Activist investing, not divestment, is how we should combat the issue of climate change.
I don’t support divestment from companies producing fossil fuels. And no, this is not just because I hold shares in Chesapeake Energy.
Divestment appears, on the surface, to be a logical and powerful way to combat the effects of climate change — effects that have been definitively linked to the use of fossil fuels. I know climate change is a very real problem. After all, as Senator Tim Kaine said in his speech last week, “I believe in science.”
But I also believe in the power of markets. While depriving oil and other fossil fuel companies of our investment dollars has the potential to make an impact on their performance, it is not the most effective way to solve these problems, and ultimately it will not be in the best economic interest of Kenyon.
The reality is that fossil fuels are here to stay, at least for a while. My understanding of geopolitics tells me that the money and influence these companies have — not to mention our reliance on their product — means that Exxon-Mobil, BP and, yes, even coal mining companies are not going away. So, if we can’t beat them, why not join them?
I am a big believer in the power of activist investing. Activist investing is when investors buy up significant percentages of the shares of public companies in order to influence the board of directors (and sometimes take over the board of directors) to force changes in a company’s operations, markets or even philosophy. Having covered activist investing during an internship at the financial publication TheDeal.com, I have a decent understanding of the power and influence activists can have.
Rather than merely insist that we abandon these investments, I would call on the managers of the Kenyon endowment, CornerStone Partners LLC, to explore opportunities to force change at energy companies. While CornerStone is a relatively small firm, only managing around $10 billion in assets, perhaps changes can be made from within by working with other firms, other university endowments and attracting the attention of activists.
I’ll admit, I am an unashamed user of fossil fuels, but I know this cannot last. I know that the world will run out of these energy sources and that their use has caused climate change. I want to see the world transition to alternative energy, but we aren’t going to get there without the money and influence of big corporations. Big fossil fuel companies know this. I’ve never believed for a second that an oil company like Royal Dutch Shell would just roll over and die with the fossil fuel industry. These companies have an incentive to pioneer the future of energy, and more than that, they have the money to bankroll the projects.
An article published by Bloomberg in May (“Big Oil Unexpectedly Backing Newest Non-Fossil Fuels”) said that oil companies are slowly but surely starting to invest in the future of energy. They know change is coming and are not going to let those profits slip away. A May article from The Guardian (“Green really is the new black as big oil gets a taste for renewables”) notes that several major players in the oil industry have invested in solar and wind farms in recent years. Even though there is some evidence to suggest these are public relations moves, oil companies aren’t ignorant of the fact the energy industry is changing. The fossil fuel industry is hedging its bets on a green future.
It is easy and popular to paint big oil as a boogeyman, wrecking the world for future generations, but this is not a practical approach, nor is it a fiscally responsible one. After all, oil, gas and consumable fuel shares are up over 10 percent year to date according to Fidelity Investments. If we truly care about growing Kenyon’s endowment and making the world better for future Kenyon students, as well as future generations around the globe, we will not withdraw investments. I urge the Board of Trustees to reject divestment but instead conduct active investment. We can’t be idle, because there’s only one planet, so why not turn our energies toward the right kind of activism?
Nathaniel Shahan ’17 is a political science major from Tully, N.Y. Contact him at firstname.lastname@example.org.