Glasgow University divests

University of GlasgowThe University of Glasgow is divesting from fossil fuels. In a dramatic decision, the university court voted today to become the first European institution of higher education to cease "profiting from the wreckage of the climate," as Bill McKibben puts it. Glasgow will "begin divesting £18m [$29 million] from the fossil fuel industry and freeze new investments across its entire endowment of £128m."

Glasgow joins thirteen US colleges and universities that have already made this commitment. Five of those institutions are in California, but the two statewide educational research systems are not yet included — the University of California and California State University. And Stanford University has begun divestment from coal stocks only. There is much more to be done in the state, and 350 Bay Area is supporting students and alumni working to change their institutions' policies.

McKibben called today's decision “a dramatic beachhead for the divestment movement,” pointing out the centrality of Glasgow to the birth of the industrial revolution. Naomi Klein added that students are "sending an unequivocal message that fossil fuel profits are illegitimate – on par with tobacco and arms profits."

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Why divest?

catastrophic climate changeThe moral arguments for divestment are clear. As Bill McKibben sums it up: "If it’s wrong to wreck the climate, then it’s wrong to profit from that wreckage."

The financial arguments are, admittedly, more speculative, as is the nature of any financial prediction. Nevertheless, there is much evidence for the likelihood that investments in fossil-fuel companies will become increasingly risky over the next few years. The logic is this:

  1. The current valuation of fossil-fuel companies is based, in large part, on the prospective market value of the coal, oil, and gas reserves which they own and plan to sell.
  2. If catastrophic climate change is to be averted, a large percentage of those reserves (an estimated 70-80%) must remain in the ground, unsold and unburned.
  3. As the effects of climate change become ever clearer, governments will increasingly implement policies to reduce the burning of fossil fuels, in the form of regulations, carbon taxes, mandatory cap-and-trade regimes, and subsidies for renewable energy.
  4. As the associated costs increase and renewables become less expensive, fossil-fuel supply will eventually outstrip demand, and it will become uneconomical to extract the reserves, beginning with the dirtiest and the most expensive.
  5. These unextracted reserves will become stranded assets; valuation of fossil-fuel companies will be reduced; and the carbon bubble will deflate.
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