Published by the Students of Johns Hopkins since 1896
April 16, 2024

Divesting stocks is the wrong strategy

December 6, 2012

Students for Environmental Action (SEA) organized a meeting yesterday to discuss Refuel Our Future, an initiative to petition the university to divest its endowment from fossil fuels and invest instead in green energy stocks and funds.

Although this page wholeheartedly supports efforts by the student body to encourage the University to combat climate change, we believe that this specific proposal may in fact set back efforts against climate change.

The targets of this divestment, corporations such as ExxonMobil and Chevron, have some of the largest market capitalizations of any publicly traded companies in the world. Even if University endowments across the country divest themselves from these stocks, other institutions, from large institutional investors to individuals, will gladly buy these newly on-the-market shares. Financially, this renders the divestment strategy impotent, as it will likely have no effect on the prices, and thus the value, of these companies.

However, it is important to remember that stocks do not just represent value held in a corporation. They also provide the owner with voting rights in the companies they represent. Someone who holds a share of ExxonMobil gains the right to have a say in the way in which these corporations are run. A better proposal for an organization seeking to reduce climate change would then be to use their voting power to move fossil fuel companies towards seeking sources of alternative energy. And, because a vast majority of shareholders do not exercise their voting rights, a concerted group of University endowments would have the potential to force real change upon these corporations.

It is important to realize that the position that Refuel Our Future takes actually does the opposite. It leaves these corporations, which they admit currently cause climate change, in the hands of those who have no moral qualms about profiting from the destruction of the environment. This will only increase the damage done by these companies, even if it absolves the University of direct moral culpability for their actions.

Finally, investing in green energy stocks and funds itself is not smart for an endowment seeking to maximize returns while minimizing risk. These stocks are currently volatile and will likely yield low returns, because the alternative energy industry has not yet become profitable.

This is even more significant when compared to the relatively well performing fossil fuel sectors endowments would be leaving behind. The comparative losses universities would sustain through Refuel Our Future’s strategy would defund important projects, such as scholarships, financial aid, new infrastructure or even other green initiatives.

When it comes to choosing between divesting oneself from an immorality and actively trying to change it, this page believes the right decision is always the latter. Using the voting powers which come from stock ownership will allow universities to push fossil fuel companies towards alternative energy, a strategy far more likely to be successful than simply ignoring them, while maintaining the financial benefits of holding these far more profitable stocks.

In an ideal world, the University would be able to set aside the thought of profits and invest in clean energy.  But it is far more realistic for the University to use the votes it has to create change from within such fossil fuel companies. It cannot, however, continue to take money from dirty energy while not attempting to promote cleaner energy in any way.

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