What Cheap Oil Means for Divestment

Unless you’ve been living on a boat in the middle of the ocean or underneath a rock, you know that oil prices worldwide have been dropping dramatically since June 2014. For many people, this seems like a great thing – filling up your car hasn’t been this cheap since the early 2000s! But for some, and I am not referring to the oil producers here, this news is not as welcome.

Investors all over have been very skittish with these recent developments and are being reminded of the volatility of the fossil fuel industry. This makes for a stronger argument in favor of divesting our University’s endowment from fossil fuels. Short-term gains and losses from these changes can impact the health of an endowment, but it is concern for the long-term health of our endowment that really drives divestiture from fossil fuels.

The recent downturn in the price of oil has come about by several different factors. Global vehicle fuel efficiency has improved and some European economies are slowing down, thereby reducing demand for oil. At the same time, American oil production has doubled in the past six years. So, oil that was once destined for US markets must now instead find a new market. With heavy competition for the same, limited market, producers must drop oil prices.

Simultaneously, members of OPEC (Organization of Petroleum Exporting Countries) are split on how to respond to these changes: larger producers (such as Saudi Arabia, the United Arab Emirates, and other Gulf countries) do not want to slash production levels – doing so would give greater market share to smaller producers (including Iran, Algeria, and Nigeria). The financial burden of these maneuvers is already running into the billions of dollars, and the price of oil is unlikely to recover anytime soon.

The fossil fuel industry is characterized by boom-and-bust cycles and every major change further illustrates the unpredictable nature of these commodities. If a company fails to perform as expected, investors redistribute their money into another company that will yield greater benefits. The leadership at Northeastern University has a financial obligation to divest our endowment from the fossil fuel industry and thereby protect the future financial health of our promising and successful university.



Sign the Faculty Open-Letter

The Open Letter from the Faculty of Northeastern University Calling for Divestment from the Fossil Fuel Industry is online and ready for signing! If you are an NU faculty member, add your name and tell our administration that it’s irresponsible to invest in fossil fuels.

View the letter online here. Neither the letter or the signatories will be released to the public until a significant number of supporters has been reached.

If you are interested in learning more, please explore our fact sheet for faculty and the resources available from our about page.

Crash Course for a Cooler Climate

A few weeks ago DivestNU held an event called “Crash Course for a Cooler Climate”.  Armed with knowledge and homemade food, we sought to provide some information to our peers about the science, economics, and politics of divestment. I was glad to see many new faces that night and hope to see more new faces next semester at our meetings.

Up first was a presentation on climate science.  Kat from Terra Society (a DivestNU coalition member) addressed global warming and the impact of greenhouse gases (GHGs). Due to the burning of fossil fuels GHG levels are now the highest they’ve been in the past 500,000 years. She spoke passionately about what this means for the future of our planet, our city, and how it will impact our lives.  Some of the biggest changes include food shortages, biodiversity loss, and rising sea levels.

Boston is one of the many coastal cities that are planning to adapt to rising sea levels.  I was taken aback by the images of what a future map of the city would look like, a prediction that will become reality unless we dramatically reduce our dependence on fossil fuels.  The UN’s Intergovernmental Panel on Climate Change has set our remaining allowance at 565 gigatons. The fossil fuel industry, meanwhile, plans to take us well beyond (5 times beyond, in fact) that limit.

Next, I talked about the implications of this limit in the economics presentation. In light of the science it becomes apparent that fossil fuel companies absolutely cannot exceed the so-called ‘carbon budget’. These unburnable reserves are a significant factor in the stock prices of these companies, but in reality they are at very high risk of becoming ‘stranded assets’. This implies that fossil fuel companies are vastly overvalued–a situation called the “carbon bubble.”  Beyond this, studies show the negligible effect fossil free portfolios have on risk and returns.  As demand for alternative energy grows and fossil fuel companies become more stigmatized, the financial case will be even stronger.

Austin followed with a presentation about the political power wielded by fossil fuel companies.  The numbers are pretty compelling – 160 climate deniers in Congress have received $98 million from lobbyists paid by the fossil fuel industry to discredit scientific research.  We saw a diagram of the vast influence of petrochemical giant Koch Industries, an enormous web that shows just how embedded they are in our political system.  These companies benefit while the public bears the burden of environmental, medical, and other costs associated with pollution and climate change.  The need to weaken the influence of companies like Exxon and Koch on our political system is at the center of the movement.

By working at the university level, we can provoke local and national change.  Austin spoke about the change that is already happening at other universities and cities around the country and the world.  At the time of the Crash Course, the University of Dayton was the most recent school to commit to divestment.  A week after the event, Humboldt State University joined the growing list.  There are active efforts in Boston and the rest of Massachusetts to divest pension funds.  Already, eight cities and towns in Massachusetts have voted to divest.

Alissa and Drew spoke about this in their presentation, which brought the evening to a close. They spoke about where we have been up to recently, giving updates on our meetings with the administration, our experience at the People’s Climate March, and the work that is being done by the different working groups within DivestNU.  They emphasized that if Northeastern wants to be known for its green campus, our endowment must also demonstrate our commitment to sustainability.

The Crash Course was successful in emphasizing the role we can play as students in effecting change. The information we shared will enable more students to start conversations with their friends, classmates, and professors about divestment.  We have made progress in our discussions with the administration and plan to keep up this momentum.  Of course, we need as many supporters as we can get and encourage anyone interested to come to our meetings.  To everyone who attended, we hope you enjoyed this event and that you left with a better understanding of divestment and a realization that you can help bring about change at Northeastern.  You can expect to see more from DivestNU next semester!




Fossil Fuel Divestment: It’s not just about money.

Last week, one of our peers wrote an op-ed questioning the effectiveness of fossil fuel divestment for combating the climate crisis. The central argument was that divestment won’t “even remotely damage fossil fuel companies financially”. The truth is, he’s right. The fossil fuel industry is a behemoth of capital and influence. To them, the fraction of Northeastern’s endowment that is invested in fossil fuels is of no concern. This is the most powerful industry in history, and there’s simply no way we can break their bank.

It’s a common misconception that divestment is a financial tool, but it’s about more than just withdrawing money–it’s about taking away social capital. Investment isn’t just about money either. Unlike simply purchasing a product, investment is a complex relationship representing a vote of confidence in a company and an endorsement of a business model. Divestment is likewise a rejection of a business’s practices. The fossil fuel industry’s plan–extracting and burning more carbon at any cost–is one worth rejecting.

We need not bankrupt these companies. Rather, the intent is to make it socially and politically impossible for Exxon and friends to continue blocking climate progress unopposed. Luckily we’re not going at it alone; divestment is the fastest growing student movement in history, with campaigns underway at hundreds of schools around the world. To date, over $50 billion of assets have divested. This movement has legs.

From a financial standpoint, divesting gets more feasible by the day. Endowments are complex structures; many are invested in commingled funds–multiple stocks packaged as a single product. This can make divestment challenging. Fortunately, an increasing number of firms, including leaders such as Cambridge Associates, offer divestiture services and fossil-free portfolios. Northeastern’s financial planners have a duty to maintain the vitality of our endowment. Accordingly, divestment will not result in higher tuition, fewer scholarships, or lower rankings. The economic incentives for divestment are worth an article all to themselves (see, for example, former SEC Commissioner Bevis Longstreth’s piece for the Huffington Post), and studies by firms like the Aperio Group show that divestment has a negligible impact on returns.

So where would the divested money go? DivestNU drew criticism from last week’s op-ed for not specifying reinvestment as part of our campaign. This is not a task for our campaign alone. Rather, it is our collective responsibility to package divestment in a manner consistent with our institutional mission, whether it be active reinvestment, sustainability initiatives on campus, bolstering research, or otherwise. In the past we’ve been recognized for our leadership in sustainability. Divestment is the logical next step.

The UN Intergovernmental Panel on Climate Change recently issued a ‘synthesis report’, bringing together years of research from leading climate scientists. These researchers, conservative by nature, are now using phrases like “severe, pervasive, and irreversible impacts for people and ecosystems” to describe the risks of continuing on our current emissions pathway. We have the solutions, and divestment is a tactic to put us on the right path. Divestment is not a silver bullet, but as students it’s the best ammunition we’ve got.


Originally published as a letter to the editor in the 11/13/14 Issue of the Huntington News. View online.

Seeing Squares

So what are all these orange squares you’ve been seeing around campus? On October 30th, Northeastern was plastered with orange squares representing the 2664 referendum votes in favor of divestment. The orange square is the symbol of the national student divestment movement, a simple geometry uniting the over 500 student divestment campaigns nationwide. The squares are a visible symbol of our voice on campus, and will raise awareness for our campaign as we engage in much anticipated discussions with the administration.

This past March, an important question was posed to the student body; should Northeastern University relinquish its investments in the fossil fuel industry? The campus responded with overwhelming (75%) support for divestment. Furthermore, this was the first time in nine years that the voting period did not require an extension in order to obtain the requisite number of votes to validate the election.

It’s been seven months since students called for action, and the administration has yet to formally address the matter. On October 10th, representatives from DivestNU met with school administrators, hoping to discuss what divestment could look like at Northeastern. Unfortunately, key members of the administration were not in attendance and the meeting became a reiteration of points we had previously discussed and resolved.

We did leave the meeting with something to look forward to, however. On Monday, November 3rd, the DivestNU negotiating team will sit down once again with administrators. We are expecting a more productive meeting in which we discuss finances with Thomas Nedell, Northeastern’s Chief Financial Officer. To facilitate the discussion, students will be joined by faculty and industry experts. We are hoping to leave the discussion with concrete next steps that we and the administration can take to reach a mutually acceptable outcome.

We need every voice possible during this crucial time. If saving the world is a cause that resonates with you, join us at our weekly meetings – Thursdays at 7PM in 012 Hayden Hall. We happily welcome new faces and ideas! Also see the links on our homepage to subscribe to our weekly newsletter, follow us on Twitter, and of course like us on Facebook!

If Northeastern is to continue to be a leader in sustainability, divestment from the industry responsible for our climate crisis is a moral imperative. Now is the time for Northeastern to join the many schools that have already divested and act in response to the voice of the student body.