I went to hear Bill McKibben speak Saturday night at the Joslyn Art Museum. McKibben is an author and the founder of an organization called 350.org. They are working to bring the world’s carbon levels down to the safe level of 350 parts per million (ppm), a measure currently at 391 ppm.
As an accountant in my previous life (or career), I really liked and appreciated the lecture’s title – “Do the Math.” My colleague, Daniel, wrote about McKibben’s related article in Rolling Stone this summer.
So here’s the math – in only 3 numbers:
2 Degrees Celsius – Why is this number important? Leaders from countries around the world have been working for years and years to address climate change. This issue is so difficult because countries like ours (the developed world) have emitted so much carbon dioxide already, yet there are many countries around the world that are still developing. Developing countries want our way of life and thus believe that it’s fair that they develop as we did (often requiring significant emissions). A 2 degrees Celsius rise in the world’s temperature was the only hard number “the world” has agreed on thus far, in Copenhagen in 2009. Here’s an excerpt from their statement:
“We agree that deep cuts in global emissions are required according to science, and as documented by the IPCC Fourth Assessment Report with a view to reduce global emissions so as to hold the increase in global temperature below 2 degrees Celsius, and take action to meet this objective consistent with science and on the basis of equity.”
Nearly all heads of states from Albania to Zambia, including the U.S., Russia, India and China signed this Copenhagen Accord. Science tells us that this is a good target. Unfortunately, the International Energy Agency (IEA) currently projects a long-term global temperature rise of 3.6 Celsius in its central projection scenario.
565 Gigatons – Scientists tell us this is the amount of carbon that can be added to the atmosphere before it is expected the earth will warm another degree Celsius; thereby getting us to the 2 degrees mentioned above. The earth has warmed around one degree Celsius already compared to pre-industrial time, and if the extreme drought in Nebraska and throughout the country this year doesn’t give us a good example of what’s to come, one can look eastward. Hurricane Sandy’s force and damage was a result – in part – because of climate change. The destruction to New York, a city I called home for more than a decade, was unprecedented. When I talked to my friends out there, they said this storm was different than any they have experienced before. The devastation was much worse and much farther reaching than anything in the past. My sister is on the ground cleaning up the mess, and she says that in places, it is like nothing she has ever seen before.
McKibben said that it will take ONLY 15 years for the world to emit 565 Gigatons at our current projected pace.
But McKibben saved the worst number for last.
2,795 gigatons – This is the estimated emissions that will result from the use of the fossil fuel that companies currently have in their reserves. From my accounting days, McKibben said all the right things on how they computed reserves – looking at SEC filings, etc. Reserves are difficult to calculate because you never know exactly what’s in the ground until you take it out, but SEC filings are going to be the best source for estimates, because the company’s auditors will have vetted them to some extent. The International Energy Agency adds credence to this number in its most recent World Energy Outlook 2012.
So let’s do the MATH.
If 565 gigatons gets us to an increase of 2 degrees Celsius, the fossil fuel companies have 5 TIMES that amount in reserves. The business plan and goal of these companies is to sell all of their reserves to generate profits. The emissions from extracting, producing and using all of these fossil fuel reserves will mean chaos for our planet. The climate change the earth will experience from our collective human action is the most significant issue our generation and possibly humankind has ever faced.
But it wasn’t the math that really got me, even though I am still an accountant at heart, it was the picture of children standing in their flooded street in Haiti – holding signs that said:
This picture and many others McKibben showed the crowd of at least six hundred on the Saturday night of the BIG TEN Championship football game, demonstrated that people around the world understand climate change, and that many Nebraskans care. But can they do something about?
The other point that struck me as critical to appreciate is that the United States is where many of the large fossil fuel companies are headquartered or have significant operations and significant investors. Exxon Mobil is currently the world’s largest company, headquartered in Texas. As a side note, its largest shareholder is Vanguard, a mutual fund many Americans invest in personally or through their retirement accounts. Royal Dutch Shell is the fourth largest company, BP is 11th, and Chevron is 12th, headquartered in California. Not only are the people of the U.S. emitting more greenhouse gasses per person than any other large country in the world, our citizens work at and control many of the largest suppliers of the fossil fuel reserves to be burned.
So what action is 350.org calling for?
Simple. Taking our money, and any money we can influence, out of the equity shares of the top 200 fossil fuel companies. The 350.org campaign is working to have students affect their university endowment investments, church-goers to get their places of worship to divest, and anyone who has a pension to get their future financial security disconnected from these fossil fuel companies. It is perfect.
These companies are driven by share price; it’s something that their Board of Directors and their leadership cares very much about. It is how the worth of their company is valued. Creating a sustained and ongoing sell off of these companies will force the share price down… and possibly, hopefully, cause these companies to become energy companies, rather than fossil fuel companies.
I worked in the financial services industry in New York for more than a decade, and this action, if taken by a collectively large group, could be what needs to happen to redirect our climate future. We need to harness the sun, wind and geothermal power to change our direction, but talking alone with these fossil fuel companies has not convinced them that this direction is imperative. Taking our money out of these entities that are suppliers of the problem needs to happen to motivate their leaders. It is time to move the money.
So what would I tell a client?
Divestment of investments in the fossil fuel industry is just like any other strategy to be considered when trying to make one’s institution more sustainable. Verdis works with clients that are committing to becoming sustainable for different reasons and at different paces. I would tell a client interested in the financial benefits of energy efficiency to consider moving money from fossil fuel investments to a green revolving fund (GRFs). GRFs are internal investment mechanisms to fund energy efficiency projects, and they use energy savings resulting from such projects to replenish the fund. Established GRFs reported a median annual return of 28%, compared to Exxon Mobil’s annual growth rate during the last decade of only 10.4%.
Even if a GRF is not a good alternative, there are many other non fossil fuel investments with excellent returns: Investments without a core business plan that is working against the efforts of all of the other sustainable strategies being implemented at one’s institution. After all, changing an investment portfolio’s guidelines, in theory, is as simple as changing the list of allowable investments. The impact could be substantial, and if it is, an institution won’t want to be left holding the stock of a company with a falling price.
Why I will act
Droughts, floods and storms are affecting so many people around the world already. Nebraska is even starting to see how droughts and floods will impact our businesses and lives. Droughts are destroying our crops here and around the world. We know rising sea levels are forcing people to relocate. And so many of the people directly affected don’t emit any carbon in their daily lives. Many of these individuals around the world could work their entire lives and never be able to afford a plane ticket to see our developed world, let alone live it.
This is a huge global, moral issue. And because we are here, in the U.S., we can do something about it. So many, so far away, with scare resources, will feel the affects of our actions or inaction. Our time is now.
We should care and we should act – for those who cannot act themselves. For those who are the future. For our children and our grandchildren. For those little children in Haiti. I will act for my daughter, who was born the very day this photo was taken in Haiti. There is no debate about the science. The debate is over. It is time to change the course of our planet before it is too late.