Category: Economics

Matters of money

University of Toronto divesting from fossil fuels

Checking through my routine administrative emails today, I was completely surprised to see a message from president Meric Gertler announcing that U of T will divest from fossil fuels:

The evidence of a climate crisis is now incontrovertible. The most recent report of the Intergovernmental Panel on Climate Change adds further urgency to the need for individuals, businesses, institutions and governments to act swiftly to respond to this global threat, using every tool available to them. World leaders will begin gathering in Glasgow at the end of this month for the COP26 meeting, where progress in the fight against climate change will be assessed and new strategies to avert a climate catastrophe will be considered.

As owners of financial assets such as endowments and pension funds, universities have both an economic imperative and a moral obligation to manage these assets in ways that encourage carbon emission-reducing behaviour in the wider economy. With the increasing financial risks associated with fossil fuel production – as well as those downstream economic activities that rely heavily on fossil fuels as their energy source – there is a strong motivation for universities to shift their financial capital away from carbon-intensive sectors and firms, and towards those businesses that are leveraging the shift to green energy and carbon-conserving technologies.

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First, UTAM will divest from investments in fossil fuel companies in the endowment fund beginning immediately. Within the next 12 months, it will divest from all direct investments in fossil fuel companies. For those investments made indirectly, typically through pooled and commingled vehicles managed by third-party fund managers, UTAM will divest from its investments in fossil fuel companies by no later than 2030, and sooner if possible.

Second, UTAM will commit to achieving net zero carbon emissions associated with the endowment portfolio by no later than 2050. Moreover, UTAM has recently joined the UN-convened Net-Zero Asset Owner Alliance, making the University of Toronto the first university in the world to join this group of institutional investors. Membership in the Alliance compels signatories to achieve progressively demanding targets every five years en route to net zero, ensuring achievement of this ambitious objective in a transparent and accountable way.

Third, UTAM will allocate 10 percent of the endowment portfolio to sustainable and low-carbon investments by 2025. Based on the current size of the endowment, this represents an initial commitment of $400 million to such investments.

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[I]n the last few years I have heard from many members of the U of T community who have urged me to deploy every means available to address the existential crisis we now face. None have been more eloquent or impassioned than our students, who have the most at stake. I want to thank them – and other members of our community – for their activism and commitment to this important cause. I would also like to acknowledge the important work of the President’s Advisory Committee on Divestment from Fossil Fuels, whose report marked a key milestone in the journey towards today’s announcement.

It will be fascinating to learn more about what prompted the decision. It certainly hasn’t been the result of a highly visible and escalated recent activist campaign. While the Toronto350.org campaign was ongoing, we would often remark that the most helpful thing for us would be if Harvard divested…

The campaign began on April 16th, 2013 when I went to the president’s office for information and ended up meeting with Tony Gray.

Disallowing rent changes between tenants in Ontario

Along with fellow NDP MPP Bhutila Karpoche, my former Member of the Provincial Parliament Jessica Bell is proposing a Rent Stabilization Act, which would stop landlords from raising rents between tenants. It would also establish a rent registry with the Landlord and Tenant Board.

If passed, the law would help rationalize the incentives faced by landlords, who at present can accept the ~2% per year rent increases set by the province with existing tenants or who can try to get rid of their tenants to reset the rent at a much higher level. Making it more profitable to cycle through tenants than to retain them also contributes to landlords wanting informal tenants rather than tenants on a formal lease, since only the former have protection from the Landlord and Tenant Board.

With the present provincial legislature comprised of 70 Progressive Conservatives under Doug Ford, 40 NDP MPPs, plus seven Liberals and some minor parties there isn’t a realistic hope of the proposal becoming law.

Workload, timelines, advisors, funding, pressure

A very good blog post on what to expect from a PhD program (and especially what the university itself won’t tell you): So You Want To Go To Grad School (in the Academic Humanities)?

Two paragraphs which are especially informative for people who don’t have recent personal experience in a PhD program:

The most important person in the process is your advisor, who is generally a senior member of the faculty in your department who shares your specialization. I struggle to find words to communicate how important this person will be during your graduate experience.. Graduate study at this level is effectively an apprenticeship system; the advisor is the master and the graduate student is the apprentice and so in theory at least the advisor is going to help guide the student through each stage of this process. To give a sense of the importance of this relationship, it is fairly common to talk about other academics’ advisors as forming a sort of ‘family tree’ (sometimes over multiple ‘generations’). Indeed, the German term for an advisor is a doktorvater, your ‘doctor-father’ (or doktormutter, of course) and this is in common use among English-language academics as well and the notion it suggests, that your advisor is a sort of third parent, isn’t so far from the truth.

If you are considering graduate school with an eye towards continuing in academia who you choose as your advisor will be very important: academia is a snooty, prestige conscious place and your advisor’s name and prestige will travel with you. But there’s more than that: your advisor, because they need to check off on every step of your journey and you will need their effusive letter of recommendation to pursue any kind of academic job has tremendous power over you as a graduate student. You, by contrast, have functionally no power in that relationship; you are reliant on the good graces of your advisor.

Related:

Canada’s election 2021 climate change platforms

UBC professor Kathryn Harrison was interviewed by the CBC’s Front Burner: Where the major parties stand on climate change

See also:

Canada’s two kinds of environment ministers

Based on my experience of Canadian environment ministers (whatever the department is called at a given time), there are essentially two types. The rarer type is the genuine environmentalist who thinks they can get things done through the compromises of government. They’re true believers on climate change but rarely have much support from cabinet or the prime minister because what they want to do is not actually popular. Set in the abstract, people want to keep the climate stable and protect the planet. Give them the choice between that and something concrete, however, and you have the recipe for delay and misdirection which has been ongoing in Canada for 30+ years. I would say Stéphane Dion and Catherine McKenna are the clearest example of the genuine environmentalist set, and demonstrate how people with those priorities get sidelined. When you have no natural allies in cabinet because most of the other departments are pro-fossil (industry, transport, finance, natural resources, etc) the constraints of cabinet solidarity put ministers of this type in the position of unsuccessfully demanding the bare minimum behind closed doors, before defending inadequate plans to the public.

The other type of Canadian environment minister is the public relations spinmaster whose behaviour does not demonstrate any sincere concern about climate change, but simply the need to manage it as a PR issue. This is a much easier approach to the job since you can always just say nice things, avoid hard decisions, and cut dirty deals in the background. I feel like John Baird, Jim Prentice, Peter Kent, and Jonathan Wilkinson fall in this category. My father recently collected a set of letters on climate change for Minister Wilkinson (mine is here) and the experience illustrates how Wilkinson is a PR man for a government which in practice largely serves the same interests as the Harper Conservatives, but who work to maintain a false public and media narrative that they are bold environmental champions.

Part of the problem, surely, is that politicians have a hopelessly distorted understanding of the scale against which they should be judged. They give themselves kudos for being better than some of their electoral competitors, rather than comparing the scale of the efforts they propose against the scale of what needs to be done. The consequences are that the future becomes more dire for everyone, and that Canada will have an infrastructure and economic base poorly matched to what success in a post-fossil world will require.

Forgone fossil fuels

Back in 2012, Justin Trudeau said that “there’s not a country in the world that would find 170 billion barrels of oil under the ground and leave them there.”

At an event in June organized by Bank of America, Saudi Energy Minister Prince Abdulaziz bin Salman supposedly said: “We are still going to be the last man standing, and every molecule of hydrocarbon will come out.”

Since avoiding catastrophic climate change is chiefly a problem of prompt global fossil fuel abolition, such sentiments are positively frightening. Trudeau’s cynicism may not be entirely justified, however, as there are examples of government choosing not to develop fossil energy, either out of innate concern about climate change or because they expect such industries to be in decline as the world decarbonizes.

For example, Greenland has banned oil exploration and Quebec’s government rejected a $14 billion LNG export project.

A few examples don’t make a trend, and enormous investments in fossil fuels continue to be made. At the same time, every noble example provides a case that can be raised with politicians who say action is impossible or that nobody will do it. If countries like Canada which have become rich on a high-carbon trajectory and which maintain excessively high per capita emissions continue to refuse to decarbonize we perpetuate a global suicide pact in which we all end up with ruin because each jurisdiction scrambled to pull in as much fossil cash as possible beforehand.

Canada submits new 2030 climate target

Canada is now promising the UN that it will cut greenhouse gas emissions to 40–45% below 2005 levels by 2030.

The government says emissions are already set to fall from 729 million tonnes (MT) in 2018 (the last year with final figures) to 468 MT by 2030.

Canada’s choice of a 2005 baseline sets it apart from the global standard of setting targets compared to 1990 emissions as required by the UNFCCC reporting guidelines, effectively forgiving 15 years in which bitumen sands output and Canadian GHG pollution rose substantially. Canada’s emissions rose from 600 MT to 747 MT between 1990 and 2005.

Related:

The insurance industry as a leverage point for fighting climate change

One of the revelations about fighting climate change that seems to have echoed broadly since 350.org started the fossil fuel divestment movement is the degree to which the industry can be suppressed by denying it access to financial services.

That includes denying it the ability to borrow from banks and institutional investors, who are increasingly concerned both about the reputational risk of supporting a world-wrecking industry and the financial risk of contributing to new fossil fuel projects which will need to be shut down to avoid worst-case climate change scenarios.

It also includes the insurance industry. To begin with, they face enormous financial risks from climate change impacts as diverse as rising sea levels, extreme storms, and wildfires. The concept of insurance is that the premiums are reasonable because things won’t go wrong for everyone at the same time; you can get affordable fire insurance, for instance, because in most cases the insurer can be confident that only a small fraction of insured properties will burn each year. That calculation changes when climate change coordinates risks for billions around the world, whether that’s coastal property at risk to rising seas and hurricanes or towns in wildfire zones that now face an existential risk every time there is a bad fire season. With those kinds of risks now evident, it’s unsurprising that the insurance industry is expressing concern and calling for action.

In addition to those insured against climate change risks, insurance is also necessary for fossil fuel project proponents. That leverage point is being made use of by anti-pipeline activists in B.C. who are pushing for insurers to refuse to cover the Trans Mountain pipeline:

Over the course of the week, Indigenous rights and climate activists from Vancouver to Kiribati to Sierra Leone called on Liberty Mutual, Chubb, AIG, W.R. Berkley, Lloyd’s of London, Starr, Stewart Specialty Risk Underwriting, and Marsh to publicly pledge to refrain from doing any future business with the project.

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Argo, one of the companies that currently insures Trans Mountain, recently confirmed it will not cover the pipeline or its expansion project, which would carry an extra 590,000 barrels of oil a day from the Alberta oilsands to British Columbia. Since then, two other insurance companies that had previously insured Trans Mountain but are not current insurers, Scor and Lancashire, have cut ties too.

No doubt this will lead to howls from pro-fossil entities, but in the long run blocking these projects has the promise of avoiding massive further investment in unusable energy.

The fossil fuel industry has been able to impose as much harm on the world as it has because there haven’t been mechanisms to make it care about the losses being suffered by others. If that freeloading dynamic changes, the world will have a better chance of avoiding climate catastrophe. Insurers can play an important role in driving the shift.