BY DON NONINI, SHELDON POLLOCK, AND DAN SEGAL

Over the past decade, faculty have most often encountered the problem of financial investments and the climate crisis when their students mobilized to divest their school’s endowments from fossil fuels. That mobilization, across some 1600 educational, religious, and other institutions world-wide, has been stunningly successful: to date, “the total pool of potential capital being taken ‘off the table’ for the fossil fuel industry” now stands at $40.6 trillion–with $1.2 trillion added in the last two years.  What we as faculty have not similarly addressed is the fossil-fuel investments in our own pension and retirement funds.

The three largest private managers of faculty retirement accounts are Vanguard, Fidelity, and TIAA.  According to multiple sources (IEEFA, Urgewald, Stand.Earth, Stop the Money Pipeline, Vanguard S0S, Action Center on Race and the Economy and TIAA-Divest), these financial firms are among the top fossil fuel investors in the world: Vanguard with $460 billion in fossil fuels; Fidelity with $162 billion, and TIAA with $78 billion—an astounding $700 billion in total. (Vanguard is in fact the largest carbon investor on the planet.) The total fossil fuel investments in public pension funds, which many  public institutions provide faculty, are harder to calculate but may amount to something on the order of $150 billion.

Why should it concern faculty that their retirement monies are invested in fossil fuels?  Precisely because these investments pose profound ethical, existential, financial, and legal risks, due to the unfolding climate crises caused by the carbon emissions of fossil-fuel-powered energy.  Here we spell these out only in brief.

There is no retirement on a dead planet, and no liveable future for our students, whose futures our teaching aims to secure. Our students are, in fact, increasingly depressed and pessimistic due to the failure of the professional-managerial classes and political leaders of the last four decades to do anything remotely adequate to address climate change.  We as their faculty have a moral obligation to do whatever we can to alleviate their present suffering and prevent the much greater catastrophes predicted over the course of their lives.

In addition, the poor and people of color in the global North and South, who have done least to contribute to fossil-fuel emissions, have been the most affected by climate disasters and the toxic effects of extraction and refining of fossil fuels. This environmental injustice must end.

Put simply: the values of educators are affirmed when they seek to divest their retirement holdings, and demand re-investment in renewable energy.

Climate risk is also financial risk. The long-term financial performance of the fossil fuel sector has been weak, and the short-term outlook is unsustainable. According to a June 2023 study, just six U.S. public pension funds would be $21 billion richer had they divested from fossil fuels a decade ago. According to the Institute for Energy Economics and Financial Analysis (IEEFA) the Morgan Stanley Capital International (MSCI) World Index without fossil fuels has outperformed the index with fossil fuels for the last decade, demonstrating the long-term relative decline of the carbon industry. With markets favoring renewable energy and governments adopting policies to reduce climate change, the coal, oil and gas industries will be forced to leave their deposits in the ground, rendering them valueless “stranded assets,” something already happening with coal. These trends are reflected in the long-term declining relative returns of fossil-fuel holdings in pension and retirement funds. Divestment is, accordingly, a defensive financial strategy to avoid losses from investments in a dying industry. And it is foolish hubris to imagine that anyone can “market time” the collapse in value of these investments.

Fossil-fuel investors also face ever-increasing legal risks. More than 2,340 climate-related lawsuits, according to 350 Colorado, have been filed since 2015, many of them targeting the fossil-fuel industry. These include charges that the industry deliberately deceived the public (knowing since the 1980s of the climate risks of fossil fuels), and therefore that the industry is liable for enormous damage restitution to climate victims and to governments. These legal risks reduce the value of fossil fuel stocks, and impose special obligations on fund managers, since, as 350 CO puts it, as fiduciaries they “are legally required to assess financial risks to their portfolios and take steps to address those risks.”

Even if we accept these ethical, existential, financial, and legal arguments, it is fair to ask if divestment actually works to slow the climate crisis. Evidence assembled in an October, 2022 report by IEEFA demonstrates conclusively that it does. The survey is the best so far produced, and deserves close study. In short, “The loss of investor confidence in the oil and gas industry has resulted in a long-term decline of the energy sector’s market share from 28% to 4.7%. The numbers show that investors are not flocking to snap up oil and gas stocks once investors decide to unload them.” And indeed, IEEFA notes that “The impact of divestment on financial flows is acknowledged by fossil fuel companies as a material market factor.”

For some educators, the first response may be to consider moving their own retirement funds to fossil-free investments. There are two main reasons not to embrace this strategy: first, not everyone can do so. Many AAUP members are locked into annuities or inflexible retirement plans. For others, the task is possible but onerous. It is also worth noting that even many supposedly “socially responsible” funds, such as TIAA’s ESG products, are awash in coal, oil, and gas.   The second–and more important–reason not to rush to individual divestment is that it is urgent  to bring about rapid structural change. Most consumer boycotts fail because people participate so fitfully that they don’t exert meaningful pressure. It is implausible to imagine that individual faculty and staff will go through the complicated process to move their own portfolios away from fossil fuels in sufficient numbers to make a major impact. For this reason, we believe the more effective strategy is to demand that all retirement funds be fully divested from fossil fuels.  This is the moment for collective and organized client demand for divestment, and that’s why we are calling on the AAUP membership as a whole to act as one.

To exert meaningful  pressure, faculty participants in public pension plans can join and organize with state divestment advocates, such as Fossil-Free California, 350 Chicago/Third Act Illinois, or Maine Climate Action and its affiliates (many such groups can be found through the Climate Safe Pension Network), which have already launched divestment legislative efforts: In California (CalSTRS, SB 252), Illinois (SURS, HB 3037), Maine (MainePERS, LD 99), and so on. And some successes have already been achieved. In 2017, the Oregon Public University Fund divested from fossil fuels, and has since matched or exceeded its performance metric most of the time. The University of California had fully divested its pension and retirement plans (and endowment) by June, 2022, and invested more than $1 billion in renewable energy. Participants in private plans can join with Vanguard SOS, TIAA-Divest, and Stop The Money Pipeline to work toward a fossil-free retirement.

All of us, in addition, should support resolutions of our professional organizations, like the AAUP (the AAUP affiliate, the American Federation of Teachers, adopted a resolution in May, 2022, and the Modern Language Association will vote on one at its January, 2024 convention; the valuable supporting materials are here). Consistent with this, the writers of this blog will introduce a resolution at the summer 2024 AAUP Biennial Association Meeting calling upon state governments and financial firms holding pension and retirement assets of AAUP members to:

• enact an immediate moratorium on all new direct and indirect investments in fossil fuels, including extraction and processing, pipelines, and power plants;
• divest immediately from all current coal, oil, and gas investments;
• implement a no-deforestation investment policy;
• reinvest funds in renewable energy, especially projects that benefit displaced workers and frontline communities.

We call on readers of this blog to support this resolution and to urge their AAUP colleagues and campus chapters to do so, to help ensure the future of their retirement funds, the future of their students, and the future of a liveable planet for all its precious beings.

Don Nonini is professor emeritus of anthropology at the University of North Carolina at Chapel Hill; Sheldon Pollock is the Arvind Raghunathan Professor of South Asian Studies at Columbia University; Dan Segal is Jean M. Pitzer Professor of Anthropology and Professor of History at Pitzer College.