Volunteer with MN350’s Clean Transportation Team
Let’s take a minute to talk about investments. Those of us who are fortunate enough to have any would probably prefer to think about anything else. We want to invest, earn some money, and not have to think about it all that much letting time work its magic. Unfortunately, time is no longer on our side when it comes to the health of our investments, and in turn, the health of our planet.
Minnesota’s pension fund has nearly $5 billion invested directly and indirectly in fossil fuels and related industries. This means that pension holders’ financial interests are unwittingly tied to the on-going success of these industries. And yet, it’s hard to imagine a scenario where the fossil-fuel industry remains successful, and those investments somehow remain unscathed. To be successful in the fight against climate change, we cannot have our individual and institutional financial interests aligned with the fossil fuel industry.
The fossil fuel divestment movement, including for Minnesota’s pension fund, is a necessary action to combat climate change, and there are two major factors worth highlighting that go beyond the immediate financial impact on fossil fuel companies.
First, divestment is an essential strategy for removing the social license that we collectively have granted to fossil fuel companies. This license allows these companies to extract from the earth and the local communities in which they operate with little regard for the consequences. In turn, these companies have used their profits to obscure the truth around climate change, even funding and advancing outright climate-change denial. By divesting, we would collectively state that the status quo is no longer acceptable, that our financial interests can no longer be tied to the rampant harm caused by these industries and that our institutions are willing to take a stand.
Second, divestment is a prudent financial decision for investors, as the risks associated with ownership in fossil fuel companies grow larger by the day. The potential carbon emissions from proven fossil fuel reserves, which currently sit as assets on the financial statements of these companies, far outweigh the emissions that can be released while staying below 1.5 degrees Celsius, the level at which the Intergovernmental Panel on Climate Change indicates we must stay to avoid the most catastrophic impacts of climate change. So either these reserves stay in the ground, which means a massive devaluation of fossil fuel companies’ assets, or the most catastrophic impacts of climate change will be realized. We can’t have it both ways.
These assets are at risk, which puts shareholders, such as Minnesota’s pension fund, at serious risk for future losses. Recent research suggests that this risk exists regardless of new climate policies, as clean energy technology grows cheaper while fossil fuels become more expensive, ensuring an inevitable transition from fossil fuels. Fossil fuels require constant extraction and distribution, both of which get more difficult and expensive in a changing climate. They cannot compete in the long-term with abundant, free supplies like wind, solar, hydro, and geothermal supplies. Add on to this the potential for new climate policies, everything from carbon taxes to renewable energy mandates, and the risks to fossil fuel assets are too great for a prudent investor.
I urge the state pension fund to recognize the risk to its pension holders and fully divest from fossil fuel companies. And I urge you to join the movement by contacting the members of the State Board of Investment and calling for divestment.
You can also help influence the public discussion on this issue by writing a letter to the editor using our easy-to-use tool.
The case for divestment is clear. We must sever the link between our financial interests and the damage done to the climate by the burning of fossil fuels. Let’s ensure that we invest in our future in a sustainable way. Protect our pensions and protect the planet.
Daniel Tikk is a financial analyst and a volunteer with MN350’s Clean Transportation Team. He lives in St. Paul with his wife, and the two of them devote their time and energy to trying to keep up with their toddler. He loves reading, swimming, exploring the Twin Cities food scene, and learning about how to be a better human, bit by bit.