Divestment Campaign

Dr. Max Blouw, President and Vice-Chancellor
Dr. Deborah MacLatchy, Vice-President: Academic and Provost
Dr. Robert Gordon, Vice-President: Research
Jim Butler, Vice-President: Finance and Administration

February 1, 2016

Dear Colleagues,

In December 2015, world leaders in Paris agreed to work strenuously toward the goal of
preventing average global temperatures from exceeding 1.5°C (relative to the preindustrial
baseline) by 2100. Even limiting warming to 2°C renders a large portion of the
fossil fuel stock effectively unburnable. According to a recent study by researchers at
University College London, published in Nature, fossil fuel reserves are at least three
times higher than the amount we can safely burn if we are to meet this target.1 Obviously,
the 1.5°C target puts even more pressure on this stock. Prudentially and ethically it is
therefore clearly time to take seriously the possibility of a near future in which the supply
of carbon-based fuel is politically constrained. The problem is that the fossil fuel industry
is not taking sufficient heed of this reality. As reported by the Carbon Asset Risk
Initiative, in 2012 “the 200 largest fossil fuel companies spent $674 billion on finding
and developing even more fossil fuel reserves, raising concern that shareholder capital is
being wasted on reserves that are likely to become stranded assets in a world that uses
less fossil fuels.”2 Sooner or later, the world is going to get serious about regulating
carbon emissions and when it does assets will likely be stranded. This means that
managers of portfolios that are invested in fossil fuels need to ascertain the extent to
which these assets are currently overvalued relative to a future regulatory scenario aimed
at curbing carbon emissions.

We are concerned members of the Laurier faculty who believe that in light of these facts
the time has come for this institution to begin the process of divesting from fossil fuels. It
is true that financial planners do not typically engage in the sort of long-term planning
this issue requires, but more and more leaders in the financial world are warning that this
focus needs to shift. Former US Treasury secretary Hank Paulson and Bank of England
governor Mark Carney are clearly worried about the issue. The same is true of Lord
Turner, the UK’s former Financial Services Authority. He claims that climate change
reveals “a major set of problems … in the relationship between finance and the real
economy”. Lord Turner adds that too many individuals and institutions are engaging in
the sort of short-term investments that “do nothing about climate change whatsoever.”3
However, some companies and institutions have seen the light and this is encouraging.
Over 500 institutions and companies, representing approximately $3.4 trillion (USD) in
assets, have currently divested from fossil fuels to some degree. Universities, colleges
and schools make up 12% of this total.4 This is cutting edge investment decision-making
and Laurier should be a part of it.

One of Laurier’s Guiding Principles is to make “strategic choices for the long-term health
of the institution.”5 Does divestment threaten this commitment through the adoption of a
risky financial strategy? Not at all. Consider two points. First, numerous studies have
shown that in the past ten year period, an endowment modeled on the S&P 500 but not
containing fossil fuel companies would have brought higher returns than an endowment
with such companies.6 Second, there is good reason to think that Laurier’s reputation as
an innovator with respect to sustainability practices would be enhanced significantly were
it to act aggressively on this initiative. Many Canadian universities are now considering
divestment—the idea is being discussed at Lakehead, McGill, UBC, The University of
Toronto, the University of Windsor, the University of Ottawa, the University of
Waterloo, and more.7 There is an opportunity here for Laurier to take a leadership role
among Canadian universities, something that is bound to have a positive impact on future
enrolments and donations.

Considerations of strategic planning and institutional self-interest aside, the decision to
divest from fossil fuels is ultimately an ethical one. The evidence concerning the
profound harms climate change is likely to bring to future generations and the world’s
poor is unequivocal, and it is also clear that the most important thing we can do now to
avoid or ameliorate these harms is reduce our carbon emissions. Members of the present
generation, especially those in the developed world, therefore have a duty to help
decarbonize the global economy as rapidly as possible. The point applies to individuals,
firms, and institutions of all kinds but perhaps to universities above all. This is because,
as President and Vice-Chancellor Max Blouw argued in a recent Open Letter to the
Laurier community, universities are meant to “persist for many centuries” and they must
maintain a correspondingly extended vision.8 Universities are by their nature multigenerational cultural fixtures part of whose job is to help shape a better future for our
communities, both local and global.

For these reasons we applaud another one of Laurier’s Guiding Principles, namely the
development of practices that encourage “sustainability and environmental
responsibility.”9 But if the world does not act pointedly to meet the threat of climate
change future generations might justifiably wonder if such official expressions of
environmental concern are sincere. We believe that the best way for Laurier to show that
it is sincere about the importance of sustainability is for the university to commit to (a) no
new investments in fossil fuels; and (b) total divestment from fossil fuels within a
reasonable time frame (5 to 10 years). We recognize that this is an ambitious goal, but it
is crucial to at least begin a conversation about it among all stakeholders in this
institution. We therefore urge Laurier’s Administration to take concerted and swift action
towards assessing the extent to which our current investments—both endowments and
pensions—are exposed to the risks we have identified in this letter. It is time both to
hedge our portfolio against a carbon-constrained future and to remove the social license
of fossil fuel companies to damage the climate any more than they have already done.

Sincerely,

Dr. Simon Dalby, Professor of Geography and Environmental Studies, CIGI Chair in the
Political Economy of Climate Change

Dr. Shohini Ghose, Associate Professor of Physics and Computer Science, Director of the
Centre for Women in Science, 2014 TED Fellow

Dr. Byron Williston, Associate Professor of Philosophy, Affiliated Member of the
Interdisciplinary Centre on Climate Change, University of Waterloo

1http://www.nature.com/nature/journal/v517/n753/full/nature14016.htmlcarbontracker.org
2 http://www.ceres.org/files/investor-files/car-factsheet
3 http://www.theguardian.com/environment/2015/may/14/former-fsa-chiefwarns-
of-carbon-bubble-threat-from-climate-change?CMP=share_btn_tw
4 http://www.gofossilfree.org/commitments/
5 http://wlu.ca/about/values-vision-mission/index.html
6 Peter Dreier, “Obama embraces the divestment movement: from apartheid to climate
change,” Huffington Post, June 29, 2013,http://www.huffingtonpost.com/peterdreier/
obama-and-the-divestment-_b_3520933.html; MSCI, “Responding to the Call for
Fossil-fuel Free Portfolios,” MSCI ESG Research Issue
Brief, 2013, http://www.msci.com/resources/factsheets/MSCI_ESG_Research_FAQ_on_
Fossil-Free_Investing.pdf; Impax Asset Management, “Beyond Fossil Fuels: The
Investment Case for Fossil Fuel Divestment,”
(2013), https://s3.amazonaws.com/s3.350.org/images/Impax–
20130704_white_paper_fossil_fuel_divestment_uk_final.pdf; Patrick Geddes, “Do the
Investment Math: Building a Carbon-Free Portfolio,” Aperio Group,
2013, http://www.aperiogroup.com/system/files/documents/building_a_carbon_free_port
folio.pdf; Atif Ansar, Ben Caldecott, and James Tilbury, “Stranded assets and the fossil
fuel divestment campaign: what does divestment mean for the valuation of fossil fuel
assets?”University of Oxford Smith School of Enterprise and the Environment: Stranded
Assets Programme, 2013, http://www.smithschool.ox.ac.uk/research/strandedassets/
SAP-divestment-report-final.pdf.
7 Concordia has agreed to invest $5 million of its $130 million endowment on
“sustainable initiatives and socially desirable goals,” but this obviously falls far short of
full divestment. http://montrealgazette.com/news/local-news/concordia-becomes-firstcanadian-
university-to-begin-divesting-from-fossil-fuels
8 http://legacy.wlu.ca/documents/61014/Open_Letter_03_23_15.pdf
9 http://wlu.ca/about/values-vision-mission/index.html