pdf. 4 Fossil Free Canada. “Divestment Commitments.” Accessed December 30, 2014. http://gofossilfree.org/commitments/.


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The ‘business-as-usual’ model of the fossil fuel industry is resulting in one of the greatest social

justice issues of our time. Climate change’s impacts continue to fall disproportionately on the world’s

most marginalized groups— those which have contributed least to the crisis, and have the most limited

means with which to adapt to climate change. Furthermore, the direct activities of fossil fuel companies

continue to infringe on the treaty rights of indigenous peoples and on the human rights of frontline

communities.

Mount Allison University is an exceptional institution and, in many ways, it has prepared us to

tackle the world’s most pressing problems. However, we recognize that no university degree, no matter

how prestigious, will insulate us from the effects of climate change. We are among the world’s most

privileged individuals and as such, we have an obligation to act. By investing in the fossil fuel industry,

Mount Allison University is profiting from global climate change and undermining the very education that

it is providing to its students. We are, however, confident that Mount Allison University can rise to the

challenge climate change presents to become a bold leader in environmental sustainability. As students,

faculty, and community members, we are prepared to work through whichever avenues are deemed

necessary to ensure that Mount Allison University is investing in the futures of its students.

WHAT WE ARE ASKING FOR

Divest MTA began as “Protest to Divest,” a project developed by students in an environmental

activism class in September of 2013. Inspired by the growing fossil fuel divestment movement made

famous by author and environmentalist Bill McKibben and 350.org, this small group of students decided it

was time for Mount Allison University to live up to its reputation as a world-class institution, and pave the

way towards an environmentally and socially sustainable, fossil-free future.

Our demands remain what they were in the fall of 2013. First and foremost, we ask that Mount

Allison University immediately freeze new investments in the top 200 publicly traded fossil fuel

companies, and divest from direct ownership and any commingled funds that include fossil fuel equities

and corporate bonds within the next five years.

These 200 companies (a full list of which is provided in the appendix) are estimated to hold a

collective 740 gigatons of carbon dioxide, which, if released, are capable of catapulting global


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temperatures above the 2° Celsius limit recommended by the Intergovernmental Panel on Climate Change

in their report Climate Change 2014: Mitigation of Climate Change, and as agreed upon by world leaders

as early as 2009 at COP 15, the United Nations climate summit held in Copenhagen.5

Furthermore, Divest MTA believes that social and fiscal transparency is of the utmost importance.

It is for this reason that we feel it necessary for Mount Allison University to make its annual reports of the

endowment fund investment portfolio publicly available, insofar as the information is available. In order

to progress towards becoming an institution that is rooted in ethical operations and free from fossil fuel

investments, this accountability to the Mount Allison community is imperative.

THE MORAL IMPERATIVE TO ACT

In their most recent report, the IPCC states that vulnerability and exposure to climate change

arises, “from multidimensional inequalities often produced by uneven development processes.”6 Impacts

from recent climate-related extremes have fallen disproportionately on the world’s most marginalized

communities and we know that without action, this trend will only continue. Climate change is thus a

defining example of social injustice. Firms that extract and produce fossil fuels do not bear any economic

burden for the harm they are imposing on others, and similarly, those who consume the most fossil fuels

are the last to feel the effects of climate change. In the last 25 years, 95% of deaths resulting from natural

disasters occurred in developing nations.7 Burning a large portion of the world’s proven fossil fuel

reserves would further inflict great social injury through the inundation of coastal areas; storms, droughts

and extreme weather events; ecosystem collapse; impacts on agriculture; threats to infrastructure; and

increased risks to human health. A report by the Environmental Justice Foundation warns that 10% of the

5 IPCC. “Climate Change 2014: Impacts, Adaptation, and Vulnerability.” 2014. 6 Intergovernmental Panel on Climate Change (IPCC), “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects.” Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L.White (eds.)]. 2014. Accessed 22 December, 2014. 7 Hoppe, Peter. “Developing Countries Are Most Affected by Climate Change and Need the Support of Industrialized Countries to Adapt to the Unavoidable Risks.” Global Economic Symposium. n.d. Accessed 23 December 2014. http://www.global-economicsymposium.org/knowledgebase/the-global-environment/managing-adaptiontoclimate-change-in-the-developing-world/proposals/developing-countries-aremost-affected-by-climate-changeand-need-the-support-of-the-industrializedcountries-to-adapt-to-the-unavoidable-risks.


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world’s population is at risk of displacement, and the number of climate refugees could increase from 26

million to 150 million people by 2050.8

As North Americans, we possess a great deal of wealth and privilege and with this, we have a

moral obligation to act. It is the responsibility of our governments, communities, and institutions to take

bold action in support of those who currently occupy the frontlines of climate devastation. However, as a

university, Mount Allison University’s role is particularly pronounced. We know the science of climate

change, we understand its global impacts, and we acknowledge that, within society, we occupy a

position of influence. The unjust nature of climate change demands that institutions such as ours take a

strong public stance on the issue. We can no longer profit from the destruction of our planet, and instead

we must invest in our futures and those of subsequent generations.

DIVESTMENT AS A TOOL FOR SOCIAL CHANGE

The divestment movement has gained significant momentum in recent years at institutions around

the world, from university campuses to municipalities and places of worship. However, while divestment

from the fossil fuel industry is a more recent pursuit, divestment as a tool for social change has a

significant history across many movements. Though this report will go on to argue for the use of

divestment to accelerate our transition to a fossil fuel-free economy, it is useful to note these examples of

success as indicators of the potential of divestment.

SOUTH AFRICAN APARTHEID

One of the most well known examples of the use of divestment to enact social change can be

found in the case of Apartheid South Africa. By the 1970s and 1980s, the world was becoming acutely

aware of the injustices unfolding in South Africa under the Apartheid regime9. To this effect, student

activists on campuses around the world sought to directly influence the South African government in an

effort to end apartheid, holding demonstrations and other forms of protest. However, activists found that 8 Vidal, John. “Global Warming Could Create 150 Million ‘Climate Refugees’ by 2050.” The Guardian. 2009. Accessed 22 December 2014, http://www.theguardian.com/environment/2009/nov/03/global-warming-climate-refugees. 9 Hendey, Eric. "Institute of Politics." Harvard University. n.d.. Accessed on January 11, 2015. http://www.iop.harvard.edu/does-divestment-work.


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these tactics, although valuable, were not as direct an impetus for change as desired; the idea of

divestment was then brought to light as a more direct way to influence policy. 10

In this case, divestment targeted foreign capital tied to South African businesses. Companies,

organizations, and institutions like universities were encouraged to sell off any interests in firms operating

under the regime, in the hope that this would influence and condemn the repressive actions of the

government. Yet, as with our present-day divestment movement, these calls for action were not met

without certain criticisms: many believed that divestment from local companies would not have any

impact on the government, but rather create even more difficulties for Black South African stakeholders.

And while the effects on divestment from these Apartheid companies had minimal effect on share prices,

the global attention that focused on companies working under the discriminatory regime was invaluable.11

On campuses, administrators and university directors were made aware that having investment interests

tied to Apartheid put them in precarious position of compliance.12 Ultimately, a total of 167 universities

and colleges including McGill University, the University of Toronto, and Dalhousie University were

brought to divest from the regime.13 Beyond places of higher learning, the movement generated

divestment action from other institutions, as well as city and state governments.14

As a gesture, the power of these activist actions cannot be understated. At the time, the South

African economy was largely dependent on foreign investment to support the growth of their industries.

From the U.S. alone, there was an estimated $14 billion in foreign direct investments15. Despite the

relative strength of several primary sectors, the large flow of capital to South Africa became tied to the

repressive regime. Furthermore, the dependence on imports and investment-in-kind of many

technologically advanced goods, like automobiles and computers resulted in a significant impact to South

10 Gethard, Gregory. "Economics." Investopedia. 2014. Accessed January 11, 2015, http://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp 11 Gethard,"Economics." 2014 12 Soule, S.A. "The Effect of Student Protest on the Diffusion of University: Divestment Decisions in the United States." Midwestern Political Science Association. 2008. pp.5, Accessed on January 11, 2015, <http://citation.allacademic.com/meta/p_mla_apa_research_citation/2/6/7/8/0/pages267809/p267809-1.php> 13 "Divestment Potential." Divest Dalhousie. 2014. pp.6. Accessed on January 11 2015. https://divestdal.files.wordpress.com/2014/10/divest-dalhousie-collaborative-reports-to-the-ic.pdf. 14 Knight, Richard. "Sanctions, Disinvestment, and U.S. Corporations in South Africa." In Sanctioning Apartheid, by Robert E. Edgar. Africa World Press. 1990. Accessed on January 11 2015. http://richardknight.homestead.com/files/uscorporations.htm. 15 Soule. “The Effect of Student Protest.” 2008.


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African businesses once the movement grew.16 In brief, several academics have argued, as Soule (2008)

and Knight (1990) do, that divestment played a key role in the decline of apartheid.

TOBACCO

To broaden our historical understanding of divestment, a comparison between divestment from

Apartheid South Africa and a more recent cause can be drawn: in the 1990s, advocates wanting to see a

decrease in tobacco used similar divestment tactics to challenge tobacco corporations as earlier activists

used to challenge the Apartheid regime. Again, the goal was to bring the power of the tobacco companies

to light and to raise awareness about the severe health risks linked to smoking17. Those advocating the use

of divestment as a tactic presented a very clear rationale, “fram[ing] the issue as one of responsible social

policy, focusing on the ethical disconnect involved in profiting from such a health-destroying product.”18.

The call of the divestment activists to action did not go unheard: according to the Council for

Responsible Public Investment, six states, ten municipalities, nineteen colleges and universities, and

several public and private institutions have restricted or divested their stocks from tobacco company

holdings19. In 1997, when Massachusetts signed onto tobacco divestment legislation, Governor Joe

Malone stated that divestment was “the only way to get tobacco companies to finally wake up to the fact

that they sell a dangerous product.”20 And while the state’s imperative for divestment stemmed from

concerns for public health, the realigned portfolios—with holdings in tobacco-free alternatives—actually

outperformed those with investments in the tobacco industry. Stanford University realized a similar gain,

with the then-chief executive stating that the potential for more profitable ethical investments would

always be significant.21 As with Apartheid, the significance of the relatively small financial impact of

divestment was eclipsed by the critical discourse that followed. The risks of consuming tobacco were now

16 Knight. "Sanctions, Disinvestment.” 1990. 17 Divest Dalhousie. "Divestment Potential." Divest Dalhousie. 2014. pp.9. Accessed on January 11 2015. https://divestdal.files.wordpress.com/2014/10/divest-dalhousie-collaborative-reports-to-the-ic.pdf 18 Wander, N, and R. E. Malone. "Fiscal Versus Social Responsibility: How Phillip Morris Shaped the Public Funds Divestment Debate." Tobacco Control, June 2006: 231-241. Accessed on January 11, 2015, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2596576/ 19 “Tobacco Divestment Fact Sheet #2” Council for Responsible Investment. Social Funds. n.d. Accessed on January 11, 2015, http://www.socialfunds.com/education/pdf/private.pdf 20 "Divestment Action Guide." Bhopal.net. 2001. Accessed January 11, 2015, pp.9, http://www.bhopal.net/old_studentsforbhopal_org/Assets/DivestmentActionGuide.pdf 21 Divest Dalhousie. “Divestment Potential.” pp. 9


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at the centre of public debate, as were the ethical hazards associated with holding investments in the

industry.

Between these movements, divestment has been instrumental in creating social and political

change which reaches beyond the financial pressures. In both cases, divestment movements tied together

moral, political and economic arguments to advance their cause. Now, the parallels between these

movements and the present movement for climate justice are apparent. The same arguments driving past

divestment actions are at the heart of fossil fuel divestment: a flow of capital in line with human interests,

a call to center our political and public debate around the issues of our time, and a challenge to the

unfettered growth of a perilous industry. In spite of opposition, these arguments and the divestment action

in which they are embodied have driven meaningful change—and will continue to do so as long as such

change is necessary.

THE ECONOMIC CASE FOR DIVESTMENT

THE CARBON BUBBLE

Capital markets rely on accounting frameworks to equate the risk, return, and price of financial

assets. As a general rule, investment projects must therefore be evaluated with strong methodologies,

according weight to the full range of possible outcomes. However, there is a growing concern that the

valuation process for certain financial assets tied to fossil fuel companies is inadequate insofar as certain

factors are not accounted for. Essentially, the misrepresentation of at-risk assets on these companies’

financial statements has left capital markets misaligned.

To describe this phenomenon and its implications, financial specialist firms such as think-tank

Carbon Tracker Initiative (CTI) have ushered the idea of a carbon bubble into the vernacular of

progressive investment. In effect, the idea holds firms to the ethical standards embodied by any

accounting framework with respect to the presentation assets and risk. Their conclusions are as follows: In

analyses by the CTI and the International Energy Agency (IEA), it was found that only 20% of the current

fossil fuel reserves reported and capitalized by the industry can be burned to maintain global temperatures


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within 2° C of pre-industrial levels by 2050.22 In other words, these companies report long-term assets

without disclosing that their useful lives are at risk of being impaired by factors ranging from the

development of green markets to the development of global climate policy framework. The latter point is

especially significant: our headlines continually show national governments’ commitments to “reduc[ing]

emissions, in a mutually accountable way, with national plans captured formally at an international

level”.23

Such a change to the operating environment of fossil fuel industry would inevitably produce

“stranded assets,” as they have come to be known. Currently, under the assumption that operations will

proceed with no such risk, capital expenditure by these firms has more than doubled in real terms since

2000.24 Yet, even a loose interpretation of intergovernmental policy endeavors would suggest the

presence of a risk of impairment to the long-term assets reported by fossil fuel companies. Any such

framework poses a hazard to the projected value of these capital investments; many argue that these

capital expenditures are being directed towards developing un-burnable reserves.

However, when the financial reporting standards are held as intended, and these assets’ risks are

properly represented, capital markets will adjust accordingly. Therefore, “institutional investors need

better and more future-oriented investment appraisal to determine a fair assessment of their investment

risks and opportunities” relating to fossil fuel firms.25 As investment decisions are only as strong as the

financial disclosure on which they are based, faulty disclosure results in a misdirected flow of capital—

away from renewable energy and toward the fossil fuel industry. Even without considering the

eventualities of stranded assets, we have already seen that previous slumps in energy prices and

implementations of full-cost accounting frameworks have resulted in write-downs. To list two examples,

British Petroleum “is taking an impairment charge of 2.11 billion USD, primarily relating to its U.S. shale

gas assets,” and “Encana reported a 1.7 billion USD after-tax impairment charge against net earnings.”26 In

summary, as explained by a letter to the Bank of England issued by several British academics and

environmental agency representatives: 22 “Unburnable Carbon 2013: Wasted Capital and Stranded Assets,” Carbon Tracker Initiative and Grantham Research Institute, 2013. Accessed 23 December 2014, http://carbontracker.live.kiln.it/Unburnable-Carbon-2-Web-Version.pdf 23 “The Cancun Agreements”, United Nations Framework Convention on Climate Change. Accessed 26 December 2014, http://cancun.unfccc.int/cancun-agreements/significance-of-the-key-agreements-reached-at-cancun/#c45 24 “World Energy Investment Outlook 2014 Factsheet,” International Energy Association. Accessed 3 January 2015, http://www.iea.org/media/140603_WEOinvestment_Factsheets.pdf 25 “Unburnable Carbon”, Carbon Tracker Initiative 26 Rogers, Deborah, “Shale Impairments are Indeed and Embarrassment,” Energy Policy Form, 28 August 2012, http://energypolicyforum.org/2012/08/28/shale-impairments-are-indeed-an-embarrassement/.


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As policy and technology work consistently over time to reduce returns in high carbon areas while

supporting low carbon ones, investing in high carbon sectors, . . . could result in stranded assets

and poor returns. Counter intuitively, institutional investors . . . continue to risk exactly that by

deploying significant amounts of capital into high carbon sectors, or in companies with significant

exposure to them.27

In response, the Bank of England acknowledged that such an emphasis on the risk of this

eventuality relied on three broad conditions, namely: exposure, the present failure of financial markets to

account for diminishing returns in their valuations, and sluggishness on the part of financial intuitions to

adjust their portfolios.28 While the likelihood of these conditions being met is rightly called into question,

research already suggests that a carbon bubble exists regardless. For example, in the spring of 2014, the

European financial advisory firm Kepler Chevreux published a report outlining net impacts of volume and

price effects assumed under three different scenarios relating to global energy trends and policy

frameworks designed to control atmospheric CO2. Their valuations of the carbon bubble are based on the

IEA report cited earlier:

Under a global climate deal consistent with a 2°C world, we estimate that the fossil-fuel industry

would stand to lose 28 trillion USD (in constant 2012 US dollars) of gross revenues over the next

two decades, compared with business as usual ... the IEA’s base-case scenario for global energy

trends out to 2035.29

This report also stresses that the base-case scenario also poses risks to the fossil fuel industry.

Though the monetary values are not derived in their evaluation, the IEA report made clear that a

difference in energy demand of several million tons of oil equivalent existed between a current policy

scenario, and the base-case scenario. The difference being that the base case and the current policy

scenario is that the latter “takes account only of policies already enacted as of mid-2013,” whereas the

former is a projection of green market developments and policy implementations.30 The conclusion is

27 Paul Abberley, et al., “Letter to Sir Mervyn King, Chairman of the Financial Policy Committee of the Bank of England,” Carbon Tracker Initiative, August 2014. Accessed 2 January 2015, http://carbontracker.org/wp-content/uploads/2014/09/Letter-to-Bank-of-England-Financial-Policy-Committee-19th-January-2012-Final.pdf 28 “Letter to Climate Change Capital,” Financial Policy Committee of the Bank of England, 1 February 2012, http://carbontracker.org/wp-content/uploads/2014/09/fpc-bank-of-england-response.pdf 29 “Stranded Assets, Fossilised Revenues,” Kepler Chevreux, 24 April 2014. Accessed 23 December 2014, http://www.keplercheuvreux.com/pdf/research/EG_EG_253208.pdf 30 “World Energy Investment”, International Energy Association


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therefore that any scenario deviant from the current policy framework would result in negative impacts to

the projected revenues of fossil fuel companies.

In broader terms, “financial analysts are already hedging their bets based on existing or reasonably

foreseeable market forces.”31 Proceeding under the assumption that the fossil fuel industry will not

disappear overnight, it must be recognized that these companies must continue to create value for their

shareholders. In fact, under pressure from activists and investors to comment on the risk of stranded

assets, ExxonMobil issued a statement asserting their confidence “that none of [their] hydrocarbon

reserves are now or will become ‘stranded.’”32 Yet, as Kepler Chevreux made note, such a claim is both

“too dismissive” and “far too binary” in assessing a global policy framework. In other words, ExxonMobil

had failed to properly report the full spectrum of risks faced by the fossil fuel industry.

At the very least, institutional investors must begin to demand the stress testing and reporting of

their fossil fuel investments under certain projections, thereby bringing about a more forward-looking

financial reporting standard. On the other hand, a more powerful message of investor non-confidence

may be sent: divestment. To speak nothing of ethics, there exist significant grounds to divest given what

many would argue as the wasting of capital expenditure on unrealizable extraction projects and the

tremendous value at risk of reported reserves. Essentially, any investor action that sets out to deflate the

carbon bubble would rightfully result in an alignment of capital markets, with management directing

investment not towards the dirtiest, costliest projects, but to the energy projects of the future.

ALTERNATIVE INVESTMENTS

Upon choosing to divest from the top 200 fossil fuel companies, the second portion of the

divestment decision is re-investing in companies that are fossil-free and working to transition to a green

energy future and a sustainable economy.33

31 “Carbon Asset Risk Initiative”, Ceres and Carbon Tracker Initiative. Accessed 23 December 2014, http://www.ceres.org/files/investor-files/car-factsheet 32 “Energy and Carbon—Managing the Risks,” ExxonMobil, 2014. Accessed 23 December 2014, http://corporate.exxonmobil.com/en/environment/climate-change/managing-climate-change-risks/carbon-asset-risk 33 350. org, Green Century Capital Management, and Trillium Asset Management, Extracting Fossil Fuels From Your Portfolio: A Guide to Personal Divestment and Reinvestment, 2011. Accessed January 5 2015.


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As with any industry, investors in low-carbon fossil fuels and renewables must nurse valid

concerns about returns on their investments. Often, the assumption is made that by acting with an ethics-

oriented approach as opposed to a purely financial rationale, returns on these investments will be

compromised. However, various analyses have concluded that this is not the case. To illustrate this point,

the financial analyst firm MSCI compared their All Country World Index with a modified version that

omitted companies in possession of carbon reserves. It was found that, over a time period of five years,

the active return differential of the fossil-free index was 1.2% higher than the conventional, fossil fuel-

inclusive index. Moreover, the modified index had a tracking error of only 1.9%, referring to the deviation

of a portfolio’s returns from its expected benchmark value.34

IMPAX Asset Management also investigated fossil free portfolios by four different approaches,

assessing hypothetical portfolios by analyzing how they would have performed over a five- to seven-year

timeframe. The nature of these portfolios ranged from wholly fossil fuel-free, to actively managed

portfolios with positive investments in environmentally sustainable options. Yet, for each of these green

portfolios, it was found that the returns were higher than those of conventional global index, with minimal

tracking errors.35

Investors would be right to point out that by constraining the breadth of a portfolio’s investments,

it increases the associated risk. However, while this relationship often holds true, investors frequently

overestimate the degree to which investments risks are affected by excluding the fossil fuel sector.36 A

study done by the Aperio Group found that removing the fossil fuel sector did have a marginal negative

effect on the performance of the portfolio, but it was by much less than initially expected. Furthermore,

the study determined that the impacts of divestment on measures of a portfolio’s performance can be so

low as to be statistically insignificant.37

The benefits associated with a flow of capital aligned with our environmental interests are not to

be enjoyed by investors alone; the growth of the green sector is positively affecting macroeconomic

variables. To speak employment, a report published by Bureau of Labour Statistics concluded that green

34 MSCI ESG Research. Responding to the Call for Fossil-Fuel Free Portfolios. 2013, Accessed 4 January 2015. 35 IMPAX Asset Management. Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment, 2013. Accessed 3 January 2015. https://s3.amazonaws.com/s3.350.org/images/Impax--20130704_white_paper_fossil_fuel_divestment_uk_final.pdf 36 350. org, Green Century Capital Management, and Trillium Asset Management, Extracting Fossil Fuels From Your Portfolio, 2011. Accessed 4 January 2015, http://greencentury.com/wp-content/uploads/pdf/DivestmentGuide.pdf 37 Aperio Group, Do the Investment Math: Building a Carbon Free Portfolio, 2013. Accessed 3 January 2015. file:///Users/owner/Downloads/building_a_carbon_free_portfolio.pdf


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sector jobs in the United States are being created four times faster (at 4.9% between 2010 and 2011) than

the job creation rate for the economy as a whole.38 Domestically, 23,700 Canadians earn their living in

the renewable energy industry, compared with the 22,340 people employed by the oil sands.39 And while

the latter industry stands as a marginal producer at the mercy of market forces and climate legislation, the

former is a youthful candidate for an influx of investment capital.40

To speak to this, a report published by 350.org, Green Century Capital Management, and Trillium

Asset Management, highlighted the increasing breadth of the green economy. It found that there are seven

fundamental “pillars” of green investing from simple power generation to sustainable developments in

agriculture and design. Our imperative to innovate and incentivize away from a fossil fuel economy

makes investments in the sustainable economy increasingly desirable.41

In brief, it can be argued, and often is, that the imperative to align investments to our

environmental interests is more than a moral cause. Investors are increasingly being made aware of strong

economic arguments and calls for financial prudence relating to fossil fuel divestment. Institutional

investors are now confronted with a body of knowledge illustrating a chronic overestimation of risks and

undervaluation of returns on portfolios devoid of the fossil fuel sector. In other words, not only is the

growth potential of the green sector foreseeably immense, it is also an opportunity for tremendous profit;

investments in such a future-oriented economy will be made both in the interest of sustainability, as well

as in the interest of stake- and shareholders alike.

38 Lee, Don. “Green Jobs Grow Four Times Faster than Others,” Los Angeles Times, 19 March 2013. Accessed 4 January 2015. http://articles.latimes.com/2013/mar/19/business/la-fi-mo-green-jobs-20130319 39 Blackwell, Richard. “Green Energy Sector Jobs Surpass Total Oil Sands Employment,” The Globe and Mail. 2 December 2014. Accessed 5 January 2015. 40 IMPAX Asset Management, Beyond Fossil Fuels, 2013. 41 350. org, Green Century Capital Management, and Trillium Asset Management, “Extracting Fossil Fuels From Your Portfolio,” 2011.


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THE DIRECT IMPACTS OF DIVESTMENT

FOSSIL FUEL COMPANIES

In choosing to withdraw holdings from the world’s top 200 publicly traded fossil fuel companies—

as determined by Fossil Free Indexes, LLC— institutions around the world are tracing and publicizing the

direct link that exists between the fossil fuel industry and the current climate crisis. Colloquially referred

to as “The Carbon Underground 200,” this list includes both the top 100 public coal companies and the

top 100 public oil and gas companies, as ranked by the potential carbon emissions content of their

reported reserves.42 As noted by Fossil Free Indexes, these firms hold over 4x their carbon budget

allocation based on the carbon emissions potential of their known reserves.

While we recognize that withdrawing the university’s endowment fund from these companies will

not immediately stop their stocks from being traded nor prevent their current operations from proceeding,

Mount Allison University’s divestment can, nevertheless, have a direct impact on the fossil fuel industry.

Divesting from these corporations will severely compromise their social licence, sending a clear message

that, faced with the severe threat of global climate change, proceeding with ‘business-as-usual’ is no

longer an option. While many of these companies are choosing to dismissively wave aside the divestment

movement, recent actions reveal that they are, in fact, feeling threatened. In November 2014, the leading

electric utility firm NRG, which has built its business from coal and conventional power plants, stated that

it would be aiming to reduce its greenhouse gas emissions by 50 percent by 2030, and 90 percent by

2050.43 When asked of the firm’s motives, the company’s chief executive, David Crane, said, “The power

industry is the biggest part of the problem of greenhouse gas emissions, but it has the potential to be an

even bigger part of the solution.” He further cited the divestment movement as a catalyst for the

commitment, stating: “I don’t relish the idea that year after year we’re going to be graduating a couple

million kids from college … with a distaste or disdain for companies like mine.” Furthermore, following

Divest Dalhousie’s meeting with their Board of Governors on November 25th, 2014, Natural Resources

Magazine released a blog post which stated that, “the divestment movement is another example of how

42 “The Carbon Underground 200: The World’s Top 200 Public Companies Ranked by the Carbon Content of their Fossil Fuel Reserves,” Fossil Free Indexes, 2014, accessed 27 December 2014, http://fossilfreeindexes.com/the-carbon-underground-2014/ 43 Cardwell, Diane. “NRG Seeks to Cut 90% of Its Carbon Emissions,” The New York Times, November 20th, 2014, accessed 5 January 2015, http://www.nytimes.com/2014/11/21/business/energy-environment/nrg-sets-goals-to-cut-carbon-emissions.html?_r=0


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difficult an environment it is for oil and gas companies to get their message out so they can advance their

projects and obtain a social licence to operate.”44

Indeed, fossil fuel companies around the world are increasingly having to confront this challenge

of securing a social licence. Educational institutions such as the University of Glasgow (UK), Victoria

University (NZ) and Unity College (ME, USA) have agreed to pull their financial holdings from the fossil

fuel industry. While others, such as Stanford University (CA, USA), have begun by specifically targeting

their investments in coal companies. Cities, including Seattle, San Francisco, Oxford, Melbourne, and

Brisbane, have also pledged to divest their holdings from carbon-intensive investments, understanding

that their economic and social stability will be severely threatened by the imminent effects of climate

change. In total, 181 insitutions and local governments and 656 individuals, together representing 50

billion dollars have committed to divestment.45Such cases prove that the divestment movement is an

effective instrument, capable of shaping the long-term business plans of fossil fuel companies.

Furthermore, as renewable alternatives become increasingly profitable, the divestment movement will

encourage the fossil fuel industry to finally transition into what it claims to be: an energy industry.

Overall, it is evident that this movement has the capacity to shut the doors on the ‘business-as-usual’

practices that are ruining our planet and our futures. As an institution of higher learning that “looks toward

a future where individuals actively engage in working together to meet new challenges in our ever-

changing world, both locally and globally,” we have an obligation to recognize the dangers of climate

change, and act to prevent and prepare for the probable challenges ahead. 46

CLIMATE CHANGE

Climate change is upon us. As previously discussed, world leaders have reached consensus that

no more than a 2 degree rise above pre-industrial temperatures is necessary to prevent catastrophic

climate change, and already we have begun to see a change in our planet. According to the IPCC, natural

44 Campbell, Darren. “Fight Over Fossil Fuel Investments Reaches Atlantic Canada’s University Board Rooms,” Natural Resources: Oil, Gas, Mining & Alternative Energy in Atlantic Canada, November 28, 2014, accessed 5 January 2015, http://www.naturalresourcesmagazine.net/?p=12205 45 “Divestment Commitments,” Fossil Free: Divest From Fossil Fuels, 2014, accessed 5 January 2015, http://gofossilfree.org/commitments/ 46 “Leadership Mount Allison Redevelopment: Proposed Vision, Mission, Goals.” Mount Allison University. n.d. Accessed 23 December 2014. http://www.mta.ca/Community/Governance_and_admin/VP_International_and_Student_Affairs/Leadership_Mount_Allison_Review/Proposed_Vision,_Mission,_Goals,_Values/Proposed_vision,_mission,_goals,_values/.


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disasters such as hurricanes and typhoons are increasing as a result of climate change47. The 11 million

affected by Typhoon Haiyan in October of 2014 are among the most direct recipients of the damages of

climate change. A new study published in Nature reveals the global inequality of carbon output and those

most susceptible to the effects. This study calculates that we are currently on course to reach a level of 5

degrees warming by 2100, to dangerous consequence.

McGlade et al. suggest that the only way to stay within our 2 degree limit is to keep a third of oil

reserves, half of gas reserves, and 80 percent of current coal reserves unused between 2010 and 2050.

These same results conclude that 85% of Canadian oil must remain unburned. The study uses well-

established economic modelling to predict that the cheapest, most accessible oil will be bought and

burned first, and that harder to access fossil fuels will be those that remain buried48. Knowing that we have

access to at least three times the fossil fuel reserves that the agreed upon two degrees will allow us

globally, we need to shift our habits and our resources.

As an educated community we know that we have to change our habits of unnecessary resource

extraction before the planet is altered extremely and irreversibly. Mount Allison students learn in courses

from across the faculties that climate change is a real and looming danger to our futures, our children, our

livelihood, to our environment. Surely, the number one undergrad university would not choose to be

blind to the effects that climate change will have on the lives of its leaders of tomorrow. Of what use will

any of our future efforts be if they are undone by the eruption of climate change?

Our education teaches us to voice our opinions and to take meaningful action against such

seemingly insurmountable challenges. Research and development – which we have been taught to

produce and to utilize- has created solutions. Alternatives to fossil fuels exist and it is up to members of

the Mount Allison community to use and support these technologies and research. As a public institution,

Mount Allison holds sway. Viable economic alternatives exist, and in order to act with the kind of long

term thinking promoted by our university, we must consider investment in the fossil fuel industry to be

unsustainable and unacceptable.

47 IPCC. “Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects,” 2014. 48McGlade, Christophe and Paul Ekins. “The Geographical Distribution of Fossil Fuels Unused When Limiting Global Warming to 2°C.” Nature 517. January 7 2015. Accessed 10 January 2015.


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CONSUMPTION AND BEHAVIOUR TRENDS

Not only as an institutional investor, but as an institution of higher thought, Mount Allison’s

influence on the consumption and behaviour trends of industry stakeholders—whether they be

multinational corporations, small businesses, or individual consumers—would not be unnoticed. Should

Mount Allison transition to a fossil-free endowment fund, the university would be a key actor in shaping

public perception of the oil and gas industry, both nationally and abroad. In choosing to leave Mount

Allison’s holdings in the industry primarily responsible for climate change, the public perception remains

that the University implicitly condones these detrimental actions, and stands to profit from the resulting

global degradation. In contrast, the disengaging of university funds from the industry would set an

important precedent, undoubtedly actuating important, broader changes in consumption and investment

patterns.

Not only does Mount Allison stand to influence consumption and behaviour through its

institutional ability to spark debate, but it also faces the possibility of placing itself at the centre of such

discussion and social change. As what would be Canada’s first university to divest from fossil fuels, it is

presented with the unique opportunity to frame this already-bourgeoning discourse on campuses and

within communities across the nation.

Environmentally ethical consumer choices can be impeded by any number of factors, from

personal or cultural values, social learning, slanted education, social barriers, habits or availability of

information. Being a prominent local and national presence, a divested Mount Allison University is

capable of helping consumers and social actors overcome many of these hurdles, understand the negative

impacts of the fossil fuel industry and make environmentally sound economic choices.

In effect, the act of fossil fuel divestment by Mount Allison would elevate climate change

conversation on campus, engaging the university community—including current, past and prospective

students in addition to staff and faculty—bringing climate justice to prominence on a personal level. This

would be of such wide-reaching social and environmental importance that for this reason alone, fossil

fuel divestment by Mount Allison could be justified. Mount Allison is presented with the opportunity to

act on the values that will define this era, and to play a part in influencing the future of climate action and

the surrounding dialogue.


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PUBLIC POLICY

The fossil fuel divestment movement has the potential to meaningfully influence public policy

decisions, thus allowing institutions to take the lead in the vital economic and political restructuring that

our environment requires. A recent article published in the Wall Street Journal discusses the political

implications of the fossil fuel divestment movement and explains that, "we have the technology to make

the transition to 100% renewables over the next few decades, while meeting the energy needs of

developing nations. What we need is the political will and financial foresight to make it happen."49 As an

epicentre of knowledge and innovation, Mount Allison is particularly well-suited to influence public

policy. By divesting from fossil fuels, the University will be able to harness this leverage and become a

leader in influencing public policy decisions. When universities and other institutions indirectly

collaborate by collectively taking part in the international fossil fuel divestment movement, they can bring

fossil fuel divestment to a much larger audience. From there, this increased awareness can influence

governments to implement an environmentally sound policy framework.

Perhaps most importantly, by divesting from the fossil fuel industry, Mount Allison will be

supporting a transition to the clean energy sector, which is gaining momentum and has become a

substantial source of employment in comparison to the traditional energy sector. In 2014, jobs in the

Canadian renewable energy sector surpassed the number of those offered in the oil sands, with 23,700

positions compared to the oil sand’s 22, 340. 50 In choosing to divest from fossil fuels, Mount Allison will

be supporting this burgeoning area of the economy and playing a direct hand in transitioning our

economy.

Overall, it is evident that public policy still has a long way to go in terms of supporting

environmentally friendly initiatives, but it is important to recognize the large impact that initiating fossil

fuel divestment at Mount Allison can have on these decisions, which is why it is essential that Mount

Allison University divest now.

49 Dorsey, Ellen. “Should Endowments Divest their Holdings in Fossil Fuels?.” The Wall Street Journal. November 23rd 2014. Accessed 2 January 2015. http://www.wsj.com/articles/should-endowments-divest-their-holdings-in-fossil-fuels-1416779351. 50 CBC News. “Clean Energy Provides More Jobs than Oilsands, Report Says,” CBC News. December 2nd 2014. Accessed 2

January 2015. http://www.cbc.ca/news/business/clean-energy-provides-more-jobs-than-oilsands-report-says-1.2857520.


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POSITIVE IMPACTS FOR MOUNT ALLISON UNIVERSITY

OUR REPUTATION

For over 175 years, Mount Allison has functioned within a framework of institutional excellence in

every possible facet of university operations. While consistently maintaining its status in the upper

echelon of academic distinction, Mount Allison has never shied from responsibility, originality and the

confidence required to pave the way for other institutions to follow. Mount Allison was the first university

in the Commonwealth to present a baccalaureate to a woman, it was also the first institution in Canada to

develop an extracurricular certificate leadership program for students, and today, it remains the university

with the largest per-capita number of Rhodes Scholars in the Commonwealth. Sustainability remains a

top priority at MTA, with the 2009-2016 University Strategic statement outlining the importance of

environmentally ethical behaviour, and sustainability as a necessity for the institution to operate.51 For

years, the university has been recognized for its commitment to environmental sustainability, a brand that

many hold in high-esteem. Although Mount Allison has policy in place to ensure that sustainable

behaviour and its mandate is upheld, the loss of the University’s Green Evolving Budget, the failure to

develop an in-house sustainability office, and the closure of Cuthbertson, the “Environmental Residence,”

have put at risk the university’s status as an environmentally-focused institution. Action must quickly be

taken if Mount Allison wishes to secure its standing as a socially responsible university.

Mount Allison University relies upon its terrific reputation to ensure high enrolment, and to

maintain a strong relationship with its donors and alumni, upon which the university depends. Although

fossil fuel divestment has proven to be successful in several American universities, churches, and even

cities, there has yet to be a university in Canada that has committed to complete fossil fuel divestment. 52

This is where Mount Allison truly stands to benefit, making a name for itself as Canada’s environmentally

conscious university: a powerful title upon which Mt.A can stake its reputation. Divestment from fossil

fuels would provide credibility not only to the reputation of the university community as a whole, but also

to the education being provided within these walls. Divestment would bolster the status of many of Mount

51 "Responsible Investment." Investment in Sustainability | Naropa University, Boulder, Colorado. Accessed January 19, 2015. http://www.naropa.edu/about-naropa/mission/sustainability/investment.php. 52 “Commitments,” Fossil Free, 2014.


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Allison’s academic departments, not only Geography and Environmental Studies, but also the Sciences,

Religious Studies, Women and Gender Studies, Economics, Commerce, Philosophy and so many more,

by institutionally acting upon an issue that so many Mount Allison students are educated on.

Being recognized as the best oftentimes means being the first, taking the risk and setting the trend

for success. Mount Allison cannot afford to simply be a follower, taking cues from other institutions; we

must present ourselves as the trail-blazers and history-makers, setting a precedent of environmental

responsibility, which others might admire and emulate.

RETURNS

Divest MTA recognizes that the university’s primary responsibilities, as they pertain to the

endowment, are fiduciary in nature, and that returns are of the greatest importance. The concept of the

carbon bubble and stranded assets have been investigated and elaborated upon within this report, and yet

here it must be emphasized that upon divesting from fossil fuels, Mount Allison faces only a minimal risk

of deviation from current returns, and would likely position itself as a more responsible, future-oriented

investor.

As a case of evidence, a unanimous vote of approval was made by the University Endowment

Committee of Naropa College, a small liberal arts institution in Colorado—with approximately 13% of its

endowment invested in the fossil fuel industry— to divest from fossil fuels in October of 2013. The

college has reported that the transition “hasn’t had a significant change on their portfolio.”53 Another

example of successful divestment can be found in Sterling College, an environmentally-oriented school in

Vermont, which reported an increase of almost $1 million in their endowment after divesting in 2013

with full support of the University Board of Trustees.54

Juxtaposing the above cases, which are presented by universities characterized by their small size,

De Anza and Foothills community colleges, with a collective 24,000 plus students operate as a unit in the

San Francisco Bay area and began the process of divesting in 2012 when students brought their

53 "Responsible Investment." Investment in Sustainability | Naropa University, Boulder, Colorado. Accessed January 19, 2015. http://www.naropa.edu/about-naropa/mission/sustainability/investment.php. 54 "News Archive - Sterling College." Sterling College. Accessed January 19, 2015. http://www.sterlingcollege.edu/news-events/news-archive/.


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proposition to the Foothill-De Anza foundation. Robin Lyssenko, the former director of the foundation,

cited fiduciary responsibility first and foremost in his responsibilities; yet, after making the decision to

divest from fossil fuels, reported that Foothill-De Anza, like Naropa, had seen no significant impact on the

institutional portfolio’s returns.55

Although it might be argued that the above are only a small selection of cases, and are therefore

not an appropriate demonstration of the stability of post-fossil fuel portfolios, a recent study by the Aperio

Group deserves attention. This investigation found that theoretical risk to returns was negligible, with an

impact ranging from only 0.004% to 0.003% when fossil fuels were taken out of an investment portfolio.56

Between the EU’s pledge to reduce carbon emissions 40% by 2030, the United States and China’s

recent carbon reduction agreement, and foreseeable intergovernmental climate policy frameworks, it is

clear that action is being taken that threatens the continued prosperity of our fossil fuel-based economy. 57

It can and has been argued that, with its investment interests in fossil fuels, Mount Allison’s long-term

endowment portfolio’s returns are at greater risk. Divestment therefore stands not only as a tool of climate

activism but also as a gesture of financial responsibility.

RECRUITMENT & RETENTION

Being a small institution, Mount Allison is always at the mercy of student enrolment. Recently, in

2013 we felt the sting of a drop in enrolment of approximately 100 students, or almost 5% of our student

population.

Current and prospective students in 2015 have been brought up with the knowledge that climate

change is a result of human action, and that environmental sustainability is of concern to all. Mount

Allison attracts students of a high academic and socially responsible calibre, with departments like

Geography & Environment, Sociology, International Relations, Philosophy and Women & Gender studies

55 "Foothill-De Anza Foundation to Divest Fossil Fuel Holdings." Inside Higher ED. Accessed January 19, 2015. https://www.insidehighered.com/quicktakes/2013/10/25/foothill-de-anza-foundation-divest-fossil-fuel-holdings. 56 "Do The Investment Math: Building a Carbon-Free Portfolio." Aperio Group. Accessed January 19, 2015. http://www.aperiogroup.com/system/.../building_a_carbon_free_portfolio.pdf. 57 "2030 Framework for Climate and Energy Policies." European Commission. Accessed January 19, 2015. http://ec.europa.eu/clima/policies/2030/index_en.htm.


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drawing in young people from across the country, students concerned with contemporary issues and

developing solutions to those issues.

The first school in the United States to commit to fossil fuel divestment was Unity College, a small

university in Maine, similar to Mount Allison in many ways, and an institution which, in recent years, Mt.

A has formed a bond with. The decision to divest came not from students or in answer to a larger

campaign, but in fact was initiated by the University President Dr. Stephen Mulkey, who immediately saw

a positive increase in online donations to the University. Unity also saw an “uptick in our inquiries from

students” which was predicted to result in an increase in enrolment. The aforementioned Sterling College

chose to divest some time after Unity, and found that after divesting, records were set for student

enrolment numbers.58

Fossil fuel divestment sends a very clear and very positive message to students both current and

prospective: that Mount Allison is an institution dedicated to the betterment of the student’s future.

Divestment tells students that Mount Allison is one of the few universities in the entire world to have

listened to the warnings of the academics and experts it houses, heard the concerns of students and

earnestly responded, fully understanding what is best, not only for Allisonians now, but Allisonians in the

future.

CONCLUSION

Universities are supposed to be epicentres of innovation, ingenuity and enlightenment and yet, at

such a critical moment in our planet’s history, post-secondary institutions around the world are standing

on the sidelines, refusing to take the bold action required to prevent catastrophic climate change. Mount

Allison University is being presented an immense opportunity. In divesting the university’s endowment

fund from the fossil fuel industry, the fiduciary would be positioning this institution as a national and

international leader of climate action. Divestment would send a clear message across the country that

Mount Allison University, the number one undergraduate school in Canada, is committed to doing

everything within its power to ensure that its students will continue to succeed for generations to come.

58 "Divestment Potential A Compilation of Collaborative Reports by Divest Dalhousie." Divest Dalhousie. Accessed January 19, 2015.


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Financial arguments against divestment are weakening. While oil and carbon stocks have

historically been solid investments, current conditions are likely to permanently destabilize this industry.

The United States and China’s recent historic agreement to cut carbon emissions proves that governments

are now mobilizing to meet the extreme threat of climate change. The fossil fuel industry will be the

greatest casualty of such agreements. A 2013 study by HSBC Bank warned that between 40 and 60

percent of the market value of European fossil-fuel companies, including British Petroleum and Royal

Dutch Shell, could be eliminated in a carbon-constrained world.59 In a low-carbon future, the top 200 oil,

gas and coal firms will be unable to bring two-thirds of their proven reserves to market. It is time for

Mount Allison University to wake up to the risks of staying invested in the fossil fuel industry. The

financial arguments against divestment are crumbling under scrutiny. Reports show that Big Oil and Big

Carbon are severely overpriced, and the inevitable correction for this overvaluation will soon fall on

Mount Allison’s fiduciary.

Yet, even with the financial case for divestment holding strong, there is still no greater reason to

pull Mount Allison’s endowment fund from the fossil fuel industry than the moral benefit of doing so. In

March 2014, oil giant Exxon Mobil scoffed at the notion that its 25 billion barrels of proven reserves could

become stranded. The company wrote that world governments lacked the political will to take the steps

necessary to prevent a 2o Celsius rise in temperature. Interestingly, Exxon did not attempt to contest the

science of climate change but rather, asserted that it had “the upper hand in the politics of climate

change.”60 The message here could not be clearer:

The fossil fuel industry is betting on international inaction. It is betting on our collective failure to act on

the greatest challenge we have ever faced.

In staying invested in this industry, Mount Allison University is doing the same. It is directly supporting an

industry whose primary interest is in maintaining the status quo— a status quo that planetary limits cannot

uphold. There is no “neutral choice” in the matter. Any institution that remains invested in fossil fuels is

implicated in the politics of climate change. As Ellen Dorsey, Wallace Global Fund’s executive director

59 Dickinson, Tim. “The Logic of Divestment: Why We Have to Kiss Off Big Carbon Now.” Rolling Stone. 14 January, 2015. Accessed 23 January 2015. 60 Ibid.


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stated, “If you own fossil fuels, you own climate change. And it’s not just owning their environmental

impacts. You own their political impacts too. You’re helping to build their war chest.”61

In directly supporting this industry, you are taking away our generation’s chances of combatting

the climate crisis. History will look back on these years as those that determined the future health of the

planet. We must decide now how we wish to be remembered. As students of this university, we rely on

this institution to have our best interests at heart, and we fully believe that Mount Allison does. However,

if you truly believe that you have provided us with an education that prepares us to rise to the world’s

greatest challenges, then you will give us a chance. Divest from the fossil fuel industry and provide us

with the opportunity to employ what we have learnt. Grant us the ability to begin building a world that

we want to live in, one that is inclusive of everyone, and one that, years from now, we will feel confident

passing onto future generations.

61 Dickinson, Tim. “The Logic of Divestment: Why We Have to Kiss Off Big Carbon Now.” 2015.


30

APPENDIX- TOP 200 FOSSIL FUEL COMPANIES

THE TOP 100 PUBLICLY TRADED COAL COMPANIES BASED ON THE EMISSION POTENTIAL OF THEIR KNOWN CARBON RESERVES

RANK

TOP COAL COMPANIES

COAL Gt CO2

1 Coal India 57.722

2 Shenhua Group 31.523

3 Adani Enterprises 25.383

4 Shanxi Coking Company 18.445

5 BHP Billiton 13.469

6 Anglo American 12.985

7 Inner Mongolia Yitai Coal 12.223

8 Datang Intl. Power 12.206

9 China National Coal 12.071

10 Peabody Energy 11.469

11 Glencore Xstrata 10.453

12 Datong Coal Industry 10.281

13 Yanzhou Coal Mining 9.799

14 Public Power Corp (DEH) 9.339

15 Exxaro Resources 8.793

16 Yangquan Coal Industry 7.298

17 Mechel 6.739

18 Arch Coal 6.530

19 Alpha Natural Resources 5.482

20 Mitsubishi 4.738

21 Vale 4.401

22 Rio Tinto 4.338

23 EVRAZ 4.235

24 Raspadskaya 4.084

25 Asian Resource Minerals 3.181

26 UC RUSAL 3.081

27 Neyveli Lignite 3.035

28 Pingdingshan Tianan Coal 3.023

29 Cloud Peak Energy 2.881

30 Sasol 2.731

31 Severstal 2.726


31

32 AGL Energy 2.704

33 Tata Steel 2.679

34 Teck Resources 2.603

35 Kuzbass Fuel 2.504

36 Polyus Gold 2.294

37 Energy Ventures 2.184

38 Whitehaven Coal 2.055

39 Banpu 2.040

40 RWE 1.943

41 Consol Energy 1.887

42 W H Soul Pattison 1.850

43 Resource Generation 1.818

44 Bayan Resources 1.806

45 Churchill Mining 1.745

46 NTPC 1.740

47 Adaro Energy 1.607

48 Nacco Industries 1.557

49 Idemitsu Kosan 1.530

50 Alliance Resource Partners 1.475

51 Huolinhe Opencut Coal Ind 1.387

52 Coalspur Mines 1.380

53 Mitsui 1.366

54 Golden Energy Mines 1.354

55 Coal of Africa 1.339

56 Novolipetsk Steel 1.288

57 Wesfarmers 1.094

58 Tata Power 1.062

59 Magnitogorsk Iron & Steel 1.046

60 Sherritt International 1.012

61 Kazakhmys 0.998

62 New World Resources 0.972

63 Mongolian Mining 0.903

64 Itochu 0.878

65 Westmoreland 0.864

66 Cockatoo Coal 0.851

67 Shanxi Meijin Energy 0.784

68 Jizhong Energy Resources 0.742

69 Bandanna Energy 0.731

70 Polo Resources 0.726


32

71 Allete 0.723

72 CLP Holdings 0.696

73 Aspire Mining 0.670

74 Walter Energy 0.641

75 Aquila Resources 0.627

76 Coal Energy 0.614

77 China Resources Power 0.567

78 Indika Inti 0.485

79 ArcelorMittal 0.464

80 FirstEnergy 0.458

81 Black Hills Corp 0.431

82 Wescoal Holdings 0.430

83 Grupo Mexico 0.420

84 African Rainbow Minerals 0.379

85 Shanxi Coal Intl Energy 0.376

86 Capital Power 0.367

87 PTT Public 0.359

88 Lanhua 0.338

89 Fortune Minerals 0.328

90 Cardero Resources 0.323

91 Zhengzhou Coal Ind & Elec 0.319

92 Steel Authority of India 0.307

93 Jindal Steel & Power 0.301

94 Shougang Fushan Resources 0.299

95 Jingyuan CE 0.297

96 Stanmore Coal 0.287

97 Prophecy Coal 0.272

98 Marubeni 0.265

99 Cliffs Natural Resources 0.247

100 NSSMC 0.237


33

THE TOP 100 PUBLICLY TRADED OIL AND GAS COMPANIES BASED ON THE

EMISSION POTENTIAL OF THEIR KNOWN CARBON RESERVES

RANK OIL AND GAS COMPANIES

OIL Gt CO2 GAS Gt CO2 TOTAL O&G Gt CO2

1 Gazprom 6.248 37.292 43.540

2 Rosneft 10.059 1.979 12.039

3 PetroChina 4.884 3.693 8.577

4 ExxonMobil 4.143 4.038 8.181

5 Lukoil 5.666 1.280 6.946

6 BP 4.203 2.197 6.400

7 Petrobras 4.676 0.674 5.350

8 Royal Dutch Shell 2.140 2.332 4.473

9 Chevron 2.545 1.591 4.137

10 Total 2.130 1.683 3.813

11 Novatek 0.387 3.391 3.777

12 ConocoPhillips 1.661 1.069 2.730

13 Tatneft 2.622 0.067 2.689

14 ENI 1.418 1.142 2.561

15 ONGC 1.449 0.703 2.152

16 Statoil 1.012 0.928 1.939

17 Sinopec 1.204 0.367 1.571

18 CNOOC 1.155 0.366 1.521

19 BG 0.593 0.664 1.257

20 Occidental 0.950 0.303 1.253

21 Apache 0.586 0.461 1.047

22 Canadian Natural Resources

0.780 0.200 0.980

23 Anadarko Petroleum 0.450 0.454 0.904

24 BHP Billiton 0.345 0.552 0.897

25 Devon Energy 0.379 0.515 0.894

26 Chesapeake Energy 0.293 0.596 0.889

27 Bashneft 0.876 0.000 0.876

28 Inpex 0.393 0.369 0.762

29 Ecopetrol 0.580 0.157 0.737

30 EOG Resources 0.392 0.258 0.650

31 Suncor Energy 0.596 0.041 0.636

32 Marathon Oil 0.473 0.151 0.624

33 Hess 0.485 0.125 0.610


34

34 Imperial Oil 0.561 0.027 0.587

35 Encana 0.089 0.479 0.568

36 Energi Mega Persada 0.020 0.537 0.557

37 BASF 0.159 0.294 0.453

38 Repsol 0.182 0.265 0.446

39 OMV 0.260 0.152 0.413

40 Noble Energy 0.141 0.271 0.412

41 Woodside Petroleum 0.058 0.334 0.392

42 Pioneer Natural Resources

0.270 0.120 0.390

43 Linn Energy 0.218 0.163 0.381

44 Cenovus Energy 0.309 0.053 0.362

45 YPF 0.235 0.121 0.356

46 Range Resources 0.090 0.261 0.352

47 PTT 0.111 0.228 0.339

48 Husky Energy 0.212 0.122 0.334

49 EQT 0.001 0.326 0.327

50 Continental Resources 0.238 0.073 0.311

51 Talisman Energy 0.111 0.199 0.310

52 KazMunaiGas EP 0.298 0.000 0.298

53 JX Holdings 0.271 0.000 0.271

54 WPX Energy 0.069 0.188 0.258

55 Santos 0.033 0.204 0.237

56 SK Innovation 0.226 0.000 0.226

57 QEP Resources 0.078 0.143 0.220

58 Southwestern Energy 0.000 0.219 0.219

59 Consol Energy 0.000 0.218 0.218

60 Cabot Oil & Gas 0.010 0.201 0.212

61 SandRidge Energy 0.134 0.077 0.211

62 Newfield Exploration 0.112 0.096 0.207

63 Murphy Oil 0.144 0.062 0.206

64 Dragon Oil 0.159 0.044 0.203

65 Freeport-McMoRan 0.155 0.028 0.183

66 Maersk Group 0.174 0.000 0.174

67 Concho Resources 0.116 0.057 0.173

68 Ultra Petroleum 0.008 0.162 0.169

69 Denbury Resources 0.139 0.026 0.166

70 GDF SUEZ 0.045 0.117 0.162

71 MEG Energy 0.155 0.000 0.155


35

72 Whiting Petroleum 0.139 0.012 0.151

73 RWE 0.037 0.111 0.148

74 MOL 0.084 0.061 0.146

75 Crescent Point Energy 0.135 0.010 0.145

76 Polish Oil & Gas 0.036 0.108 0.144

77 Mitsui 0.048 0.095 0.142

78 Penn West Petroleum 0.111 0.029 0.140

79 Pacific Rubiales Energy 0.104 0.028 0.132

80 Oil India 0.073 0.059 0.132

81 Cimarex Energy 0.062 0.068 0.130

82 Energen 0.082 0.044 0.126

83 TAQA 0.065 0.055 0.121

84 Oil Search 0.028 0.088 0.117

85 ARC Resources 0.044 0.065 0.109

86 Canadian Oil Sands 0.109 0.000 0.109

87 Genel Energy 0.105 0.000 0.105

88 SM Energy 0.057 0.045 0.102

89 Sasol 0.004 0.085 0.089

90 National Fuel Gas 0.018 0.071 0.088

91 Tullow Oil 0.080 0.008 0.088

92 Pengrowth Energy 0.051 0.037 0.088

93 Xcite Energy 0.084 0.001 0.085

94 Vermilion Energy 0.069 0.013 0.082

95 Peyto E&D 0.009 0.070 0.079

96 Quicksilver Resources 0.017 0.061 0.077

97 Petroceltic International

0.026 0.050 0.077

98 Forest Oil 0.026 0.050 0.076

99 Tourmaline Oil 0.009 0.065 0.074

100 Bonavista Energy 0.027 0.045 0.072

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