When I arrived at the University this semester, divestment and the activism surrounding it was yet another new concept for me. Whispers about divestment came from students in my classes, from presentations and speeches at Wesleyan Student Assembly meetings, even from members of the administration. Divestment is an issue that is bubbling beneath the surface and could explode into more aggressive activism at any time.
Once again searching for understanding, I turned to the Disorientation guide, this time to figure out exactly what activists on campus were trying to accomplish with divestment. I found that the divestment activists do not want the University’s endowment to have any investments in fossil fuel companies due to these companies’ contributions to global climate change. According to the Disorientation guide, activists want a “direct freeze on new investments and divestment within five years from…funds that include fossil-fuel public equities and corporate bonds.”
I have a degree in accounting, so I was confused about what message the divestment community was trying to send. I’ll explain more about why shortly, but it prompted me to dig deeper. After researching a bit more, I realized that divestment activists are trying to prevent the University’s endowment from profiting from “dirty energy” and to send a message to oil, gas, and coal companies in order to cause them to change their ways. On the surface, this seems like a cut-and-dry moral message and a similarly straightforward activist stance.
But is it, or will it be, effective? The answer is no, and at best it will be a Pyrrhic victory: The victory will come at a high cost. Having public equities, or shares of stock in a company, is having a piece of ownership in that company. If you own one share of Exxon Mobile, for example, you own a very small piece of the company, and have certain rights, the most important being the right to vote for the company’s board of directors. When divestment activists demand that the endowment sell off its shares in fossil fuel companies, they are literally telling the school to give up the right to its only form of true influence inside of the companies the activists so despise.
Even worse, the act of selling stocks will not affect a company like Exxon Mobile financially in any way. Companies issue shares to raise capital for investments inside of the company, such as new pipelines, oil platforms, and so on. In other words, Exxon had already received its money by the time the University’s endowment purchased the shares. Additionally, even if all of the University’s approximately $800 million were invested in Exxon, it would still represent a very small portion of the company’s market value, which as of closing on November 5 was approximately $403 billion. Even if the University invested every dollar it had into Exxon, it would own only two tenths of one percent of the company. Moreover, approximately $1.2 billion dollars of Exxon stock is traded, on average, every single day. The University’s endowment doesn’t even represent one day’s worth of trading. This is all to say that if and when the University divests, there will be a line out the door of willing investors to snap up those shares, and Exxon will continue unscathed.
Divestment activists will continue to spend money, time, and effort to send a message to Exxon that will have no significant impact. It represents a type of action that I have dubbed “junk food activism,” or activism that looks good on the surface but contains nothing of substance underneath. Yes, not being invested in “dirty energy” is a nice moralistic standpoint to take, but at the end of the day, that is all it is: a standpoint. It is a way to pat oneself on the back and look good; it will not actually achieve anything.
I am not here to just criticize, however. In fact, I have a suggestion that might seem counter-intuitive. Because shares represent influence at the highest executive level in Exxon—as a shareholder, you literally are a company boss—this can be leveraged to achieve change within the company. It will first require a pooling of resources and an organized effort, but it can be done. It will mean reaching out to other colleges with divestment clubs, green movement organizations, and so on, to pool together their shares. With a relatively large coalition of shareholding activists, the divestment community would then have some weight.
This would not mean that Exxon would stop selling fossil fuels overnight. They are an oil company, after all. But it could mean demanding that the company invest more of its profits in green energy, stop financing junk science that casts doubt about climate change, and stop being obstructionist to green movements through governmental lobbying. With a significant number of votes, members of the board of directors who want those votes will have to come up with plans and initiatives that satisfy these demands. Again, it won’t be easy—and change will come slowly—but at least the divestment community will now have a voice.
Additionally, the divestment community could demand that any and all profits from fossil fuel companies be re-invested by the college, or, more accurately, the managers of its endowment, into green projects, companies, and so on. This could offset any moralistic issues that one might feel. In that case, Exxon would in a sense be funding green projects on campus.
My goal in writing this article is not to deflate the energy behind divestment. I think it is a worthy cause in light of dwindling resources and climate change. Rather, this is a fight against “junk food activism” that is all too prevalent in the activist community and something that I take real issue with. If we work within the rules of capitalism, we will achieve lasting change.
Stascavage is a member of the class of 2018.