Fossil fuel divestment campaigns at Canadian universities may one day spur a real transition to clean energy, but right now, trading all such investments for green energy stocks will have little impact on climate change or offer investors a safe haven from plunging oil prices, a new report says.
That is partly because Canada's economy is "so entrenched in fossil energy" that most stocks are still linked to the extractive industries, says a white paper from two University of British Columbia researchers working with the Pacific Institute for Climate Solutions. Justin Ritchie and Hadi Dowlatabadi's research offers several different steps to a greener economy and contradicts common assumptions of divestment campaigners, such as the belief that divesting from fossil fuel companies will stop the production of oil, gas and coal. The paper says it will not work because foreign governments, not shareholders, control most of the world's supply.
They also found there are not enough renewable energy companies to absorb the large amount that would suddenly be freed up by "en masse" divestment. Mr. Ritchie and Mr. Dowlatabadi's paper says investing in Canada's banks "looks green" but could be "greenwashing" because so much of those institutions' lending and revenue involves the oil sands.
The paper (PDF) states that substituting renewable stocks for the UBC endowment's $100-million worth of fossil fuels would reduce the portfolio's holdings linked to greenhouse gases by only 3 per cent.
That's partly because materials like steel, which is mostly produced using coal, and oil are needed to build renewable options like wind turbines and install dams.
However, the pair did find several concrete steps for provincial and municipal governments, universities and divestment campaigners to begin helping Canada switch to a clean-energy economy.
Mr. Dowlatabadi said the paper does not offer advice to the federal government because talking about renewable energy "falls on deaf ears."
"A lot of very well-meaning people put a lot of energy into the divestment campaigns and they are our friends – we believe that the symbolic value of their activities is significant," Mr. Dowlatabadi said. "But for that symbolic value to be translated into progress towards decarbonization of the economy, all sorts of supported policies are needed."
Mr. Ritchie and Mr. Dowlatabadi recommend politicians create an "energy transition bank" offering bonds to projects trying to create a low-carbon economy, as programs do in Ontario, Connecticut and Massachusetts. They also recommend a tax credit to attract private capital to low-carbon projects.
The paper also calls on public pension funds to reassess the risk of holding stock in fossil fuel companies, which are valued in part on how much of their reserves are too expensive to extract. Mr. Ritchie and Mr. Dowlatabadi's paper recommended universities force the managers of their endowment funds to revise "how they screen investments to meet environmental, social and governance targets in order to report a portfolio's carbon intensity and exposure to unburnable carbon."
Meanwhile, the pair recommend that the members of the 27 active Canadian postsecondary divestment campaigns can propose a smaller parallel endowment, like Concordia University committed to last month, to prove that socially responsible and environmentally sustainable investments can provide a return.
Professors at UBC are voting in an online referendum on whether to ask the institution to divest its $1.2-billion endowment of any oil and gas stocks. After 77 per cent of student voters asked UBC's board of governors to divest from fossil fuels last January, organizers of the faculty referendum hope a vote in favour of divestment will force the board to make the endowment free of fossil fuels.