Until now one of the most famous industrial names in American history has been synonymous with oil. Now the fund set up by the sons of the highly controversial industrial tycoon is selling its fossil-fuel interests to invest in clean-energy – a movement that is also growing in Britain. As an epoch-making change, it is in its infancy. But Rockefeller knew how to pick long-term winners. Jon Herbert investigates.
A handful of names are associated with the titanic industrial revolution of the nineteenth and twentieth centuries. John D Rockefeller is one of them. From humble origins he built a controversial US oil monopoly that eventually paid for a wave of philanthropy that continues today.
The ethos of the foundation set up by Rockefeller is “to promote the well-being of mankind throughout the world”. His successors are interpreting that in a modern context.
Winning the Rockefeller name recently has been a coup for Divest-Invest Philanthropy which is gaining momentum and gathering commitments from funds, foundations, universities and pension funds. Its aim is to show high-level leadership in forgoing the safe income that comes from fossil-fuels, and principally oil, in favour of investing actively in long-term revenues from ‘clean energy’.
Several UK universities, including Glasgow and possibly Edinburgh, are also looking to dispose of their high-carbon investments in favour of a greener future and urging others to follow.
But the message being sent to business by big names such as Rockefeller is that investing in renewable technology, solutions, products and services is now a mainstream commercial decision.
What’s in a name?
At this stage, the influence being created by Divest-Invest and kindred movements is too small to upset the thick skins of well-established markets. However, the aim is to prick consciences in the run up to the November 2015 United Nations Climate Change Conference, COP21 or CMP11, in Paris.
A commonly-held view is that the global climate process has stalled because nations don’t really want to make the deep changes that are needed to cope with climate change. Divest-Invest hopes to be the grain of sand in the oyster that produces the pearl of reasoned debate.
The significance of having a name like Rockefeller on-board is the notion that entrepreneurship and industrial-savvy run in the blood and can be trusted. In the same way that John D Rockefeller began as a paraffin lamp oil supplier and went on to found Standard the Oil Company of Ohio, will his name now be associated with a successful twenty-first century energy revolution? The activities of Standard Oil were curbed by the US anti-trust laws; today’s sustainable business mores have moved on. But Divest-Invest hopes to invoke the positive legacy power of the name.
Changing of the guard
Divest-Invest Philanthropy was set up earlier this year as a platform for key institutions to leave behind fossils fuel investments and see the value of reinvesting in new energy resources. If follows a trend started in academia which has seen Harvard and Yale reconsider their investment stance.
At the core of their argument is the dichotomy that many universities actively support climate change research while depending upon income streams from traditional fossil-fuel market investments. Their true role should be to ‘mitigate the substantial risks presented by climate change and the carbon bubble’ says Divest-Invest.
Fiduciary duties mean that future financial returns are important. However, recognising that climate change affects the global economy is even more important if investors want to profit on their assets in the long-term, says the organisation. The logic is that change is right and responsible.
The case for green energy
Conversely, foundations such as universities are also on the cutting-edge of change, says Divest-Invest. They have the resources and scope to build a more ‘sustainable, equitable and clean energy economy’. By focusing on climate solutions and the need for clean tech investments, foundations are key to making the $1 trillion investment needed for a global energy transition, it noted. They are the forerunners of change.
The ethos is that despite their apparent size – foundations are a pinprick on the hide of modern markets – disposing of carbon assets is an important step on the road towards new regulations and the introduction of ‘disruptive’ technologies that will replace the status quo sooner rather than later when economic and environmental realities click in.
Comparisons have been made to the financial disinvestments that brought down the apartheid South African economy.
The Rockefeller Brothers Fund, founded in 1940, has already pulled out of coal and tar sand investments and is preparing to move ‘soberly, but with real commitment’ out of oil.
However, there is always a ‘but’.
The ‘but’ here is that the fund sees climatic prudence in retaining its investments in natural gas as a low-carbon interim, including investments in fracking.
Scotland takes a lead
Glasgow University is the UK’s first university to adopt a pro-renewables stance. Over the next decade, it will dispose of some £18 million of fossil-based assets – a decision taken following rallies and protests by more than 1,300 students.
A spokesperson for the university’s governing body explained that, “The university recognises the devastating impact that climate change may have on our planet and the need for the world to reduce its dependence on fossil fuels”.
He added, “Over the coming years we will steadily reduce our investment in the fossil fuel extraction industry while also taking steps to reduce our carbon consumption”. Hydrocarbons comprise some 4% of the university’s total endowment. However, there will have to be reassurances that the financial impact for the university is acceptable.
Earlier in the summer, 59 academics at the University of Oxford – including former chief scientific adviser to the Government, Lord Professor Robert May – signed an open letter as part of the Fossil Free campaign urging the institution not to hold investments in fossil fuel companies. Its current endowment tied to fossil fuels is valued at £3.8 billion.
The university described the position as ‘complex and multifaceted’ and called for the ‘collection of evidence and opinions and time for reflection and informed debate’. The University of Edinburgh is understood to be looking at the issue carefully too.
Lib Dems vote against coal
Meanwhile, the Liberal Democrats have voted to close down coal-fired power stations within a decade if they form part of the next government after May 2015.
Lib Dem Energy and Climate Change secretary, Ed Davey, has accused the Conservatives of wanting to ‘frack every square mile of Britain’, but added that controlled shale gas exploration was important given the forecast fall in North Sea oil and gas output. But coal is the ‘real fossil fuel enemy’ and ‘climate destroyer’, he says.
This would mean that the UK remains reliant on gas as ‘a bridge to a zero fossil fuel future at least for the next two or three decades’. He further added, “I would far rather use Britain’s gas than Putin’s gas or even Middle east gas.” Security, tough UK environmental regulations and no need to ship gas cargos around the world are key reasons.
A man of his time
Before he died in 1937, John Davison Rockefeller built an empire that included 20,000 US oil wells, 4,000 miles of pipelines and employed more than 100,000 people. In the 1880s, Pennsylvania produced 85% of the world’s crude, with Russian and Asian oil just beginning to reach the market. In less than four months in 1872, Standard Oil absorbed 22 of its 26 Cleveland competitors and its founder was accused of unacceptable business practices in cahoots with railway companies and others to build his monopoly position. The New York World in 1880 complained about the “most cruel, impudent, pitiless and grasping monopoly that ever fastened upon a country”.
However, he also poured more than half a billion dollars into educational, religious and scientific causes and funded the establishment of the University of Chicago.
He instigated the Rockefeller Foundation too which is working today on ‘building greater resilience against unpreventable shocks’ following the principle that, according to its present president, ‘we can’t predict everything or prevent it’ but we can ‘learn to absorb those shocks and rebound more quickly’.
The current president of the Rockefeller Brothers Fund, Stephen Hintz, added recently, “We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”
Rockefeller’s name lives on.
Published by Croner-I in November 2014