{"id":224,"date":"2014-01-23T15:19:59","date_gmt":"2014-01-23T15:19:59","guid":{"rendered":"http:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/?p=224"},"modified":"2014-04-09T16:36:11","modified_gmt":"2014-04-09T16:36:11","slug":"divestment","status":"publish","type":"post","link":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/2014\/01\/23\/divestment\/","title":{"rendered":"A Perspective on Responsible Investment in Times of Global Change"},"content":{"rendered":"

In this article, Stephen Porter examines some of the arguments ar<\/em>\"Stephen<\/a><\/em>ound the issue of responsible investment – and raises provocative and pertinent questions about the risks of divestment in relation to personal pensions and\u00a0charity endowment funds.\u00a0 He\u00a0challenges us to carefully cons<\/em>ider if divestment from our major sources of fuel really is ‘responsible’ if we leave future <\/em>generations\u00a0without the ability\u00a0to meet the energy gap for at least half a century! In this sense does\u00a0divestment really ali<\/em>gn with the principles of Sustainable Development?<\/em><\/p>\n

As far as winters go, Edinburgh\u2019s this year has so far been rather mild.\u00a0 The mercury has fallen below zero in the city only a handful of times, and even then just at night.\u00a0 The gas company should be getting less of my hard-earned dosh than may have otherwise been the case (price-rises excepted, of course).\u00a0 Global warming? Bring it on and hand me the sun-cream! Turn this pasty Northerner into an olive-skinned Mediterranean type.<\/p>\n

<\/p>\n

However, if I were with our friends across the pond, perhaps I might see things a bit differently \u2013 at least at the moment. \u00a0As I sit here writing at the end of January 2014, yet another cold snap and snowstorm are hitting the East Coast of the US.\u00a0 And this is after even Hell froze over (well, Hell, Michigan anyway) in the midst of the Artic Vortex that gripped North America over Christmas and New Years.\u00a0 Global warming? What global warming?\u00a0 Thank heavens for cheap shale gas to keep the frostbite away by turning the heating up without busting the bank.\u00a0 Drill, baby, drill!\u00a0 Or has this year merely been a typical winter that seems cold relative to recent, mild ones? Our memories are sometimes rather short<\/a>…..<\/p>\n

Those in many parts of Africa and Asia may have yet a different perspective on this global warming business.\u00a0 Failing monsoons, droughts, floods, rising sea levels.\u00a0 While this may be \u201cweather\u201d, the longer-term climate patterns are changing, becoming less reliable and more extreme.\u00a0 People living (or trying to live\u2026) in these regions are likely to feel the effects of changing weather patterns much more profoundly that I am, sitting here on a hill in Edinburgh (which may become beachfront if Antarctic ice-sheets melt \u2013 the irony, living on a tropical island in a world destroyed).\u00a0 These countries and regions are less able to adapt to and\/or combat these changes \u2013 the simply don\u2019t have the same level of resources as, for example, the EU does.\u00a0 To paraphrase: It\u2019s the climate, stupid!<\/em><\/p>\n

Whilst I\u2019m certainly no historian, I ask you: where we might be today if we had not discovered the uses of wood, charcoal and coal to create heat, and through heat create work, and through work initiate the Industrial Revolution?\u00a0\u00a0 And we still use a heap of coal today for generating energy (in addition to other fossil fuels).\u00a0 I might also argue that the Industrial Revolution continues \u2013 it\u2019s merely moved South and East.\u00a0 If it weren\u2019t for the abundance such energy-rich compounds, what would our life be like today? Would it be better or worse? \u00a0I don\u2019t have an answer to such a philosophical question.\u00a0 Hmm, where can I get my hands on Dr. Who\u2019s Tardis to pose that to Aristotle?<\/p>\n

What does seem to be evident, however, is that change won\u2019t happen overnight \u2013 likely not this decade or even the next.\u00a0 According to\u00a0an article<\/a> in Scientific American the major global energy transitions (from wood to coal to oil) have each taken between 50 to 60 years.\u00a0Developed economies are \u201clocked-in\u201d to certain technologies and infrastructure that are tried and tested. These economies are also (still) the largest portion of the global economy.\u00a0 In a mad-dash catch-up exercise to narrow the wealth gap between the Developed and Emerging worlds, Western dominance over the global economy is beginning to ebb away.\u00a0 In terms of GDP, China is now the world\u2019s second-largest economy, Brazil is 7th<\/sup> and India is 10th<\/sup>; but their growth has largely been fuelled by fossil fuels, coal in particular.\u00a0 Unless an unexpected technological advancement occurs that changes the economics of non-fossil fuel energy generation (not to mention storage), worms may have feasted upon my remains (or at least be eyeing up this old bag-of-bones in anticipation) before renewable energy reaches a meaningful share.\u00a0 So, what do we do about it?<\/p>\n

The \u201cResponsible Investing\u201d movement \u2013 such as the United Nations Principles for Responsible Investing<\/a>, to which the University of Edinburgh <\/a>is only the second higher education institute to be a signatory \u2013 has gathered pace over recent years.\u00a0 But who wouldn\u2019t invest responsibly? Or put another way, how should we define responsible? And then how do we implement that definition?<\/p>\n

For some, such as Bill McKibben and http:\/\/350.org\/<\/a>, \u201cresponsible\u201d is about divesting from fossil fuels, on environmental as well as financial grounds.\u00a0 McKibben\u2019s article in Rolling Stone <\/a>of a couple of years ago, and that of \u201cUnburnable Carbon\u201d<\/a> from the Carbon Tracker Initiative, remain thought-provoking reading.<\/p>\n

But is divestment today, or even within the next five years, \u201cresponsible\u201d if the transition to world where renewable energy finally provides the majority of energy generation is indeed 50-60 years away?\u00a0 Is the opportunity cost of not having a voice that company management may listen to or not participating in the earnings fossil fuel companies will generate for the foreseeable future an acceptable risk for our pension funds (state, personal and\/or corporate), universities\u2019 endowment funds or charity and foundation funds?\u00a0 The unintended as well as intended consequences of actions must be weighed up before action is taken \u2013 if such consequences are desirable, go for it!<\/p>\n

Finally, I pose a question wrapped in hope.\u00a0 With the immense annual revenues they generate from you and I consuming their product (in one form or another), could fossil-fuel companies actually become an engine of change?\u00a0 Is a culture shift from \u201cBig Oil\u201d that knows only about drilling to \u201cBig Energy\u201d that knows how to develop viable, non-finite alternatives possible?<\/p>\n

A pipedream perhaps \u2013 but without dreams, and the fortitude to try to turn dreams into reality, we will live in a much poorer place.<\/p>\n

 <\/p>\n

Stephen Porter is a tree-hugger come investor.\u00a0 He worked in the institutional investment management industry for nearly 20 at some of the leading global firms, engaging with the senior leaders of asset owners such as sovereign wealth funds, public pension funds and charitable foundations to create custom solutions to meet their specific requirements.\u00a0 To atone for such \u201csins\u201d, in 2012 Stephen embarked upon a rather different path \u2013 enrolling in Edinburgh\u2019s MSc in Carbon Management.\u00a0 Stephen has also begun part-time PhD studies at the University of Edinburgh\u2019s School of GeoScience, exploring the links between climate change mitigation and losses across the food supply chain.\u00a0 Helping to fund his further student excesses, Stephen joined with two Edinburgh PGT peers to found a (currently) small sustainability consultancy. Oh, and he\u2019s also a husband and a father to three boys under eight \u2013 so please excuse the grey hair!<\/em><\/p>\n

References<\/strong><\/p>\n

http:\/\/www.scientificamerican.com\/article\/polar-vortex-chill-fails-to-make-history\/<\/a><\/p>\n

http:\/\/www.nature.com\/scientificamerican\/journal\/v310\/n1\/full\/scientificamerican0114-52.html<\/a><\/p>\n

http:\/\/www.carbontracker.org\/wp-content\/uploads\/downloads\/2011\/07\/Unburnable-Carbon-Full-rev2.pdf<\/a>)<\/p>\n

http:\/\/www.rollingstone.com\/politics\/news\/global-warmings-terrifying-new-math-20120719<\/a><\/p>\n

http:\/\/www.docs.sasg.ed.ac.uk\/GaSP\/Governance\/SociallyResponsibleInvestment.pdf<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In this article, Stephen Porter examines some of the arguments around the issue of responsible investment – and raises provocative and pertinent questions about the risks of divestment in relation to personal pensions and\u00a0charity endowment funds.\u00a0 He\u00a0challenges us to carefully … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":43,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19,47,45],"tags":[48,53,50,51,49,27,54,192,193,52],"acf":[],"_links":{"self":[{"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/posts\/224"}],"collection":[{"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/users\/43"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/comments?post=224"}],"version-history":[{"count":7,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/posts\/224\/revisions"}],"predecessor-version":[{"id":271,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/posts\/224\/revisions\/271"}],"wp:attachment":[{"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/media?parent=224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/categories?post=224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.sps.ed.ac.uk\/global-environment-society-academy\/wp-json\/wp\/v2\/tags?post=224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}