Anderson professor Ivo Welch on fossil fuel divestment

The original version of this article contained an error and has been changed. See the bottom of the article for more information.

The University of California plans to create a task force to investigate the possibility of divesting from companies in the fossil fuel industry. The task force formed after numerous student protests across the UC called for fossil fuel divestment.

Several other universities, such as Pitzer College and Stanford University, recently decided to divest from fossil fuel companies.

Ivo Welch, a professor at the UCLA Anderson School of Management, wrote an op-ed article in the New York Times this month titled “Why Divestment Fails.”

In his article, Welch argued that divestment is not an effective tool, writing that individual divestments “have never succeeded in getting companies or countries to change.”

The Daily Bruin spoke to Welch last week about his stance on fossil fuel divestment.

Daily Bruin: In your op-ed, you talked about why fossil fuel divestment would be an ineffective tool. Can you elaborate on that?

Ivo Welch: I have done research earlier about the divestment effort from South Africa. … Unfortunately, (divestment) didn’t seem to have much of an economic effect.

It may have had a moral effect, but that one, I can’t measure.

My point was not that I particularly like (fossil fuel). On the contrary, I probably hate it just as much as the people who want to divest. It’s just that I fear that the way (proponents of divestment) want to go about it is completely ineffective. I would much rather see them focus their energy and ideas on things … that are also far more effective.

DB: Can divestment be an effective tool for educating people on issues like climate change?

IW: That may well be true. Neither I nor (proponents of divestment) are well equipped to judge it. I hope they are right, but I am more pessimistic than they are. On some level, divestment is relatively harmless. It doesn’t do much good and it doesn’t do much harm. I hope I will be proven wrong and it will make a dent, especially in the usage of coal. I hope my critics are right. It’s just that I fear that they are not.

DB: Is investing in coal economically ineffective, as some advocates of fossil fuel divestment have said?

IW: That’s simply not true. Prices and the market are fairly efficient. (Stock prices) reflect the value of the cash … these fuel companies will bring. It won’t hurt us a great deal to leave (coal companies) but it’s also not a bad investment. Coal is as good a investment as thousands of other stocks are.

DB: What do you think about some divestment supports’ suggestion to have the University take money from its investments in fossil fuel companies and put it into clean energy?

IW: The people that run our endowment have the fiduciary responsibility to the people who donate to the University to invest in things that they deem are the best for the endowment. If they violate that, they are legally liable and they are morally on very, very conflicted terms. They have to decide if clean energy investment is a good investment or not.

DB: Is controlling the demand for fossil fuel more effective than divestment?

IW: Fossil fuel companies are not going to listen to divestment. The only thing that is going to matter is if fossil fuel is going to get more expensive than the alternatives. We want to bankrupt them, but the way to bankrupt them is to provide alternatives that are cheaper. It’s not by saying “we are going to sell your share in the stock market” where, five nanoseconds later, it will be purchased by somebody else. We need to make it less profitable for (companies) to burn coal and more profitable (for using) alternatives. That’s the only way to go.

Compiled by Jeong Park, Bruin contributor.

Correction: Welch said University officials have a fiduciary responsibility to those who donate to the UC to invest in things they believe are best for the endowment.