Unhealthy Investments – why we need to talk about where the health community is putting its money
Rita Issa is from the UK, currently interning the Climate Change and Health department of the WHO. She has been active within Medsin-UK network, IFMSA national member organization from the United Kingdom. This blog entries is part of a follow-up on the ADP 2.8 Session held in Geneva last week (see Entry 1, Entry 2, and Entry 3).
Twenty years ago, the health community chose to divest from tobacco. The reasons are obvious: it would be counterproductive and unintuitive for an organization with the role of improving health to financially support an industry responsible for the single greatest cause of preventable deaths.
Today, the theme of divestment is back on the table. This time: fossil fuels.
To coincide with the Global ‘Fossil Free’ day on 13th February 2015, climate change negotiations in Geneva and the call from UN secretary general Ban Ki Moon “urging companies […] to reduce their investments in a fossil-fuel based economy to move to renewable sources of energy”, an event was held at the World Health Organisation with representatives from IFMSA Delegation to ADP 2.8 Session in attendance, to explore the theme of divesting from fossil fuels.
Anthropogenic climate change is so well recognized in the scientific literature that there is no need to discuss it here (though if in doubt, this video makes for good watching). More so for health professionals, the health related impacts of climate change are set to be at such a magnitude that they cannot be ignored. These encompass both direct and indirect effects of climate change. Direct health hazards include the burning and extraction fossil fuels (air pollution, occupational hazards), and health related effects of extreme weather, such as floods and heat waves. Indirect effects include those related to change in ecosystem, impacting food production and vector spread, and pressures on social systems – such as conflict and migration.
If we are to have any chance of mitigating the worst of such catastrophic climate change (and the subsequent associated health impacts), global warming needs to be kept below 2 degrees centigrade. In order to stand an 80% chance of doing so, we have a ‘carbon budget’ of 225 gigatonnes of carbon (GtC) – the amount of carbon we can afford to burn. To stand the same chance of keeping temperatures below 3 degrees, our carbon budget rises to 319 GtC. Currently known fossil fuel reserves amount to 762 GtC.
This imbalance between the carbon we have and the carbon we can afford to burn leads us to 2 possible scenarios:
Scenario 1: we continue to burn carbon at current rates, the fossil fuel industry continues searching for new fossil fuel reserves with increasing engagement in carbon heavy extraction such as with tar sands. This results in runaway global climate change with the health, social, geographical, ecological, political and economic impacts that will invariably follow. Though this scenario sounds terrifying (and frankly, it is), if we look to the markets and international climate change agreements, this is the way that we are headed.
Scenario 2: for any number of reasons outlined below, we are limited by how much carbon we can burn, thus standing a chance of mitigating the worst of climate change. Though this scenario is evidently preferable for health, polar bears, small island developing states etc., the fossil fuel industry is trying its hardest to make sure it doesn’t happen.
Any company’s valued is based on its assets – the products it has that it is able to sell. In the case of the fossil fuel industry, many of its assets (e.g. oil, gas or coal) are under the company’s ownership but aren’t physically in the company’s hands and haven’t yet been sold on the market. For example, ExxonMobil will have ownership of an oil field, but wouldn’t yet have extracted all the oil from it. Despite this, ExxonMobil’s share price would be based on the assumption that it will one day be able to sell all of that oil. This assumption is reflected in the current market value of fossil fuel companies.
However, for a number of reasons, ExxonMobil (or any other company) may one day not be able to sell its assets, making those assets ‘stranded’. ‘Stranded assets’ may happen for 4 broad reasons:
- Economic: In this scenario, extracting assets becomes more expensive than the price you can sell them for, thus not making it worth the extraction.
- Physical: Due to weather, geographical or geological reasons, it becomes too difficult to access assets under a company’s ownership.
- Technological: A super cheap and/or efficient technological advancement is made meaning that using fossil fuels doesn’t make sense.
- Regulatory: National or international agreements are drawn that legally limit the amount of fossil fuels that can be burnt.
If any of the above scenarios happens, the market will respond accordingly: no longer will the fossil fuel company be valued on its assets (as they are now inaccessible), and the company value will subsequently fall. Given the number of scenarios where this can happen, some have deemed that the fossil fuel industry has inflated value (known as the ‘carbon bubble’), which runs the risk of bursting with a sudden and simultaneous drop in fossil fuel companies’ value.
This is where the fossil fuel divestment campaign differs from its predecessors, and may relate to why this campaign has been the fastest growing divestment campaign in history. The arguments surrounding tobacco and arms divestment are largely moral; the financial reasons for doing either would be largely negligible. However for fossil fuels, alongside the moral argument about climate change and health is a financial one that says to investors: your stocks, bonds and shares in the fossil fuel industry are at risk of the carbon bubble – resulting in huge losses should the bubble burst.
The divestment campaign is calling for:
- Removal of stocks, bonds and shares from the top 200 publically listed fossil fuel companies over the space of 5 years, and;
- Redirecting investment to renewable energy projects.
The moral arguments for divestment (especially in the health industry) are clear: we cannot continue funding an industry that – though did result in huge advancements in technology, transport, agriculture and poverty reduction – has now become the biggest threat to human health in the 21st century. However, if the moral arguments aren’t enough, the financial facts are clear. Sustainable investment portfolios do as well as their fossil fuel comparators. Dr Jim Kim, president of the World Bank has stated, “Rethink fiduciary responsibility… It’s simple self-interest. Every company, investor, and bank that screens new and existing investments for climate risk is simply being pragmatic.” It makes both ethical and financial sense.
What does this mean for medical students worldwide? The first step is being aware of climate change, the health impacts and divestment as a valid mitigation tool. Secondly, the British Medical Association led the way by being the first medical association worldwide to divest from fossil fuels. This is alongside a landslide of universities choosing to divest. Where can you place your pressure? Universities and medical associations are a good place to start and where a vocal and committed student voice can make a true difference.
For any questions about IFMSA work on climate change and health, please contact Claudel P-Desrosiers (IFMSA Vice-President for External Affairs) at firstname.lastname@example.org and/or Skander Essafi (Director of Public Health) at email@example.com.