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On 'divestment'

By Don Aitkin - posted Tuesday, 21 October 2014


I lived in Sydney in the 1970s, and I seem to remember a fuss when it was discovered, learned or alleged, that the Sydney Anglican diocese owned some buildings close to White City, then the hub of tennis, that were used for prostitution. Again, memory tells me that those responsible said that the Church simply owned the buildings, and did not know what they were used for. 'Well, you'd better do something about it!', was the politically correct retort of the time. And the next day a space-ship landed, or some other event took over the front page. We learned no more.

But 'divestment' - getting rid of property of some kind that that has been part of your portfolio - is back on the front page. There are many reasons for divestment (it is the opposite of investment): you may want to focus on what you do best, or you need some cash, or you sell bits that are more trouble than they're worth, and so on. But for organisations that simply hold lots of shares, like superannuation funds, or as a reserve, divestment can also occur for ethical, political or ideological reasons.

And this is plainly what prompted the Australian National University not simply to sell some shares, but also to publicly announce that it had done so: all the companies seem to be in fossil fuels and mining, the most prominent being Santos, which is the largest producer of natural gas for the Australian market. Santos felt rather piqued by the announcement, which was accompanied by revelations that in the ANU's assessment the company was doing 'social harm'. One might ask whether or not the various benefits of natural gas had been incorporated in that assessment.

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Anyway, there were cries of outrage from the Government, the Mining Council and several companies, and enthusiastic support from those, like the Greens, who see the University's action as a form of boycott (which it is). Such boycotts have a long history, and I can remember them when South Africa still endured apartheid, and later when it became embarrassing for it to be known that one had shares in tobacco companies*.

For a former political scientist like me the really interesting question is the process through which the University came to make the decision. I have a modicum of sympathy for every vice-chancellor, past and present, and see in the ANU Vice-Chancellor's statements on the matter a CEO finding the whole issue to be awkward, and that he will be damned whatever he does.

And he wrote to me, as an ANU graduate, to set the record straight, though non-graduates can read the same story in the Sydney Morning Herald and the Canberra Times. To summarise, various 'stakeholders' wanted the ANU to divest from all fossil fuels. Professor Young wanted a more nuanced approach, so he hired a consultant, and came up with something that looks like what Stanford University does (so it must be kosher).

The ANU seems to have a portfolio worth about $1.6 billion, and the shares involved are a trivial proportion, 1 per cent of its portfolio, and of course an even more trivial proportion of the share backing of the companies involved. But the reasonable reader might well still shake her head in puzzlement, and ask why such an action is appropriate for a University. After all, as Professor Young writes, We invest for the betterment of its community – students, staff and researchers. The returns on these investments fund scholarships, staff salaries, research projects and new infrastructure.

But then he adds, The University has a responsibility to invest wisely but also in a manner consistent with the desires of our stakeholder students, alumni and staff. There has been growing sentiment from our community to not just get a good financial return from our investments but also to invest in companies which would have activities consistent with the goals of the University, and do not manifestly cause social harm.

The problem here is that the only group which seems to have had its view canvassed on this issue is the student body, and 82 per cent of the 2000 students who took part were in favour of the University's action (ANU had 18,569 students either last year or earlier this year). The 'short version' of the question put to them was 'Should ANU stop investing in fossil fuels which drive dangerous climate change?' Hmm. If alumni were asked their views I seem to have been missed. I'm not aware that staff were consulted, but parts of the ANU do seem to be basins of belief in AGW.

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How did Professor Young explain the need to divest? Well, on the one hand, he said, My own views are that the world must eventually move away from the use of fossil fuels. This, however, will take decades. In the meantime we will require such fuels.

And on the other he said, What will our industries be in 20 or 30 years' time? I am confident they will not be in producing fossil fuels. Australia should not be an adopter of alternative energy, we should be a producer.

I am reminded of the need for American Presidential candidates to be able to say the right things to the right constituencies. Professor Young said that the approach we have adopted is considered, measured, analytical and appropriately balances the desires of our community and the requirement to achieve an appropriate financial return.There you go.

My guess is that the ANU Council, no doubt amply filled with good people who like to do good things, put so much pressure on its V-C that he had to find a way out that gave something of what they wanted, but left him able to deflect a lot of the Green push. Maybe I'm wrong. But potential donors may well wonder whether political forces like the ones in play in this case give the right protection to their donations.

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This article was first published on Don Aitkin.



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About the Author

Don Aitkin has been an academic and vice-chancellor. His latest book, published in 2015, is Turning Point, the second novel in The Hogarth Trilogy.

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