Ethical Consumption in the News: March 2017

It’s been a long hiatus, but ethical consumption in the news is back! Here are the top stories this month: (1) Ireland may be the first country to divest from fossil fuels; (2) Norway’s pension fund has foregone returns due to its socially responsible investment policies; (3-5) several universities are acting on fossil fuel divestment; (6) Berkeley takes aim at the US border wall; (7) Shell sells oil sands; (8) US activists call for boycotting Mexican shrimp; (9) a pro-BDS group is suing the British government; and (10) a Spanish retail chain passes MSC certification.

1. Ireland may go green

The Irish Parliament is considering whether to divest its 8 billion EUR sovereign wealth fund – the Ireland Strategic Investment Fund – of all fossil fuel holdings. If the bill (the Fossil Fuel Divestment Bill) passes, it would be the first country to fully divest from fossil fuels. Norway’s sovereign wealth fund has a responsible investment policy that includes coal divestment, as well as other ethical issues (for more on this click here; on fossil fuel divestment generally click here).

2. Norwegian Pension Fund’s ethical choices reduced returns by 1.1%

In related news, a recent estimate suggests that Norway’s Government Pension Fund Global (GPFG) has generated 1.1% less in equity returns between 2006 and 2016 as a result of excluding stocks on ethical grounds. Although the policy may still be worthwhile, this finding is important because it provides evidence a recent claim that ethical investing can be done without sacrificing financial returns. 

3. University of California divests additional $150 million from fossil fuels

The University of California has divested an additional $150 million in fossil fuel investment. In 2015 the University had divested $200 million from coal and oil sands investments. UC also divested from two companies that are building the Dakota Access Pipeline, as have other actors like the City of San Francisco and a Norwegian public sector employee union pension fund.

4. Columbia University divests from coal

Columbia University Trustees announced that the university will divest from companies that derive more than 35% of their revenue from the production of thermal coal.

5. First Canadian university divests from fossil fuels

The University of Laval became the first Canadian university to divest from fossil fuels. Fossil fuel divestment is gathering momentum on campuses around the world, but especially in Anglophone countries (for instance, Bristol University agreed to new fossil fuel divestment plans this month).

6. Berkeley divests from the US-Mexico border wall

The City of Berkeley, CA passed a resolution condemning the proposed US-Mexico border wall, and calling on the City to divest from companies involved in building it. The aim of the policy is to dissuade businesses from pursuing involvement in any stage of border wall construction. A similar bill has been introduced at the state level in California.

7. Shell sells out of the oil sands

Shell has sold most of its oil sands assets, $7.25 billion, to Canadian Natural Resources. There has been some debate regarding the motive of the sale: some argue that the primary rationale was price – the high cost of oil sands extraction coupled with low oil prices – or emissions – whether Shell sought to shed the high GHG emissions associated with oil sands extraction. Shell has been taking strides to improve its environmental reputation. Whichever interpretation is correct, there has been some concern about CNR’s safety record in light of the sale.

8. US activists call for a boycott of Mexican shrimp

Conservation groups are calling on US consumers and seafood companies to boycott Mexican shrimp in a bid to save a rare porpoise – the vaquita porpoise – that is on the verge of extinction. The boycott was called because Mexico’s ban on gillnet fishing in the vaquita’s habitat is set to expire and has been poorly enforced.

9. A Pro-BDS group is suing the British government

Last year the UK government issued a new procurement policy barring government agencies from implementing boycott policies. The policy was intended to be targeted at BDS, but could potentially apply to boycotts of different kinds. The policy wasn’t the only attack on BDS in 2016. Jewish Human Rights Watch (JHRW) had sued three local councils in England and Wales, each of which had passed resolutions to boycott goods produced on Israeli settlements in the West Bank. However, in summer 2016 the court ruled against JHRW, dismissing claims that such bans were discriminatory against Jews.

A group called the Palestine Solidarity Campaign (PSC) challenged the new UK Government policy in December 2016. It is “seeking judicial review of the changes to the rules governing Local Government Pensions Schemes (LGPS) that will prevent ethical decision making with regard to human rights abuses and the arms trade”, the group said in a December 2016 statement. This month the UK Government was unsuccessful in having the case dismissed, so it will go to a full trial this summer.

Whatever your position on BDS, one has to admit that the evolving use of legislation and the court system is an interesting development for political consumerism advocacy. Whether policies like the one in the UK pass legal muster will potentially shape the advocacy terrain for a variety of social and environmental issues. Amid rising anti-Semitism it is increasingly popular – or at least there is an arguably more pressing public policy rationale – for governments to take efforts to restrict BDS. However, these laws have consequences for consumer and investor activism of all types, and for freedom of expression more generally.

10. First retail distribution chain in Spain is MSC-certified

Eroski became the first Spanish retail distribution chain to pass a Marine Stewardship Council (MSC) chain of custody certification audit. MSC is the most well-recognized and respected sustainable fish ecolabel (for more on MSC click here).

Ethical Consumption in the News: June 13-20

This week’s top ethical consumption story is (1) New York Governor Cuomo’s decision to ban state government agencies from doing business with groups that support BDS. In climate change news: (2) several Aussie Catholic orders, following Pope Francis’ lead, will divest fully from fossil fuels; (3) a former SEC commissioner is arguing that ‘prudence’ in investment management should include managing climate-related risk; (4) Mark Carney praised Alberta’s climate change plan; and (5) Cambridge and NYU will not go fossil free. Also this week: (6) India’s mandatory corporate social responsibility law was amended to include sports; (7) the South Korean Oxy boycott leads to layoffs; and (8) can big data end boycotts?

1. Boycotting a boycott: NY won’t do business with BDS supporters

New York Governor, Andrew Cuomo, has signed an executive order directing state agencies not to do business with organizations that support the Boycott, Divest, and Sanctions (BDS) movement. BDS boycotts Israeli companies for human rights reasons. Cuomo’s decision has been fiercely opposed by civil liberties organizations, some of which claim that the order constitutes “21st-century McCarthyism” and violates the First Amendment.

While alarming in this writer’s view, it is important to note that Cuomo’s decision is not without precedent. In February 2016 the UK issued a new procurement policy barring public bodies from undertaking procurement boycotts unless the UK Government has put in place formal legal sanctions. Although targeted at BDS the procurement policy covers all boycotts. Last year BDS was ruled hate speech in France.

In May a law barring the Government of Ontario from doing business with BDS-supporters was proposed as a private member’s bill in that province. Although the bill failed, it demonstrates increasing hostility to BDS amongst government bodies in Canada. For instance, in February the Government of Canada passed a motion formally condemning BDS. And you may recall the political scuffle from May 2015 when it was rumored that then-Public Safety Minister Steven Blaney was prepared to direct the Ministry to apply hate crime laws against groups promoting the BDS movement. These rumors prompted an onslaught of public pressure. While Minister Blaney unequivocally denied the rumors, calling them “inaccurate and ridiculous”, moves to ban BDS in Canada and elsewhere serve as a reminder that the freedom of boycott movements is not a foregone conclusion, and that ongoing efforts will be needed to preserve the space for consumers to act as moral agents.

2. Aussie Catholic orders, following Pope Francis’ lead, divest fully from fossil fuels

Four Australian Catholic orders will divest completely from fossil fuels. The decision has been interpreted as a response the papal encyclical on the environment that Pope Francis released in 2015, which called for “swift and unified action” to protect the environment and combat climate change.

The move accompanies an open letter from multi-faith religious leaders calling on the Government of Australia to protect the Great Barrier Reef and transition to a low carbon economy immediately. Faith organizations, notably the United Church, have been significant actors in the fossil-free movement; however, this recent announcement is unprecedented for the Catholic Church.

3. ‘Prudence’ in investment management should include managing climate-related risk, former SEC commissioner argues

Bevis Longstreth, a former commissioner of the SEC (the US securities regulator) has written a proposal that would potentially open the floodgates to further divestment from fossil fuel producing companies. Fossil fuel divestment is a movement in which asset holders pledge not to invest in companies which produce fossil fuels, or some variationon that general theme. The movement now encompasses at least $2.6 trillion in assets, following a fifty-fold increase in the three months leading up to the Paris climate summit.

Longstreth’s proposal discusses how the duty of prudence, which governs the investment of funds held by non-profit corporations and some other institutions in the US, should be exercised in light of climate change risks. This duty has become an obstacle for some organizations that wish to engage in socially responsible investment, which can be riskier and typically brings in a lower return on investment, but are bound by an obligation to preserve the endowment. The proposal argues for a legal reinterpretation of prudent management such that it takes into account climate-related risks.

4. Mark Carney praises Alberta’s climate change plan

Bank of England Governor Mark Carney praised Alberta’s climate change plan while in Edmonton to speak at a University of Alberta convocation ceremony. Mark Carney, also the former Governor of the Bank of Canada, has commanded attention recently by calling for greater attentiveness to the financial risks of the ‘carbon bubble’.

5. Campus divestment news: Cambridge, NYU will not go fossil free

Cambridge University will not divest its £5.9 billion endowment from fossil fuels, nor will NYU.

6. India’s mandatory corporate social responsibility law amended to include sports

The Indian Companies Act – a law passed in India in 2014 that requires companies to use two percent of profits for corporate social responsibility (CSR) activities – has been amended to allow the use of CSR funds for sports, including sports infrastructure.

7. Oxy boycott leads to layoffs

“Oxy out”, a South Korean consumer boycott of Oxy Reckitt Benckiser, prompted by lung damage deaths connected to the company’s humidifier disinfectants, has led to mass layoffs by the company. The company’s sales have dropped considerably since the boycott was announced.

8. Big data to end retail boycotts?

A recent article heralded Qloo for its potential to end the retail boycott. Qloo, which claims to have “mapped the [consumer] taste genome”, uses big data to analyze consumer preferences, which they can then use to shape business decisions. Specifically, Qloo can identify cultural sensitivities so that businesses are able to avoid issues that might potentially prompt consumer boycotts – for example, Target’s laudable transgender inclusive bathroom policy.  

Ethical Consumption in the News: April 18-24

This week featured five notable ethical consumption news stories: 175 states signed the Paris Agreement; Alberta released details on its carbon levy; a London mayoral candidate endorsed fossil fuel divestment; campuses are protesting in favor of fossil fuel divestment; and Dalhousie’s students’ union backed BDS. 

1. World Leaders Sign Paris Agreement at UN on Earth Day

On Friday government representatives of 175 countries signed the Paris Agreement, setting a new record for the most signatories to an international agreement. The Agreement will enter into force when countries representing at least 55% of total greenhouse gas emissions and 55% of the population ratify the agreement (passing a domestic law implementing the treaty). Canada plans to ratify the Paris Agreement this year, as does France, Mexico, and Australia.

2. Alberta to Set Carbon Price at $20/tonne in 2017

Alberta’s Climate Leadership Plan, which will launch at the beginning of 2017, is to include a carbon levy set at $20/tonne, rising to $30/tonne in 2018. The Government expects that the program will garner $9.6 billion in revenue, which it plans to reinvest in economic diversification and supports to households, SMEs, and vulnerable communities. The opposing Wildrose Party has characterized the carbon pricing scheme as a cash grab.

Also on Albertan climate policy, a report released on Earth Day by Greenpeace, the Alberta Green Economy Network, and Gridworks Energy Group estimates that the green economy will create 145 000 jobs in the province.

3. The ‘Carbon Bubble’ Prompts U.K. Conservative Mayoral Candidate to Back Fossil Fuel Divestment

Zac Goldsmith, Conservative candidate in London’s mayoral race, has said that, if elected, he will divest that city’s pension fund from oil, gas, and coal. Goldsmith plans to achieve fossil fuel divestment by appointing pro-divestment members to the fund’s board. Perhaps more interestingly, Goldsmith linked fossil fuel divestment to the risk of a ‘carbon bubble’ – a financial theory that has been advocated for recently by Bank of England Governor Mark Carney. The carbon bubble points to systemic risks posed by the ‘unburnable carbon’ thesis (the notion that some fossil fuels will by necessity be left in the ground), which implies that coal, gas, and oil assets are overvalued.

4. Agitations for Fossil Fuel Divestment on Campuses Resulting in Socially Responsible Investment Policies, Disappointing Some

Columbia University students organized a sleep-out to protest their University’s investment in fossil fuel companies. This follows a decision in November by the University’s Advisory Committee on Socially Responsible Investing that rejected a proposal for fossil fuel divestment, instead recommending targeted divestment. The protests at Columbia are emblematic of unfolding socially responsible investment politics in which normative calls for divestment are responded to with less exclusionary policies that draw on a mix of normative and financial arguments. This is in part because member- and mission-based organizations have fiduciary duties that render normative divestment challenging. Steps along these lines have recently been taken at the University of Toronto and Boston University. Additionally, Yale University divested $10 million in coal and tar sands investments, arguing that such investments will not be profitable if carbon is priced effectively. Of course, other institutions like Syracuse University have divested more categorically from fossil fuel extracting companies. In June the University of Massachusetts may follow Syracuse’s example. Still others, such as Stanford University, have adopted exclusionary investment policies but against coal producers only.

Also in campus fossil fuel divestment, Australian university students held a “Flood the Campus” campaign, undertaking protest actions at several major universities there.

5. Dalhousie SU Backs BDS

Dalhousie’s student union has voted to divest from Israeli companies that they argue are complicit in human rights abuses. 

Bill Gates: Fossil Fuel Divestment a False Solution; Humanity Should Innovate its Way Out of Climate Change

The Atlantic recently published an article interviewing Bill Gates, who is arguing for a dramatic increase in investment to innovate for fossil free energy. 

Bill Gates wants innovation to drive humanity's response to climate change through a big investment push for technological innovation to arrive at a carbon-free energy source. Specifically, Gates wants this push to begin with government-funded R&D, which would then be followed up by spin-off investment from private actors that can afford to take big risks. He called on the U.S. government to triple its budget for energy research to $18 billion USD annually. 

Gates notes that current levels of investment in clean energy are nowhere near where they need  to be in order to avoid the disastrous consequences of climate change. The reason for this, he argues, is that private sector R&D for clean energy is too low because, frankly, there is no fortune to be made by investing in fossil fuel innovation: "the incentive to invest is quite limited, because unlike digital products - where you get very rapid adoption and so, within the period that your trade secret stays secret or your patent gives you a 20-year exclusive, you can reap incredible returns - almost everything that's been invented in energy was invented more than 20 years before it got scaled usage." Gates acknowledges that the government doesn't always pick the right 'winners' but notes that it is no worse at this than the private sector: "How many companies do venture capitalists invest in that go poorly? By far most of them." 

Gates argues that strategies like divestment promote false solutions and are counterproductive -because the only viable way to go off fossil fuels is through a real alternative. Divestment campaigners have since reacted against the criticism. For example, Tim Ratcliffe at 350.org argued that divestment was a necessary step to weaken the political power of the fossil fuel industry, and as such was an important prerequisite to moving forward on climate action.

Norway Divests from Destructive Palm Oil Activities in Rainforests

Norway has announced that its sovereign wealth fund will add four large Asian companies to its list of excluded companies - companies in which it will not invest - for the damage that their palm oil activities cause to tropical rainforests. The country's sovereign wealth fund is the world's largest (worth around $1 trillion USD) and controls 1.3% of all stocks worldwide. It is managed by over 50 managers and invests primarily in Europe, North America, and Asia and Oceania. Specifically, the Norwegian sovereign wealth fund will no longer invest in Posco (produces steel), Daewoo International (a subsidiary of Posco), Genting (casinos and resorts), and IJM (construction, palm oil plantations, infrastructure, property development/management). 

This decision was made by Norges Bank (the Norwegian Central Bank) on the recommendation of the Council of Ethics (CoE), appointed by the Ministry of Finance. The Council of Ethics makes recommendations based on a set of Guidelines for Observation and Exclusion of Companies from the Government Pension Fund Global, which was adopted by the Ministry of Finance in 2014. The four companies above have been added to a list of over 50 other companies that are to be excluded from investment. Norway has also divested from companies for their involvement in: anti-personnel landmines, the production of cluster munitions, the production of nuclear arms, the production of tobacco, serious or systematic human rights violations, severe environmental damages, violations of the rights of individuals in situations of war, and "other particularly serious violations of fundamental ethical norms". Notably, at least two Canadian extractive companies are on Norway's list of excluded companies: Potash Corporation of Saskatchewan (added 6 December 2011 for violations of "fundamental ethical norms") and Barrick Gold Corp. (added 30 November 2008 for severe environmental damages). 

This recent decision to divest is based on warnings issued by the CoE. Norway's sovereign wealth fund previously had almost $300 million USD in investments in these four companies. 

• Posco and Daewoo: CoE warning issued over the conversion of tropical forest into palm oil plantations in West Papua, Indonesia. Posco has a controlling interest (over 60%) in Daewoo and Daewoo, in turn, owns 85% of the Indonesian plantation company, PT BIA, that is converting rainforest to palm oil plantations. Plantation development began in 2012 and is expected to be finalized in 2018. The Norwegian sovereign wealth fund owned 0.9% of Posco (worth $198 million USD at the end of 2014) and 0.3% of Daewoo ($9 million USD).
• Genting: CoE warning issued for the development of palm oil plantations in Indonesia. The Norwegian sovereign wealth fund owned 0.4% of Genting ($41 million USD).
• IJM: CoE warning issued regarding the development of palm oil plantations in Indonesia by IJM's subsidiary, IJM Plantations. The Norwegian sovereign wealth fund owned 1.6% of IJM ($46 million USD).