Why a Rockefeller Divested From ExxonMobil
Divesting shares from companies or even nations involved in reprehensible practices has a long history. In the 1960s, a divestment movement emerged to protest South Africa, ultimately playing a key role in the ultimate dismantling of the country's apartheid system. Today, nations such as Iran, Israel, Northern Ireland, Myanmar and Sudan are targets of similar divestment campaigns.
In the corporate world, no other sector has been targeted so heavily by an international divestment campaign as the fossil fuel industry. Aided by the well-established climate movement and a deeply ingrained public awareness of how burning oil and gas contributes greatly to climate change, the fossil fuel divestment movement has been steadily growing, with universities, foundations, pension funds and individual investors dumping their shares in Big Oil. At COP21, the climate summit held in Paris in December, 350.org and Divest-Invest, two organizations coordinating the movement, reported that 500 institutions representing over $3.4 trillion in assets have made some form of divestment commitment.
The movement isn’t lacking for star power, with Hollywood stars like Tilda Swinton and Leonardo DiCaprio joining political leaders like Desmond Tutu and President Barack Obama offering their support. Now, the movement has a compelling new advocate: Neva Rockefeller Goodwin, who serves as the co-director of the Global Development and Environment Institute at Tufts University. But it’s not Goodwin's academic background that makes her unique; it’s the fact that she’s the great-granddaughter of John D. Rockefeller Sr., founder of the American oil giant Standard Oil Company, out of which ExxonMobil, the world's largest publicly traded international oil and gas company, was born.
Goodwin recently decided to gift her $400,000 shares of ExxonMobil to nonprofits so the proceeds can be used to fight climate change and climate denial. Her decision was prompted by the findings of two independent investigations by InsideClimate News and the Los Angeles Times into Exxon’s climate change coverup. In 1977 ExxonMobil’s own climate science team reached the conclusion that burning of fossil fuels would not only have a “catastrophic” impact on our planet but also pose a financial risk to Exxon’s financial stability in the future.
In November, New York State Attorney General Eric Schneiderman launched an investigation into ExxonMobil to determine if ExxonMobil lied to the public or investors about the risks of climate change to its future business. In January, California’s AG, Kamala D. Harris, threw her state into the ring with a similar investigation, suggesting that other states may follow Schneiderman’s lead, possibly expanding the probe into other fossil fuel companies. The growing inquiry has been already been compared to the lawsuits that have bedeviled tobacco companies, which concealed from the public research conducted in the 1950s and '60s into the health effects of smoking cigarettes.
I had a chance to ask Goodwin some questions about her decision and her thoughts about the growing divestment movement and the future of fossil fuel.
Reynard Loki: You decided to divest your ExxonMobil shares after reading about two independent investigations by InsideClimate News and the Los Angeles Times. Were those stories the first you had heard about ExxonMobil’s potential fraud? What was your initial reaction?
Neva Rockefeller Goodwin: Yes, those were the first data I had encountered about the company’s scientific investigations several decades ago. I was pretty stunned. I had had interactions with the company over more than a decade, including a lunch with Lee Raymond, Rex Tillerson and my father in 2006. I guess I’m naÃ¯ve. I believed, based on what I understood of the science, that the company’s stance on climate change was simply incorrect; I had not assumed that they were lying.
RL: It’s interesting that these journalistic investigations inspired you to take this action. Do you think it's the role of media to get people to make these kinds of decisions, whether divesting from fossil fuel, calling on their representatives to support renewable energy solutions, or simply reducing their own carbon footprints?
NRG: The reporting function of the media is essential in assisting people to understand the facts, on a wide variety of topics as well as climate change. Then, beyond reporting the facts, there is a role for editorial writing, selection of op-eds and editorials. This is where it seems appropriate to encourage people to divest, or to change their lifestyles, or to get involved in politics. Of course, the selection of news articles also depends on the knowledge and beliefs of the editorial staff — media can choose whether to run a story about a person who has had a good experience installing solar panels, or one who has had a bad experience. The editorial role assumes that the people involved in a particular news outlet collectively have better access to facts on a wide variety of topics than do most of the users of the media — and, that, with this better access, they can make good recommendations and selections. But this may also be naÃ¯ve. When I look at the anti-scientific stance of some media, not only on their editorial pages but throughout their reporting, then I worry about their dedication to truth, or where they get their facts from.
RL: Do you believe that the media has done a good job covering the climate change issue?
NRG: Some have done a very good job. A weakness of a lot of reporting, however, has been on the matter of balance. It has become widely accepted that the media need to represent all sides of any issue that is at all contentious. Climate change is an issue on which there is one side composed of scientists who believe that it is a very serious danger, warranting strong response. The other side – sometimes called “climate deniers” – includes less than 1% of the world’s climate scientists. Too often media have given in to pressure to give something like equal time to these very unequal sides.
RL: You wrote an op-ed piece in the Los Angeles Times about your decision to divest, saying that you “lost faith in ExxonMobil's future value.” How much of it was about the risk to future value vs. the risk to the environment that the company’s main product causes?
NRG: The two issues are very closely connected. A company that has been causing disasters on local and global scales is sooner or later going to run into various kinds of trouble — lawsuits, regulations, other expressions of public anger.
RL: The New York and California AG investigations into ExxonMobil may result in lawsuits, just as the tobacco companies faced. But though U.S. tobacco production has decreased significantly since the 1980s (from nearly 180,000 tobacco-growing farms to about 10,000 in 2012), the United States continues to be a leading producer of tobacco leaves. And the health-related impact is still severe: Smoking-related illness in the United States costs more than $300 billion each year.
What’s to say that litigating the oil and gas industry will have a more pronounced effect on climate and public health than litigating tobacco? Maybe Big Oil will just pay huge fines and then back to drilling as usual.
NRG: I recently read that the leading causes of death in the whole world are tobacco-related, with pollution-related causes coming in second, with the largest number of pollution-related deaths occurring in China and India. As the tobacco business shrank in the U.S., much of it went overseas, and those businesses have fought vigorously, often successfully, against efforts to reduce tobacco use around the world. We can certainly expect that the fossil fuel industries will fight every attempt to reduce their harmful activities, and they will win some of the battles.
In the large picture, however, tobacco and fossil fuel emissions are quite different. Tobacco kills people one by one. Climate change will increasingly cause events like hurricanes that will destroy large swathes of property, kill numbers of people, make many homeless. While it can be argued that smoking tobacco is a matter of individual choice, the production and use of fossil fuels is more obviously a social issue. In the long run, producers of fossil fuels will have to lose. The only question is how much the people and ecologies of the world will lose before our economies cease to make the situation worse.
RL: ExxonMobil’s alleged deceit — as well as the tobacco companies’ similar deceit that led to a wave of litigation that began in the 1970s and also the anti-GMO labeling attempts by Big Ag firms — underscore a lack of corporate ethics. Are business ethics and personal ethics different? Can they be in conflict? What are the greatest threats and opportunities for companies embracing responsible business practices?
NRG: From casual observation it appears that there are people with a reasonable sense of morality who steer their companies to do pretty immoral things. Evidently such people erect a firewall between their personal and business ethics. There is a slowly growing movement to point out the ways in which what is commonly accepted as decent morality is also good for business. For example, the “Porter hypothesis” suggests that good environmental ethics tend to be efficient and cost-saving for business. There is considerable evidence that this is correct. Other kinds of ethics may be less clearly related, positively or negatively, to profits. An important role for government is to create an environment in which socially good behavior does not hurt the company, and in which the kind of behavior that creates what economists call “negative externalities” is not profitable.
RL: In your Los Angeles Times op-ed, you write, “In shareholder resolutions and meetings with company representatives over the last 15 years, I and other members of my family have argued that it is shortsighted for Exxon to insist on remaining ‘an oil and gas company’ — rather than evolving into an energy company prepared to transition to a post-carbon economy.”
In May of last year, ExxonMobil CEO Rex Tillerson mocked renewable energy in a speech to shareholders. In those meetings, how were your proposals for changes received by the executives?
NRG: They were civil, but barely.
RL: How would you explain such short-sightedness? Has the quarterly-earnings mentality robbed publicly traded corporations from adopting a longer view?
NRG: The quarterly-earnings mentality has certainly played a large role in pushing corporations in general to a short-term mentality. This should be less true for companies like the oil majors, who have a long planning time from decisions to pursue new ventures and the time that those ventures may produce revenues. Given that, I am mystified by the failure of such companies to see where the future is heading — especially when their own science gave them a pretty clear picture a number of decades ago.
RL: In December, 350.org and Divest-Invest, two organizations coordinating the growing divestment movement, reported that 500 institutions representing over $3.4 trillion in assets have made some form of divestment commitment. Do you believe that the divestment movement will ultimately succeed in convincing Big Oil to switch to renewables?
NRG: The divestment movement is an important piece of the necessary process, but alone it would not accomplish what is needed. Right now those who want to sell shares in harmful companies can almost always find willing buyers; the share price may be lowered in some cases, but generally not much. But the divestment movement is a way for people in our market democracy to make their voices heard. This is one of a number of ways to express disaffection with companies that do more harm than good. When these voices are raised, that gives strength to other forces, such as government regulation, litigation, etc. that can both diminish the profitability of producing fossil fuels and make it harder for companies to continue profiting from destruction.
RL: In your op-ed piece, you write, “A prime reason is that Exxon's valuation is based largely on the immense untapped reserves of oil and gas it owns. And yet if future generations are to inherit a livable world, most of those reserves must stay in the ground.”
Are you hopeful that future generations will inherit a livable world?
NRG: I am not extremely optimistic about this. On bad days my probability estimate for future generations inheriting a livable world is in the single digits. But I keep my eye on whatever percent chance I think there is for future generations, and keep thinking about how to bring about that more or less improbable good future.
RL: What would you recommend to investors who care about the climate? Surely it can't be as simple as divesting from fossil fuel stocks.
NRG: No indeed. As investors, people should be actively looking for how to use their money to find solutions. For example, there are ways of capturing and storing CO2 in soils, oceans and mangrove forests as well as the better-known tropical forests. There are materials and technologies that can reduce the energy used, whether in production, transportation, or other ways, to fill human needs. Investors should seek to direct their resources to such innovations. Recognizing that finding such opportunities is not easy, it is best to move gradually while learning the terrain. And then, too, investors are people. As people we all need to think about how our behavior affects the earth.
RL: If you could advise the next president on America’s climate plan, what are the top recommendations you would make?
NRG: This country's inability, so far, to respond appropriately to the climate challenge is rooted in two social issues: economic inequality and economic insecurity. In our increasingly unequal society the biggest corporations are able to distort the information that reaches the public, and to hide the realities we are facing. In a society in which most individuals and families are increasingly insecure, fear of losing the income required to stay at an acceptable level makes people easy prey for rage- and hate-mongers like Donald Trump. Given that technology is making it easier to fill all real needs with ever less human labor, a guaranteed basic income for all is increasingly being discussed as a way of addressing both inequality and insecurity. This would be my first recommendation.
A related issue is the hold of corporate money on politics. Subsidies on fossil fuels is one example of that hold; shockingly, the fossil fuel industry is still more heavily subsidized by our government (and by many other governments) than is the development or production of sustainable fuels. Another example is the subsidies given to biofuels. If our government were following scientific evidence rather than corporate money it would recognize the substantial climate effects of ethanol and several (though not all) other biofuels. My second recommendation, then, would relate to getting money out of politics — for example, requiring all lawmakers to make known all their sources of income, and to recuse themselves from voting on legislation relevant to their donors. There are many other areas of our society where “conflict of interest” is taken seriously; why not in government?
There are other, more obvious recommendations, such as putting a price on carbon; that is a relatively easy step now, while fossil fuels are relatively cheap. But this, without deeper change in our corporate and consumerist culture, will not be enough. We cannot solve our environmental problems without addressing basic economic and political ones.