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Wednesday, July 10,2013

Putting pressure on fossil fuels

by Terry Link
Like the students and faculty who led Michigan State University to be the first public university to divest from firms doing business with apartheid South Africa, today’s MSU students with the Fossil Free Campaign have a mission: Pressuring the administration to divest its endowment holdings from fossil fuel companies. 

Theirs is a response to the growing evidence that the increased release of carbon dioxide from fossil fuels is taking our atmosphere into unchartered territory since humans have stood erect, recently hitting the 400 parts per million level for the first time in 3 million years. To date, the university administration, like its predecessors in the 1980s, has resisted any action.

This column has typically focused on different considerations that citizens might use to spend our money to, paraphrasing Gandhi, support “the change we want to see in the world.” My intent is simply to remind us to pause, in our fast-paced world, and align our values with our consumption choices. Today I want to take a slight detour, but use a similar framework for thinking about the money we invest rather than spend.

The financial planning industry has convinced us that a narrow Return on Investment is the only consideration. It argues that it is the fiduciary responsibility to seek the greatest return to the shareholders. Of course, they don’t give a hoot for the consequences of those investments to any of the other stakeholders — employees, customers, community or the environment. Wall Street continues to speed up the speculation game with trades being made at warp speed so a quick profit might be made. Why else would we see daily, if not hourly, ticker-tape reports on the stock market?

The MSU Fossil Free students recognize that this speculative game in which investors look for quick wins has a price that the students and their generation will be forced to pay as our climate continues to destabilize. In making its case, MSU Fossil Free stands on the shoulders of a growing segment of investors who try to align their personal values with their investment choices — socially and environmentally responsible investors, or SRIs. Often this means simply not investing in — or screening — firms or projects that make a product or provide a service one doesn’t support, such as tobacco, alcohol, weapons or nuclear power. These are considered ”negative” investment choices. However, there is a growing positive investment force aimed at community investing, renewable energy and social entrepreneurship. Despite the reflexive response from many, if not most, financial planners that SRI investing will underperform unshackled investing, the research shows that SRI investments do as well, if not better. In fact, says S. Prakash Sethi, City University of New York distinguished business professor, SRI is the only alternative. 

Globally, the movement of money into responsible investing vehicles is accelerating rapidly. The Principles for Responsible Investment, or PRI, now has almost one-third of all investment funds committed to the principles. The typical response to efforts like the students at MSU is that the risk of lower performance is greater if they divest from such a big industrial sector. However, a recent study by the Aperio Group showed that performance risk was less than one-tenth of one percent — hardly a major concern, especially in light of the impact of adding yet more fossil fuels to the atmosphere and the resistance of those industrial behemoths to redirect their businesses in light of the scientific evidence. The comparison to the apartheid government is not far-fetched. How we choose to respond will determine how we will be seen by history.                                                                                                                        

Unfortunately for small investors, there is little if any local help for those wanting to align their values with their investment choices.  Looking in the local Yellow Pages or even Green America’s National Green Pages listing for Michigan, you’ll find not a single financial planner who markets him/herself as a ”socially or environmental responsible investor” in our area. Fortunately, there are a number of fossil fuel-free funds available and many more that might better match your own set of values. Good sources for finding these opportunities are available here at Social Funds (socialfunds.com); the Social Investment Forum (ussif.org); and Bloomberg’s Environmental Social and Governance Data Service (charts.ussif.org/mfpc). 

All mutual funds and investment vehicles disclaim that “past performance is no guarantee of future success.” Nonetheless, the vast majority of investors look for the highest Return on Investment when making investment choices. While the logic may seem sound on the face of it, subordinating all other values for this singular one affirms the myth that the only real value in life is monetary.

(Consultant Terry Link was the founding director of MSU’s Office of Campus Sustainability and recently retired as director of the Greater Lansing Food Bank. He can be reached at link@lansingcitypulse.com.)

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