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Proponents of Socially Responsible Investment (SRI) and other forms of “green” capitalism continue to put profits before moral considerations. Ethical Funds, a leading Canadian SRI consultancy owned by NEI Investments, exemplifies this paradox inherent to many attempts at corporate social responsibility by advocating against divestment from tar sand oil ventures.
By Theo Lyons
At a panel discussion on ‘Sustainable University Endowments and Divestment’ at the New Economy Summit hosted by UBC last weekend, Christie Stephenson of NEI Investments argued that the most effective means of bringing about change is actually to invest in industry leaders, and to then use one’s leverage as a shareholder to encourage innovation and sustainable practices from within.
Speaking in response to Professor George Hoberg, who outlined the compelling case for universities to divest their endowments from fossil fuels on behalf of UBCC350, a group working in coordination with the broader 350.org movement, Stephenson suggested that in the case of the Canadian tar sands, full divestment would represent a “huge missed opportunity for constructive engagement.”
Stephenson defined SRI as “an investment approach making reference to environmental, social, and government factors in the selection and management of investments,” and explained that Ethical Funds implements these criteria through evaluations, corporate engagement, public policy work, and research. The first of these four mechanisms, evaluation, actually resembles divestment: a company may at any point be found to be “ineligible” for Ethical Funds investment. Despite that, Stephenson made it clear that this decision to not invest is only used in limited circumstances, and would not preclude all investment in tar sands oil. She listed tobacco, nuclear energy, and the manufacture of weapons controlled by international treaties as examples of investments that would never be “eligible”.
With regards to her policy of investing in tar sands oil, Stephenson made reference to a pie chart showing that the vast majority of Canada’s GDP is made up of banks and resource extraction industries in order to demonstrate that a Canadian investor wishing to divest from these areas would be left with very few places to put their money. More generally, she continually emphasized that investment in these sectors allows Ethical Funds to practice ongoing constructive engagement as a stakeholder. Finally, Stephenson also raised the tired argument that if we don’t do it — that is, don’t invest in these companies, or more broadly don’t produce tar sands oil — someone else will.
While advocating for this kind of “corporate engagement,” Stephenson basically chose to ignore the central purpose of divestment as a political strategy. As George Hoberg made clear, divestment is intended as a means of publicly acknowledging the fact that our carbon emissions are on the verge of causing catastrophic damage, and the complicity that is thus inherent to investing in and profiting from the fossil fuel industry. In a conscious emulation of the divestment campaign which targeted South African apartheid, the 350.org movement makes a compelling moral argument for divestment from all fossil fuels.
To return to Stephenson’s pie chart, it’s worth pointing out that a full divestment from fossil fuels would according to recent estimates have a negligible effect on the performance of university endowments. This calls into question the assumption that without mining and oil stocks, Canadians would have nowhere else to invest. More importantly though, the fact that our economy is being increasingly dominated by these industries is a problem that can only be worsened by further investments in tar sand oil. It is perhaps also significant that all of these arguments raised in favour of investment in ‘good’ tar sands projects were also employed against those who advocated for a total divestment from apartheid South Africa. Furthermore, once the question of complicity has been sidelined, this reasoning would logically also apply to engagement with ‘leading’ and ‘innovative’ providers of tobacco, nuclear energy, or landmines.
While reflecting on Stephenson’s emphatic preference of “constructive engagement” over divestment, I came to realize that her comments were actually indicative of a much deeper problem. Throughout her speech, Stephenson’s word choice reflected the belief that ethical investment must always be justified in terms of profitability. SRI was rationalized as an option that presents lower risk and higher returns over the long-term, and “ineligible” investments were conversely described as presenting “too high a risk.” On the Ethical Funds website, the potential client is similarly assured that they can “now invest widely in companies that are socially responsible, without sacrificing investment performance.”
It was this categorical refusal to acknowledge that investing ethically might mean investing in a way that is slightly less profitable that most troubled me. I think it profoundly demonstrates the extent to which profit maximization has — within the broader context of a society in which growth has come to be the only benchmark of progress — supplanted ethical considerations almost entirely. Investors are expected to maximize profit and morality is expected to impose itself upon them in the form of potential class-action lawsuits, consumer backlash, or other forms of profit-jeopardizing “risk”.
This fundamental abdication of responsibility and refusal to acknowledge complicity which is so characteristic of the financial sector was the root cause of the shocking divergence between Stephenson’s approach to tar sands investment and that which was advocated for by professor Hoberg.
The 350.org divestment campaign is about bringing together communities in response to the overwhelming evidence that our carbon emissions are well on the way to causing catastrophic damage, and simply saying “not in our name.” Both the rhetoric and the investment policies of Ethical Funds sadly suggest that their equivalent of this statement would be “not in our name, unless there’s no equally profitable alternative.”
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