A3_CartoonFor too long, Georgetown University — and the vast majority of its peers — has invested in fossil fuels. For too long, these investments have given financial support to companies that significantly contribute to a rapidly changing climate. For too long, these investments have disproportionately affected minority groups and impoverished nations. For too long, these investments have disregarded Georgetown’s beloved Jesuit value of cura personalis. For too long, these investments have been predicated on and defended by the record of a currently declining, but historically profitable, energy sector. For too long, these investments have valued comfort over foresight and precaution.

These problems are at the crux of the argument for divestment, a global movement by investors, students, faculty and alumni on campuses across the country — including our own — to encourage the removal of holdings from the 200 largest fossil fuel companies, as defined by carbon in proven oil, gas and coal reserves. Georgetown’s endowment — made up of a variety of financial assets and investments — is about $1.4 billion. Around 8 percent is invested in both commingled mutual funds and direct holdings in fossil fuel companies.

The university itself has already recognized the importance of divestment. In June, Georgetown’s Board of Directors released a statement that said they “will not make or continue any direct investments of endowment funds in companies whose principal business is mining coal for use in energy production.” While this decision (which affects less than 2 percent of Georgetown’s endowment) did validate the divestment movement, it failed to match the gravity of the environmental issues at hand. This step in the right direction begs the question: If partial divestment is acceptable, what is the problem with a full commitment to divestment?
Few — if any — members of Georgetown’s board deny the existence of human contribution to climate change. If this is the case, there can be no refuting the intertwined climatic, socio-economic and social effects of the fossil fuel industry, such as the disproportionate effects on poorer and low-lying countries. What then, if not moral or environmental, is left of the argument against divestment?

What is left is perhaps the least understood — and most practical — aspect of divestment: economics.

To understand the financial reasons for divestment, we must understand the nature of fossil fuels as an asset. According to the United Nations and the vast majority of scientists, we must keep emissions from warming the planet past 2 degrees Celsius or there will be irreversible damage. Even under this limit, there will be serious consequences to the planet.

However, in order to limit the rise in temperature to 2 degrees Celsius, only 20 percent of the reserves currently owned by fossil fuel companies can be extracted and burned. Thus, the other 80 percent of the world’s fossil fuels must be left in the ground and will soon end up as stranded assets — assets that become liabilities — for companies. This will irrefutably lead to incredible losses for fossil fuel companies and shareholders.

This is the concept of a carbon bubble, the idea that the valuation of these companies is vastly overstated because the real costs of carbon dioxide in exacerbating climate change are not taken into account in current stock market value. For example, if the Paris climate talks are successful, Citigroup projects that stranded assets across the industry will total $100 trillion.

Despite this, fossil fuel companies continue to pour billions of dollars every year into finding and extracting new reserves, about $674 billion in 2012. As Bevis Longstreth, a former U.S. Securities and Exchange Commission commissioner, noted in a 2013 Huffington Post article, “there is no good reason for this vast expenditure [investment in fossil fuels] stockholder wealth. It is wasted capital, an offense against stockholders in terms financial alone. It suffices as justification for a fiduciary to divest from any company so engaged.”

These investments are indeed stranded assets, not only because of increasing public pressure to move away from fossil fuels, but also because the returns on these investments would be catastrophic for our world.

Former SEC commissioners and environmental activists are not the only people who see this future. Many hedge fund managers, like Tom Steyer and Al Gore, have divested and have seen a greater return on investments than before. Empires built on oil, such as the Rockefeller Brothers Fund and the Norwegian Sovereign Wealth Fund, have done the same. The movement is growing and we should not miss our chance, lest we face the economic consequences.

The upcoming Georgetown University Student Association presidential election ticket this February will include a referendum on whether Georgetown’s board should divest fully from fossil fuels. When you head to the polls, we urge you to not only think of the social and moral repercussions of our university’s investment in fossil fuels, but also of the economic repercussions of these investments.

Divesting now is not only the right thing to do morally, but it is also the financially responsible decision to make.


Theodore Montgomery is a sophomore in the School of Foreign Service. Isaiah Fleming-Klink is a freshman in the School of Foreign Service. They are both members of Georgetown University Fossil Free.


  1. Although I certainly believe that climate change is a pressing concern that we have to address ASAP with real policies (not just goals), the authors do not convincingly make the point that divestment is the “financially responsible decision.”
    First, there is no iron law that says we will stay below 2 degrees Celsius, and we’re slated to blow past the target, even with all the announced goals for the upcoming Paris conference. Limiting warming t 2 degrees will require *serious* concessions by advanced economies that I’m not sure we’re going to see.
    Second, now is definitely NOT the time to divest from fossil fuels. Oil is at its lowest point in years, and divesting right now will just lead to unnecessary losses.
    Again, it’s the morally right thing to do, and I support divestment on those grounds, as well as its use for shaping public sentiment.
    But if divestment leads to serious negative consequences for the university – it allows it to fund 50 fewer scholarship students, or whatever, I don’t know the details – then we ought to take a harder look at it. I suspect that divestment really doesn’t make too much of a difference in the long run, which again is a reason to support it.

    One last point: Why do all fossil fuels? Natural gas is a pretty good fuel that’ll be important for emissions reductions in the upcoming decades, especially when used in combo with wind and solar. Why not just limit divestment to coal-based companies?

  2. Theo Montgomery says:

    These are great questions, which couldn’t be elaborated on in 800 or so words, so allow me to respond here, and thank you for your engagement on this important issue.

    To your first point about the 2 degrees increase, it is true that there is no law that will prevent this temperature increase. There will have to be serious investment in renewable energy/technologies in the near future, and real concessions not only by developed countries but also big and growing CO2 emitters like India and China. It is not certain that these things will happen, but if they don’t, the consequences on our climate will be ruinous not only to our economic system but also the political and social fabric of our world. This potential reality becomes clearer day to day, and given a combination of public pressure and changing economics, I believe that we have little choice but to reduce our carbon emissions.

    To your second point, GU Fossil Free has always advocated for divestment over an appropriate period of time that makes financial sense for the university. We are very aware of the university’s goal to grow its endowment. GU Fossil Free has advocated for divestment since before the drop in the price of oil, and if we had divested earlier we would not have seen the millions of dollars in losses that afflict us now. We can’t take back anything we have done, so looking to the future, the university should divest as soon as makes financial sense. But there are no guarantees that the price of oil will return to over $100 a barrel anytime soon, if ever, and so timing should be considered but not a decisive factor.

    To your third point about financial losses from divestment, the Investment Office of Georgetown itself has stated that as far as they know there will be no financial consequences from divestment, and other institutions that have previously divested have seen this to be the case as well. We argue that the future prospects for the fossil fuel industry, especially coal and oil are grim, and given the great changes the energy industry is currently undergoing, keeping our investments in energy mutual funds is risky business.

    To your last point concerning the differences between fossil fuels, natural gas is the only aspect of the fossil fuel industry that will help reduce the rate of emissions growth overall, if not the emissions themselves. Natural gas will be important in reducing the economic strain of making necessary changes to the way we go about powering our civilization. While all of this is true, divestment as a political tool requires that we recognize all fossil fuels as contributing to climate change, even if the way that they exacerbate the problem varies.

    Even if natural gas will serve as a way to mitigate the necessary short-term economic consequences of changing the way we produce electricity, the long term costs of continuing to emit fossil fuels far outweigh any short term losses that will come from shifting to renewables. Moreover, the longer we continue to invest in these companies, the greater our losses will be later, as returns on these investments will never materialize. Divestment is an ask to recognize the perilous situation that we are in, and urge greater action in emissions reductions. This affects the entire fossil fuel industry, which generates the most carbon emissions worldwide.

    More important than the specific fossil fuel that the company owns is the amount of carbon that they own and intend to extract. As stated in the article, many companies have these reserves that are vastly overvalued. If you honestly believe that all of these reserves will be extracted and profitable (as is the current logic of these industries), divestment has no merits. But if you believe that, then you also believe in a future of 6 degrees of warming for our planet, and at that point the collapse of civilization as we know it is a certainty. We should make the transition now, before the carbon bubble bursts.

    For reference, our ask is that Georgetown divests from the top 200 companies with the largest carbon reserves. That list can be found here –> https://gofossilfree.org/top-200/

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