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April 15, 2015

Boston University professor Cutler Cleveland lectures about energy and the environment. (Kalman Zabarsky/Boston University).

Many universities hold large endowments that have significant positions in fossil fuel companies or funds that hold fossil fuel assets. But universities also support most of the research that has identified the existence, nature and consequences of climate change, and the principal purpose of the university is to educate, particularly the young adults who will live and work in the climate of the future.

 Arguments for universities to divest from fossil fuels are frequently based on moral grounds. Ignoring the moral issue at the core of the climate challenge presents real peril to the reputation of universities and their standing in society. The costs of climate change stretch across generations due to the long atmospheric lifetimes of greenhouse gases and the inertia in the Earth’s climate system, posing the question of what the impacts of today’s societies are on the well-being of their children and grandchildren. The poor bear the brunt of the economic and health impacts of climate, a relationship that holds within every nation, and between rich and poor nations.  

But the case for divestment is not limited to moral imperatives. Holding assets in fossil fuel companies, and in companies that are fossil fuel-intensive, poses a significant array of risks for universities that appear on multiple, simultaneous fronts.

Fossil fuel companies will eventually experience a dramatic decline in demand for their products, producing so-called “stranded carbon.” Price volatility of fossil fuel assets is the norm, and it will be exacerbated by rising concerns about extractive practices and the forced internalization of external costs, shareholder advocacy, the elimination of generous subsidies, and intense competition from energy efficiency and fast-developing, low-carbon sources of energy. 

Related: Amid Calls to Divest, Schools Explore Green Revolving Funds

Taken as a whole, the financial, moral and reputational risks associated with holding assets in fossil fuel companies create a compelling case for divestment, even without considering the rising opportunity costs of not transferring investments to cleaner alternatives. 

Instead of viewing the choice as “business as usual” or “disinvest,” universities should engage with other universal owners — asset owners who recognize that their portfolios are diversified across multiple industries and asset classes — and learn how to invest responsibly.

Related: Divestment Is No Substitute For Real Action on Climate Change

Developing the capacity to identify good investments that make sense from both a moral and a financial standpoint, and doing that work will help inform the rest of us. Doing this work also visibly fulfills the university’s role in society, and will attract high-quality students, faculty and donors.

Even the most cold-blooded investor will eventually have to acknowledge that the risks of investing in fossil-fuel companies are growing, as is the value of industries that are not vulnerable to regulation, resistance and devaluation. 

University leaders should recognize how intelligently going down the road of divestment fulfills their role in society, and that failing to fulfill the university’s basic mission will eventually degrade its reputation and capacities.

Cutler J. Cleveland is a professor of Earth and Environment at Boston University. Richard Reibstein is a lecturer in the department. This piece was originally published in the New England Journal of Higher Education.

This opinion is part of a series produced by WGBH's On Campus called The Cost of Divestment. The series was done in partnership with WCAI's Living Lab, a forum for the stories behind science headlines. 

climate change, confronting cost, Boston University, new business models, divestment

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