Vision

and Leadership

Towards Responsible Environmental Citizenship at McGill University

By Christopher Bangs

Vision and Leadership

Towards Responsible Environmental Citizenship at McGill University

Vision and Leadership

If we are complacent, the world will pass us by. Principal Monroe-Blum By Christopher Bangs

Towards Responsible Environmental Citizenship at McGill University

November 2012

Global climate change is called the most significant threat facing humanity.

Anthropogenic greenhouse gas emissions have steadily raised the temperature of the planet since the start of the Industrial Revolution in the 18th century. The Earths surface temperature is now 0.8C warmer than in 1911, with 0.6C of that warming occurring in the last thirty years (BASC, 2011). The science on global warming is clear and compelling. This brief will lay out the impacts of climate change on the planet, discuss the negative effects of climate change on McGill Universitys future funding, detail the investment links between the University and fossil fuel companies, and argue that the Board of Governors must divest from fossil fuel companies to fulfill its moral obligation to humanity and its fiduciary obligations to the University.

4 that:

Vision and Leadership Given the urgency of climate change and the clear and compelling rationale

for divestment, the students, faculty, staff, and alumni of McGill University demand 1. That the Investment Committee be instructed to immediately dispose, in an orderly and responsible fashion, of the Universitys holdings in corporations which develop the Canadian tar sands, transport or refine hydrocarbon from the Canadian tar sands, sell products of the Canadian tar sands, or are otherwise involved in the production, distribution or sale of goods from the Canadian tar sands, as determined by the Committee to Advise on Matters of Social Responsibility. 2. That the Investment Committee be instructed to dispose, in an orderly and responsible fashion in no longer than three years, of the Universitys holdings in corporations which produce, refine, transport, or sell fossil fuels, as determined by the Committee to Advise on Matters of Social Responsibility. 3. That the Investment Committee be instructed to dispose, in an orderly and responsible fashion in no longer than three years, of the Universitys holdings in financial institutions which have not adopted, as determined by the Committee to Advise on Matters of Social Responsibility, a policy of making no further loans to corporations that produce, refine, transport, or sell fossil fuels. Canadas Future in Peril According to the Board of Atmospheric Sciences and Climate, the arm within

the American National Academies for atmospheric and climate sciences, The preponderance of the scientific evidence points to human activitiesespecially the release of C02 and other heat-trapping greenhouse gases (GHGs) into the atmosphereas the most likely cause for most of the global warming that has occurred over the last 50 years or so(Committee on America's Climate Choices 15).

Towards Responsible Environmental Citizenship at McGill University Scientists agree that the highest safe level of C02 at 350 parts per million;

human emissions have now pushed the level of C02 in the atmosphere to 392 ppm (350.org). The BASC further advises that, The faster emissions are reduced, the lower the risks posed by climate change. Delays in reducing emissions could commit the planet to a wide range of adverse impacts . . [and] the risks associated with doing business as usual are a much greater concern than the risks associated with engaging in strong response efforts (Committee on America's Climate Choices 2). Canada, through its international agreements has made strong commitments to a green future. In the 2010 Cancun agreements of the United Nations Framework Convention on Climate Change, Canada affirmed: that climate change is one of the greatest challenges of our time . . . [and] that deep cuts in global greenhouse gas emissions are required according to science, and as documented in the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, with a view to reducing global greenhouse gas emissions so as to hold the increase in global average temperature below 2 C above preindustrial levels, and that Parties should take urgent action to meet this long-term goal, consistent with science and on the basis of equity (United Nations 2, 3). Despite the scientific consensusthe consensus has been endorsed by

every National Academy of science of every major country on the planet, every major professional scientific society related to the study of global warming and 98 percent of climate scientists throughout the world, writes Al Gore (Gore)and despite Canadas strong public commitments, our country is pushing forward with developing the Tar Sands, has barely even slowed the rate of greenhouse gas emissions growth let alone reduced emissions, and under the current government has pulled out of the Kyoto Protocol. Climate change raises global temperatures. Every summer, new temperature records are set across the globe. Much of the South West United States saw

Vision and Leadership

unprecedented wildfires and droughts, while regions across the world face extraordinary flooding and storms. Climate scientists used to say that global warming stacks the dice in favour of more extreme weather: what might have used to be a storm so large that it occurred only once every 1,000 years now might happen every 500, or a 100-year flood might instead happen every 60 years. Now they say that we are adding more dots on the dice: whereas before we might have rolled a 12, now we are rolling 13s and 14s. Entire neighborhoods of many major cities are threatened by global warming. Vancouver, New York, New Orleans and many other North American cities are so close to sea level that projected sea level increases could put sections underwater (Gore). As the temperature rises, we can expect more and more severe impacts. The Intergovernmental Panel of Climate Change, in its 2007 report, discussed some examples of impacts associated with global average temperature change. Appendix 1.1 reproduces a figure demonstrating some of the impacts of climate change (Intergovernmental Panel on Climate Change). In North America, the report continues, Warming in western mountains is projected to cause decreased snowpack, more winter flooding and reduced summer flows, exacerbating competition for over-allocated water resources. In the early decades of the century, moderate climate change is projected to increase aggregate yields of rain-fed agriculture by 5 to 20%, but with important variability among regions. Major challenges are projected for crops that are near the warm end of their suitable range or which depend on highly utilised water resources. Cities that currently experience heat waves are expected to be further challenged by an increased number, intensity and duration of heat waves during the course of the century, with potential for adverse health impacts. Coastal communities and habitats will be increasingly stressed by climate change impacts interacting with development and pollution.

Towards Responsible Environmental Citizenship at McGill University And for Canadians living in Polar Regions, the report discusses some The main projected biophysical effects are reductions in thickness and extent of glaciers, ice sheets and sea ice, and changes in natural ecosystems with detrimental effects on many organisms including migratory birds, mammals and higher predators. For human communities in the Arctic, impacts, particularly those resulting from changing snow and ice conditions, are projected to be mixed. Detrimental impacts would include those on infrastructure and traditional indigenous ways of life. In both polar regions, specific ecosystems and habitats are projected to be vulnerable, as climatic barriers to species invasions are lowered. Pressed from All Sides It is clear that Canada faces clear and pressing challenges from climate projected regional impacts, including,

change.

The many problems posed by climate change are pressures on the University.

Warming threatens all of the Universitys funding sources in many ways. Falling returns on investment can be expected, while infrastructure costs will demand a larger percentage of the Quebec government expenditures. Alumni and parents will be less able to give. These three founding sources comprise the vast majority of McGill Universitys annual budget. Government funding will be more difficult to come by. 48% of the Universitys annual budget comes from provincial subsidies (McGill University Office of the Provost), a huge source of funding that would be hard to replace. As the claims on government revenue rise due to global climate changenew public infrastructure will need to be built, old infrastructure will need to be replaced more

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often, emergency disaster spending will be needed more often, and income support programs might need to be expandedit is clear that the money will have to come from either increased taxes or savings in other parts of the budget. Tax increases ultimately either fall on individuals or shareholders, hitting McGill at both ends. The former Liberal government and the current PQ government have both shown themselves willing to reduce the relative government contribution to higher education, and the MELS grants to public universities in Quebec might shoulder some of the burden of government cutbacks. Continued public subsidies are not guaranteed to remain at a sustainable levelalthough there are many of us students who want to see them increased greatlyand global climate change threatens the continued public investment in higher education. The economic costs of global warming threaten the return on investment for McGill Universitys endowment. All sectors of the economy will face rising costs that will be factored into either profits or consumer prices. The rise of extreme weather events like flooding and hurricanes means that businesses must purchase more, and more expensive insurance and will have to replace capital faster. Vancouver, New York, and other large, coastal North American citiesin which the University has large investmentscould see entire neighborhoods engulfed by the ocean. According to the IPCC, infrastructure across the coast is impacted by many effects of global warming, including temperature rise, extreme weather and ocean events, flooding, erosion, and salt water intrusion (M.L. Parry 6.4.2, 14.2.3; Sinoski). These factors mean that transportation costs will rise, and that capital might have to be moved inland, and that shipping and pipeline infrastructure will be less secure. Appendix 1.2 details the direct and indirect impacts on the built environment, infrastructure industries, and natural resource infrastructures. Many of these costs will be born by governments, and others will be born by individuals and corporations. Governments across the world will have to levy taxes to raise seawalls, expand sewers, and respond to disasters. That government money will come from corporations, either through direct corporate taxes or through increased taxes on labour, and those corporations will likely pass some of those costs on to their shareholders. Corporations will pay higher operating costs, including heating,

Towards Responsible Environmental Citizenship at McGill University

cooling and building maintenance, and increased prices for inputs due to mitigation efforts and scarcity will have to be born by either consumers or shareholders. Backing up this analysis are the predictions of global capitalist investors. One in three surveyed told Bloomberg News that they expected corporate profits to fall due to action to limit pollution (only 38% believe that global warming is a major threat to the environment, while 40% believe it is a minor threat) (Efstathiou). If shareholder returns fall as the Consumer Price Index, a measure of inflation, rises, then the return on McGills endowment will be less secure and will provide less financial support for the Universitys future operations. Thus decreased corporate profits seem likely, as do decreased real incomes for families, some of whom will send their children to McGill University. Individuals will pay higher taxes and higher prices for goods. All of the drivers of lower shareholder returns are also drivers of higher output prices, and markets can expect price increases across the board. Those price increases could result from mitigation efforts or from scarcity. Regardless, the growth rate in real family incomes will be negatively impacted by higher prices, and that could affect McGill in two main ways. Lower real parental income may force many talented students, especially out-of- province and international students paying higher tuition rates, to choose an alternative school or go deeply into debt, requiring more students to work longer hours. When students work more than 15 hours a week, their academics suffer, as does their ability to participate in the McGill community (BC Teachers Federation). Even more, the ability of alumni and parents to give back to school through financial donations is threatened by the fall in real incomes. If graduates have less disposable income at all stages of their life, the frequency and size of gifts can be expected to fall. Decreased real incomes due to climate change would seem to impose real costs on the University. Climate change clearly poses a risk to the continued financial health of the University. Responsible governance requires Board members to put the University in a position to help tackle the problem of climate change. Some researchers at McGill University are already working towards solutions, but McGill can do more

10 best option.

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than research. If we are serious about mitigating global warming, divestment is the

Investing in Fossil Fuels: A Bad Deal for McGill University McGill Universitys investments in fossil fuels make up a relatively small portion of the endowment fund, but the global impact of those companies the University invests in is extraordinary. The December 2011 report on the Publicly Traded Equity Holdings of the University is the most recent data available, and all discussion of the composition of McGills investments comes from that list. Two lists were used to identify specific corporations. The first, from the Rainforest Action Network, lists companies involved in the Canadian tar sands; the second, from the Carbon Tracker Initiative, has two lists of the top 100 companies with the largest estimated carbon reserves either in coal, or in oil and gas. McGill invests in 645 publicly traded corporations. 14 are involved in the tar sands, while 35 number among the worlds largest fossil fuel corporations. In total, these two lists identify 37 unique companies that McGill profits from, 5.89% of the Universitys unique holdings (Appendix 2 has the complete list of these firms). The number of shares in each is not publicly available at the time of writing, although Access to Information requests filed under the Act respecting access to documents held by public bodies AND the protection of personal information will hopefully provide further insight to members of the McGill community. It should be made clear that this is an incomplete list of the fossil fuel companies that McGill invests in. Only the largest and dirtiest fossil fuel companies are represented on these lists, and other smaller corporations certainly comprise part of the schools endowment fund. Of the 35 companies identified by the CTI, many are cross-listed on all three lists, meaning they have some of the largest reserves of carbon in coal, and in oil and gas, and they invest in the dirtiest form of oil production on the planet. The CTI also expressed its concern that Canadian accounting practices artificially lower the size of unconventional oil reserve size estimation, since they are only reported under

Towards Responsible Environmental Citizenship at McGill University

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Canadian rules once production is believed to be imminent (Initiative 12). Thus it is likely that the size of the actual reserves of carbon owned by the 12 firms involved in the tar sands for which an estimation is available is significantly larger than expressed. All told these 35 companies have 205.455 Gigatonnes of C02 locked away beneath the earth. If humanity burns that carbon, global warming will be uncontrollable. Understanding the enormity of 205.455 Gigatonnes C02 is not easy, but the following graphs should help.

250 200

Chart 1. Yearly Emissions in Comparison

1751 150 2008 100 50 0 Gigatonnes C02 Estimated Carbon Reserves

Chart 1 shows the difference between yearly global anthropogenic carbon

emissions and the estimated carbon reserves that McGill is profiting from. In 1751, just at the start of the Industrial Revolution, humans emitted just .003 Gigatonnes of C02 a year. In 2008, we emitted 8.749 Gigatonnes. If these corporations burn all of their carbon reserves, that is the equivalent of pumping out about another quarter- century of emissions.
Chart 2. Total Emissions in Comparison

Gigatonnes C02

50

100

150

200

250

300

350

Emissions, 1751-2008

Estimated Carbon Reserves

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Vision and Leadership To see this issue in another light, humans emitted 356.758 Gigatonnes of C02

from 1751 to 2008 (data on the last three years are not readily available, but probably another 20 to 35 Gigatonnes have been emitted since). Chart 2 shows the size of those emissions. Humans raised the amount of carbon in the atmosphere from 275 ppm to 392 ppm, or a 117 ppm increase (350.org). If these 35 companies burn their entire reserves, that would be an additional 57.64% of all anthropogenic carbon emissions since the start of the Industrial Revolution released into the atmosphereif 350 ppm is the maximum safe level, another 205.455 Gigatonnes of C02 means rapid, severe warming. There is no coming back from that. With the additional carbon reserves not represented on the CTIs estimates, it is clear that McGill University is directly profiting from the exploitation of massive carbon reserves, and our investments serve to legitimize this system of fossil fuel consumption. If the companies we invest in continue to carry on business-as-usual, global climate change is unavoidable. Divestment: McGill as a World Leader Divestment is an effective tool in the arsenal of socially responsible universities to affect wide-reaching, deep change. If McGill University takes bold decisive action by publicly divesting from fossil fuels, it will attract global attention as a world leader in sustainability and environmental governance. It is also the only responsible course of action for fulfilling the Board of Governors fiduciary obligation to the financial wellbeing of the school. Movements at comparable universities across North America have taken The question then is what to do about this problem. The responsible answer is divestment.

hold in the last three years, starting at Harvard University and spreading to Amherst College, Boston University, Brown University, Tufts University, and Yale University (Divest for Our Future). Furthermore a growing political consensus, especially in Quebec, recognizes that we will eventually end our reliance on fossil fuels. We will put an end to fossil fuels; the only question is when?

Towards Responsible Environmental Citizenship at McGill University If McGill University goes first, it will raise the political capital of the

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University. McGill will be a world leader in responsible governance, attracting headlines across the globeuniversities like Harvard and Yale will be forced to play catch-up, or be forever remembered as the schools that refused to act. For many students entering university, this global environmental crisis is of the utmost importance, and talented, driven young people considering undergraduate or graduate school are looking for a university that can springboard their future careers, provide for their personal growth, and where they can live their values. Leadership on this issue would both expand the cachet of the University and the quality of the applicant pool. Alumni donations can also reasonably be expected to rise. Many studies have shown that alumni with a positive emotional attachment to their university are more likely to donate, and they have also shown a strong positive relationship between the capacity to give and donor status (Hoyt). Alumni share the broad societal concern over global warming, and seeing McGill University take bold action to mitigate climate change would raise the frequency and intensity of positive emotional attachments to the school for most. By precipitating a broader social move away from fossil fuels, McGills actions would also ensure that the real incomes of alumni do not fall due to carbon emissions. Thus action on climate change raises both the likelihood that alumni would want to give, and the ability of alumni to give. Divestment can also push entire governments to action. In the latest national election, concern over climate change spanned all of the parties, including the Parti Qubcois, which formed the present minority government; the PQ has banned fracking to wide public acclaim. There is social support for strong action to mitigate climate change, and the historical record of divestment shows that one university can spur broader action. Michigan State University was one of the first schools in North America to divest from South Africa, passing its resolution in 1977. Its leadership encouraged the state of Michigan to require all public universities in the state to divest their holdings in South Africa. While that law was eventually struck down by a court,

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Michigan States courageous stewardship not only presaged but brought about broader social change. Michigan State will always be remembered for taking a stand against apartheid, while schools that failed to respect human rights can never obviate that mark against them. If McGill University makes the right choices, it will always be remembered as a world leader in socially responsible governance, and given the willingness of Quebec to engage with the issue of climate change, divestment could precipitate national action. Further, this is a positive financial decision for the rate of return of the Universitys endowment. Across the world governments have passed or are considering legislation to regulate fossil fuels and carbon emissions. Europe already has cap-and-trade legislation, and California is considering one as well, while Sweden has put in place a carbon tax, and U.S. President Obama delayed the Keystone XL pipeline carrying bitumen and other products of the tar sands from Canada down to Texas. Worldwide, pressure is building to replace the Kyoto Protocol with a more effective version. Fossil fuels only make profits when the full cost of their use is not born by the producers. Once more stringent, wide-reaching measures are in place that force companies to pay the full social costs of their products, fossil fuel companies rates of return will dropthere is no way around that. Any major announcement of effective climate change mitigation legislation will cause the values of these stocks to drop; when BP garnered international attention for the huge spill in the Gulf of Mexico two years ago, its share price fell dramatically. By shifting out of these stocks to safer, more stable assets, McGill University can ensure the value of its portfolio. Investing in fossil fuel companies is a risk to McGills financial security, and the University can find similar returns from safer stocks. Divestment is the best course of action. By divesting from fossil fuel companies and the financial institutions that fund them, McGill University will be internationally recognized for its progressive environmental citizenship and will be rewarded by alumni, parents, prospective students, and prospective faculty. It

Towards Responsible Environmental Citizenship at McGill University reduces the uncertainty in the value of the endowment that comes from major policy changes. And ultimately, it is the right thing to do. We need to move to a carbon- neutral future, and McGill University has an obligation to its students and staff, to the people of Quebec and Canada, and to the planet. Moving Forward

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Time is of the essence. We need immediate action to keep this planet livable,

and McGill University is in a position to act. Climate change threatens the Canadian people and it jeopardizes the future of McGills financial stability. Given the urgency of climate change and the clear and compelling rationale for divestment, the students, faculty, staff, and alumni of McGill University demand that: 1. That the Investment Committee be instructed to immediately dispose, in an orderly and responsible fashion, of the Universitys holdings in corporations which develop the Canadian tar sands, transport or refine hydrocarbon from the Canadian tar sands, sell products of the Canadian tar sands, or are otherwise involved in the production, distribution or sale of goods from the Canadian tar sands, as determined by the Committee to Advise on Matters of Social Responsibility. 2. That the Investment Committee be instructed to dispose, in an orderly and responsible fashion in no longer than three years, of the Universitys holdings in corporations which produce, refine, transport, or sell fossil fuels, as determined by the Committee to Advise on Matters of Social Responsibility. 3. That the Investment Committee be instructed to dispose, in an orderly and responsible fashion in no longer than three years, of the Universitys holdings in financial institutions which have not adopted, as determined by the Committee to Advise on Matters of Social Responsibility, a policy of making no further loans to corporations that produce, refine, transport, or sell fossil fuels.

16 Appendix 1

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1.1 Examples of impacts associated with global average temperature change (Intergovernmental Panel on Climate Change)

Towards Responsible Environmental Citizenship at McGill University 1.2 Table 7.2 from section 7.4.2.1 of the IPCCs Climate Change, 2007 Report: Working Group II: Impacts, Adaptation and Vulnerability.

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18 Appendix 2

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McGill Universitys investments in fossil fuel companies, and the size of their estimated carbon reserves

The estimated carbon reserves of 35 of the fossil fuel companies McGill invests in.
Companies Coal (GtC02) AGL Energy 0.89 Anglo American 16.75 ArcelorMittal 0.62 Baytex Energy Corp * BG Group BHP Billiton 16.07 Bonavista Energy Corp BP * Cairn Energy Canadian Natural Resources * Cenovus Energy Inc * Chevron * Crescent Point Energy Corp. EnCana Corp. * EOG Resources Exxon Mobil * GDF Suez S.A. Inpex Corp Itochu Corp 0.34 Mitsubishi Corp 4.31 Mitsui 1.03 Nexen * Oil Search LTD OMV Repsol YPF S.A. Rio Tinto 5.23 Royal Dutch Shell * RWE AG 1.94 Santos Limited Oil (Gtc02) 0.3 2.29 1.82 0.18 32.68 0.35 4.23 1.4 20.11 0.47 0.24 0.97 38.14 0.17 2.44 Gas Total (GtC02) (GtC02) 0.89 16.75 0.62 0.3 0.48 2.77 0.2 18.09 0.03 0.21 1.92 34.6 0.35 0.14
4.37

0.006 1.11 0 0.47 0.38 2.89 0.05 0.1

1.406 21.22 0.47 0.71 1.35 41.03 0.22 2.54 0.34 4.31 1.03 1.402 0.91 1.08 3.04 5.23 16.2 1.94 0.36

1.4 0.002 0.91 1.02 0.06 2.75 0.29 14.11 2.09 0.19 0.17

Towards Responsible Environmental Citizenship at McGill University Statoil ASA * Suncor Energy * Talisman Energy Inc. Tullow Oil Wesfarmers Xstrata

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1.86 11.6
Coal 60.64 Oil

2.23 3.74 1.47 0.36

0.25 0.007 0.19 0.01

2.48 3.747 1.66 0.37 1.86 11.6 Total 205.455

Gas 133.97 10.845

Total

* Also invests in the tar sands; due to Canadian accounting practices, the estimated carbon reserves for companies that exploit the tar sands likely hold higher carbon reserves than is publicly available. Companies Involved in the Tar Sands Companies in bold appear on both lists Baytex BP Canadian Natural Resources Cenovus Energy Chevron Enbridge Encana Exxon Imperial Oil Nexen Royal Dutch Shell Company Statoil ASA Suncor Energy Transcanada Corps

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Works Cited
350.org. Science. 2012 20-10. 2012 20-10 <http://www.350.org/en/about/science>. BC Teachers Federation. BCTF Research Report. 1999 01-05. BC Teachers Federation. 2012 22-10 <https://www.bctf.ca/publications/ResearchReports.aspx?id=5622>. Committee on America's Climate Choices, National Resource Council. America's Climate Choices. Washington, D.C.: National Academies Press, 2011. Divest for Our Future. University Campaigns. 2012 20-10. 2012 20-10 <http://divestforourfuture.org/university-campaigns/>. Efstathiou, Jim Jr. Company Profits Unaffected by Climate Change Laws. 2012 07-09. Bloomberg News. 2012 22-10 <http://www.bloomberg.com/news/2012-09-07/company-profits-unaffected-by- climate-change-laws-poll.html>. Gore, Al. "Climate of Denial: Can the Science and the Truth Withstand the Merchants of Poison?" Rolling Stone 22 06 2011: 7. Hoyt, Jeff E. Understanding Alumni Giving: Theory and Predictors of Donor Status. Salt Lake. Initiative, Carbon Tracker. Unburnable Carbon: Are the Worlds' Financial Markets Carrying a Carbon Bubble? London, 2012 01-08. Intergovernmental Panel on Climate Change. Synthesis Report. New York: http://www.ipcc.ch/publications_and_data/ar4/syr/en/spms3.html, 2007. M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van der Linden and C.E. Hanson (eds). Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007. Cambridge: Cambridge University Press, 2007. McGill University Office of the Provost. McGill University Budget Book FY2013. 2012. Sinoski, Kelly. Rising Sea Levels Throughout Metro Vancouver Putting landmarks at Risk. Vancouver Sun. Vancouver, 2012 04-08. United Nations. Framework Convention on Climate Change. 1992. 01 12 2012 <http://unfccc.int/essential_background/convention/background/items/1362.php >.