Memorandum

TO: Janet Hopkins, CEO

Ralph Kramden, COO
FROM: Amanda Biernacki, Research Consultant
DATE: October 22, 2015
SUBJECT: BBI Research Status Report

Dear CEO Hopkins and COO Kramden,

Introduction

My purpose in writing to you is to obtain approval for the current progress of the report on the
economic effects of fossil fuel divestment. As you requested, I have developed a status report
containing a description of the project, the completed work, the remaining work, and the overall
progress.

Project Description

As you know, PWG managers have reported that group members have been insisting BBI
pension funds be divested from environmentally insensitive companies, and in some groups there
have been conflicts among the members. In hopes of coming to a reasonable company-wide
agreement on these issues, the CRC will hold a series of meetings with PWG members about the
controversial investments and, based on these meetings, come to a decision on divestment. In
order to ensure that the PWG members are educated about important divestment issues, formal
reports regarding divestment-related issues were requested to be written. The economic effects of
fossil fuel divestment was approved for one of these reports. The report will detail the
controversies surrounding whether fossil fuel divestment has positive or negative economic
effects. One side states that the negative economic costs for divestors, including loss of income,
outweigh the impact the divestors are trying to make on fossil fuel companies. However, others
believe that fossil fuels are old technologies that will prove to be poor long term investments as
cleaner energy sources gain popularity. The economic effects of fossil fuel divestment are
difficult to understand, but it is a relevant controversy that PWG members should be aware of.

Work Completed

The project has been progressing well. Research has been completed concerning the economic
effects and controversies surrounding fossil fuel divestment. The following annotated
bibliography provides a citation, summary, and description for each source that has been found.

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ANNOTATED BIBLIOGRAPHY

Source:
Brecha, R. (2015, February 24). Challenging Notions About the Negative Financial Impact of
Divestment. Retrieved October 21, 2015, from http://fossilfreeindexes.com/2015/02/24/
challenging-notions-about-the-negative-financial-impact-of-divestment/

Summary:
A recent report by Prof. Daniel Fischel calls into question the efficacy of institutional divestment
from fossil fuels, both as a tactic for combating climate change and as a prudent financial
strategy. But are the negative financial impacts of divestment really what Fischel claims? An
examination of the assumptions made in his report raises doubts. Divesting from fossil fuels can
seem like a symbolic act, a statement against fossil-fuel companies. But it is an act that can carry
with it the seeds of something much larger than that initial statement. Given the increasing risk of
stranded assets, divestment from fossil fuels can be viewed as a prudent, proactive measure taken
in the interest of protecting future economic returns.
(Brecha, 2015)

Analysis:
The article provides a pro-divestment response to economic claims that fossil fuel divestment is a
poor financial decision that does little to cause the change divestors hope it will. The information
provided in this journal is important because it will help explain the economic controversies
surrounding nuclear fusion. Brecht is directly attacking Fischels arguments and disagreeing with
his stance on fossil fuel divestment. The article touches upon some of the largest disagreements
surrounding this topic. This will provide the PWG members with a greater understanding of the
disagreements regarding fossil fuel divestments economic effects. This information will clearly
establish the economic controversies surrounding fossil fuel divestment for the PWG members.

Source:
Fossil Free MIT. (2015). Economics. Retrieved October 28, 2015, from http://www.
fossilfreemit.org/economics/

Summary:
Divestment is MITs only carbon-cutting instrument equal to the unequivocal and unparalleled
urgency of climate change. Divestment fulfills MITs moral imperative by putting an end to
unconscionable investments of up to $1 billion per year in the industry at the root of global
warming. Divestment diminishes the political influence of FF companies by stigmatizing their
untenable carbon pollution, their anti-climate action lobbying and their anti-science
disinformation campaigns. This will create political breathing room for meaningful climate
legislation. Divestment harnesses MITs most powerful asset its reputation to galvanize a
sense of generational mission, fostering a climate change movement unwavering in its demand
for bold political action. Divestment protects the long-term security of MITs endowment from a

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looming $20 trillion carbon bubble predicted by the London School of Economics, HSBC, and
Standard & Poors, to name a few.
(Fossil Free MIT, 2015)

Analysis:
This website is a wonderful source of information regarding reasons why fossil fuel divestment
is considered an economically responsible action by many people. It will provide the PWG
members with the perspective of activists who are placing time and effort into persuading large
institutions, such as MIT, to divest from fossil fuels.The economic concerns, including the
carbon bubble, discussed on the website will help explain why many do not believe fossil fuels
are a safe investment economically. Additionally, the concept of the carbon bubble can be
technical and may be difficult for those without basic economic knowledge to understand. If this
concept is explained further, it would help PWG members fully understand the complexity of the
fossil fuel divestment debate. The information provided by this website can be used to offer a
detailed explanation of one side of the fossil fuel divestment debate from an economic point of
view.

Source:
Dickinson, T. (2015). THE LOGIC OF DIVESTMENT. Rolling Stone, (1227), 31. Retrieved
October 21, 2015, from http://0-search.ebscohost.com.helin.uri.edu/login.aspx?direct=
true&db=f5h&AN=100425220&site=eds-live

Summary:
The article discusses the influence of pressure from climate-change activists and declining oil
prices due to increasing reserves on decisions made by oil companies and fossil-fuel investors.
Topics include the influence of lowering oil prices on expansion plans of fracking companies
such as North Dakota's Continental Resources, the carbon emission mitigation agreement made
between the U.S. and China, and the divestiture of fossil-fuel stocks by investors as part of a
Divest-Invest coalition. As climate-change activists pressure public institutions to dump their
fossil-fuel investments, it's becoming increasingly clear that the right thing to do is also the smart
thing to do.
(Dickinson, 2015)

Analysis:
This article can be used to better explain the recent financial concerns of companies divesting in
fossil fuel companies. Many investors are worried that fossil fuel companies may prove to be
poor long-term investments due to increasing regulation and decreasing prices. The information
provided regarding the concerns of investors regarding fossil fuel investment can be used to
present PWG members with an understanding of economic reasons for divestment. Investor
concerns may be difficult to understand if employees are not familiar with the economic
reasoning behind the possibility of fossil fuels becoming poor long-term investments. Non-
investors may be unfamiliar with the economic concepts behind these concerns. However, the

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information from this article can be used in the formal report to ensure that PWG members
understand these concerns.

Source:
Fischel, D. (2015, February 9). Fossil Fuel Divestment: A Costly and Ineffective Investment
Strategy. Retrieved October 21, 2015, from http://divestmentfacts.com/pdf/
Fischel_Report.pdf

Summary:
Should universities accede to activists demands and divest their endowments of fossil-fuel
related stocks? Proponents say that divestment can "stigmatize" the oil and gas industry, all while
costing institutions that adopt these policies almost nothing at all. But a groundbreaking study
just released by Prof. Daniel R. Fischel of the Univ. of Chicago exposes the mythology behind
these claims. The report finds that colleges and universities that choose to divest can collectively
expect to see billions of dollars evaporate from their endowment funds each year, all while being
forced to pay hundreds of millions in new management fees to comply.
(Fischel, 2015)

Analysis:
This report will provide information regarding the economic arguments against fossil fuel
divestment. It discusses specific economic effects of fossil fuel divestment on American colleges
and universities. The information provided will show the PWG members the most pressing
economic obstacles that worry fossil divestment opposers. The economic concepts and data
presented will help provide an even greater understanding of the complexity surrounding fossil
fuel divestment. Fischel, along with many others, believes that the economic data proves fossil
fuel divestment is a poor financial decision. Others, such as Brecha,view this data differently.
The final report can establish genuine controversy over the fossil fuel divestments economic
effects by comparing Fischels analysis to Brechas response. Because of the technical nature of
the data in this article, additional explanation would most likely be needed for PWG members to
understand the resulting controversies.

Source:
Ritchie, J., & Dowlatabadi, H. (2014). Understanding the shadow impacts of investment and
divestment decisions. Ecological Economics, 106132-140. doi:10.1016/j.ecolecon.
2014.07.005. Retrieved October 21, 2015, from http://0-search.ebscohost.com.
helin.uri.edu/login.aspx?direct=true&db=edselp&AN=S0921800914002079&site=eds-
live

Summary:
In recognition of the cumulative effects resulting from financial decisions, a growing number of
campaigns are advocating for the removal of investment funds from companies responsible for
high levels of carbon emissions. A systematic approach can aid in examining the social,
economic and environmental impacts that extend beyond political motivations to divest from
fossil fuel companies. We have adapted publicly available economic inputoutput life cycle

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assessment models (EIO-LCA) to develop a Shadow Impact Calculator (SIC) for examining the
potential environmental impacts of investment decisions. An investment portfolio's shadow
impacts represent the economic, social and environmental effects underlying an investor's
decision to place their funds in particular financial instruments. In this study, we focus on
greenhouse gas emissions to show which sectors of the United States economy have particularly
large or small carbon shadows and place those results in the context of volatility and earnings. To
demonstrate how SIC may be used, we examine the endowment investments of a Canadian
university in the context of divesting from fossil fuel companies. Our analysis suggests that large
pooled funds choosing to direct their investments away from heavy carbon emitters may have
less of an impact than would otherwise be expected.
(Ritchie, 2014)

Analysis:
This journal will greatly benefit the formal report. It details some of the most significant
economic data regarding fossil fuel divestment. One of the main controversies surrounding fossil
fuel divestment is whether or not the act has a greater negative economic effect on divisors than
on fossil fuel companies. This journal presents information, including statistics, charts, and
diagrams, detailing the economic effects of fossil fuel divestment. The equations and diagrams
used to explain the effects of fossil fuel divestment may be difficult for those without a technical
background to understand. However, with additional explanation, this information can be used in
the formal report to explain why fossil fuel divestment is controversial. It will help provide
context for why many are against fossil fuel divestment.

Work Remaining

As previously scheduled, I will meet with BBI to present the development of this topic on
November 3. A full outline of the report will be developed and submitted for your approval by
November 12. The final formal report will then be written and submitted on November 19.

Overall Progress

There have been no delays in the progress of the project. The research portion of the assignment
is complete. I now plan to begin preparing for my presentation to BBI. The development of this
project has followed the initial schedule, and the formal report is set to be complete on the
original date, November 19.

Conclusion

Again, I am hoping to receive your approval on the current progress of the report on the
economic effects of fossil fuel divestment.. At this point, the research for the report has been
completed. I still need to meet with BBI, develop an outline, and submit the formal report. The
project continues to follow the originally agreed upon timeline. I look forward to hearing from
you.

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