Why the ‘Do the Math’ tour doesn’t add up

Why the ‘Do the Math’ tour doesn’t add up

Bill McKibben’s Do the Math tour, while not (yet) getting much mainstream media notice, has become a catalyst for raising significant awareness about the “unburnable carbon” question, and has brought some interesting energy to university campuses, where students can now start to take charge of their future.

Kudos to 350.org for raising much-needed awareness to the problem we have identified within the Carbon Tracker Initiative, and to Bill for his landmark Rolling Stone piece on the subject, but I also have some concerns about aspects of the 350.org approach; more on that in a minute.

This Carbon Tracker Initiative, where I’ve been one of the founding directors, has determined that we can burn only about 20 percent more of the coal, oil and natural gas still in the ground and remain within a safe degree of global temperature increase. Solutions to this will not be easy, but it is essential to get more people aware that the implications of business as usual will likely be catastrophic. Even if we are off by 50 percent, there are major consequences for investors if and when we try and deal with this question as well.

Hurricane Sandy is a clear, sharp sign of the sort of future we may have in store, with increasingly violent weather causing ruin and chaos, both personal and financial. The financial crisis of 2008 is also worth mentioning, for this is an example of free market capitalism run wild, without adequate protections. Without intervention, the crisis likely would have brought the world’s financial system to its knees.

If, like me, you favor capitalism as an economic system, then we must find a way to factor in sustainability for that system to operate most efficiently. This would bring maximum benefit to all stakeholders, including those who hold equity portfolios.

What we need now are pathways forward. Cara Pike of Climate Access recently wrote a wonderful piece on the ways forward we need to consider, and it is well worth a read. This is exactly the line of thinking that has led me to want to see taught in all business schools, especially the ones sending future leaders to Wall Street as well as the largest corporations, a course simply called “The Implications of Business as Usual."

We can no longer tolerate students emerging from leading business schools without this perspective. We need to start doing real future scenario work -- hence my new course at Columbia University’s Earth Institute, to be entitled “Scenarios for A Sustainable World,” starting in early 2013. (More information here.)

The premise is to explore with students the three choice sets we have:

  1. Ignore the signs, and continue on with business as usual, and explore the Implications;
  2. Attempt incremental change, and see if that is enough. Part of this requires identifying what is “incremental” versus “meaningful” change, and if the former is not enough, then:
  3. Examine radical transformation and its implications for investment portfolios. Can portfolios, rather than ultimately being ruined by future sustainability trends, become part of the solution? If so, what do such portfolios look like? None of us have concrete answers, but we need to start having this conversation in earnest and at scale.  Jeremy Grantham’s latest quarterly letter (a must read - download this at www.gmo.com) suggests he’ll have thoughts for investors next time possibly.

Back to McKibben and his tour. Asking universities to divest from fossil fuels is an interesting angle to take to the subject.

Public companies rely on a flow of capital, and cutting off a few endowments here and there might get some notice. But what about companies in the oil services sector, such as drillers and transporters: Are they off the hook? How about companies that use oil and gas? Should we divest from them as well?

What if we suggested owning oil and gas companies could make sense, but that we do practical, in-depth real risk assessments and establish ratings schemes that take those risks into account, and allow portfolios to file their own integrated reports on risk? What about looking for opportunity? Do we really know how much of an environmental savings best practice natural gas could be versus oil and coal -- and if not, why haven’t we done this homework?  

It is time for practical, well-thought-through solutions that work for all stakeholders. And so it's a concern when 350.org points website visitors wondering ‘How can I divest my own money from fossil fuel companies?’ to this list of socially responsible mutual funds -- but with a caveat: “While not all of the funds there are fossil-fuel free, they are all moving that direction.”

I did some research, and it turns out this claim is patently false. Almost none of the listed funds are divested from fossil fuels. (Happy to share my research with anyone interested.) And they certainly are not moving in that direction, statements to that effect or otherwise.

And so we take out the megaphone, and suggest correctly that there is a problem that we all need to recognize, yet refuse to see that no one person or company is at fault here. Instead, there is a severe systemic problem, one that requires really serious conversations, scenario analysis and consideration.

Let’s stop with the flag-waving and finger-pointing, roll up our sleeves and figure out what we really should be doing.

Photo of student in front of blackboard provided by dedek via Shutterstock.