Monday, September 22, 2014

Is Divestiture the Right Tactic? The Rockefeller Foundation Divests Its Energy Holdings

Is Divestiture the Right Tactic?  The Rockefeller Foundation Divests Its Energy Holdings

When the Rockefeller Brothers Foundation announces that it’s going to divest its conventional energy holdings, it makes front-page news in many newspapers and on many websites.  With $860 million in assets, the Rockefeller Foundation is a relatively small player in the world of institutional investing.  However, there’s certainly a powerful symbolism to the heirs of John D. Rockefeller casting off the very investments that created their fortune in the first place.  In addition, their sense of timing is extraordinary.  With the UN Climate Summit occurring in New York City tomorrow, the Rockefeller Foundation’s announcement is getting even more attention than it would on an ordinary news day.

As various news stories have pointed out, the Rockefeller Foundation is joining a number of institutions that are ridding their portfolios of conventional energy exposure.  The New York Times estimates that institutions have sold about $50 billion worth of energy stocks.[1]  In world of finance, this is actually a small number when you consider that institutional assets are denominated in the trillions of dollars.

I’m of mixed minds on divestiture.  While I understand the symbolism, I wonder about the effectiveness of divestiture.  When institutions sell their holdings, they give up their rights as owners to confront companies and their managements.  Wouldn’t it be more effect if the heirs of John D. Rockefeller confronted the management of Exxon-Mobil instead of walking away?

Ironically, the Rockefeller Foundation may be making a sound long-term economic decision instead of a moral one.  Perhaps, carbon based energy companies will, one day, be stuck with oil and gas reserves, that will have to remain in the ground because we’ve moved away from a carbon-based energy system.  Sadly, I think that time is far off.

Meanwhile, I wish the Rockefeller Foundation and other institutions would band together and confront the oil and gas industry.  If institutions divest, that wish cannot come true.


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