Why Seattle should unload its fossil fuel investments
Given President Donald Trump’s intentions to dismantle all efforts to tackle climate change, it is vital that Seattle respond by doubling-down on policies that protect our shared climate. One way for Mayor Ed Murray to do so is to follow up the city’s historic divestment from Wells Fargo, by instructing his staff that sit on the board of the city’s $2.5 billion pension fund to vote in favor of full divestment from fossil fuels.
The fossil fuel divestment movement started back in 2011 on just a few university campuses. Over the next six years it grew to become the largest divestment movement in history, with over $5.44 trillion worth of investment capital committing to some form of divestment from fossil fuels. Institutions committed to divestment include the World Council of Churches, the Californian State employee pension board and the entire nation of Ireland.
Yet, despite this, the City of Seattle's pension fund is still heavily invested in coal, tar sands and other fossil fuel corporations, whose basic business models are incompatible with the emissions reductions targets agreed to in Paris by 194 nations. This is an inconsistency irreconcilable with Seattle’s claim to be an environmental leader.
The 2014 Intergovernmental Panel on Climate Change report found that to have any hope of remaining below the internationally agreed upon limit of 2°C of global warming — never mind the aspirational target of 1.5°C — we must remove over $30 billion a year from the fossil fuel industry, and invest an additional $147 billion in the renewable sector. That fossil fuel divestment is a vital tactic in achieving this is a fact not lost on the former UN Climate Chief, Christiana Figueres: “The investments that we are going to make globally over the next five years … will determine the quality of life for future generations, simple as that.”
What’s more, divesting is not only the right thing to do, it is the financially prudent thing to do. This fact has been spotlighted by a recent financial report, delivered to Mayor Murray’s desk on Wednesday by over 150 divestment advocates. The report, authored by Gang Chen, a former North American Director of equity index derivative trading at UBS, shows that the city pension fund has lost $65 million by remaining invested in fossil fuels over the last ten years.
Yet, despite these losses and the $5.44 trillion worth of investment capital that has already divested, we expect that the Seattle City Employees and Retirement System (SCERS) board may try to argue that their hands are tied by their legal responsibilities to fiduciary duty.
Such a response would be unforgivably myopic.
The Californian State pension funds CALpers and CALsters were ordered to divest from coal by the state legislature; however, they were told they could only do so if doing so was possible within the definitions of fiduciary responsibility. It was, and the country’s largest pension fund has now committed to divesting from all coal companies within a five-year time period.
Furthermore, the losses felt by the Seattle pension fund as a result of its investments in fossil fuels are concurrent with wider market trends that indicate the profit-making glory days of fossil fuel corporations are already a thing of the past: just two weeks ago Exxon-Mobil, the world’s largest oil corporation, was forced to write off over $2 billion worth of assets, while study after study after study has now shown that fossil fuel-free portfolios often outperform those that include companies like Energy Transfer Partners, Exxon-Mobil and Shell.
Just this month Mercer, the world’s largest human resource consulting firm, published a report concluding that, owing to their fossil fuel investments, the average U.S. public pension fund is exposed to losses of billions of dollars should action be taken to limit global warming to 2°C, the baseline goal of the 2015 Paris Climate Agreement.
The Mercer report draws heavily on the logic of the carbon bubble, the theory that should the world take the required action to prevent catastrophic climate change then trillions of dollars worth of fossil fuel reserves, currently factored into the stock market valuation of fossil fuel companies, will need to be left in the ground. And their valuation will be wiped from the stock market.
In a recent phone conversation, the theory of the carbon bubble was succinctly described Dr. Bruce Flory, principal economist at Seattle Public Utilities: “The stock value of fossil fuel companies reflects expectations of their future profits which are based on their known reserves and the assumption that those reserves will be fully exploited. But the survival of human society depends on most of those reserves being left in the ground. When this fact becomes clear to the market, the value of fossil fuel stocks will crash. Smart investors will have already divested.”
Dr. Flory is one of hundreds of city employees who have signed a petition calling on the city to divest from fossil fuels.
Of course, while the financial argument is now clear, it is vital not to lose sight of the moral necessity of moving our money out of the fossil fuel industry. With a racist, science-denier in charge at the White House and the EPA, it’s more important than ever that Seattle does every single thing it can to combat climate change. One very clear way to do this is to align the city’s money with its values. As we have seen with the Wells Fargo divestment spreading like wildfire across the country, when we do this, others follow.
Mayor Murray should continue to ensure that Seattle remains a beacon of hope during these dark times by instructing his staff to vote in favor of divesting the city’s pension fund from fossil fuels.