Johns Hopkins University took an important step this month with its decision to divest from certain coal producing companies, chiefly those providing coal for power plants. Burning coal is regarded as the single biggest contributor to climate change, but it is also associated with any number of adverse impacts on human health and well-being from ash dumps and acid rain to groundwater pollution and smog. Such a well-regarded institution of higher learning with its links to cutting-edge research and health care simply had no business supporting such a singularly destructive enterprise as thermal coal.
But there was also a more basic reason for divestment that may have set coal apart from any number of other, ethically suspect businesses from private prisons to same-day lending in the judgment of Hopkins’ board of trustees: Coal’s potential for future profits is lousy. Investing in coal isn’t just bad for the environment, for human health and for a university’s reputation, it’s probably not good for bottom line of a $3.8 billion endowment either. For all the talk from President Donald Trump about reviving the coal industry, deep-sixing EPA clean air regulations and walking out on the Paris climate change accords, coal isn’t destined for a renaissance any more than buggy whip manufacturers are in the age of Teslas. Coal isn’t the energy of tomorrow, it’s the energy of the 19th and 20th centuries.
As a political issue, talking up coal might make some sense as it is mined in more than half of the states and has taken an oversized importance among Trump fans who are suspicious of climate science but believe in the so-called “war on coal.” Yet take a gander at how Wall Street sees the coal industry; they know better. If the energy sector is going to stick with fossil fuels, it’s going to be in natural gas, not in coal, thanks in no small part to fracking, horizontal drilling technologies and less polluting emissions. That’s why U.S. coal production dropped to its lowest level last year since 1978 despite Mr. Trump’s election. Zacks Equity Research ranks coal at 193 of 258 industries — the bottom third. In the short-term, the Trump administration’s cheerleading may push up coal production, but in the long-term it’s what the president might call “a loser.”
How much of the Hopkins’ decision was because coal poses a “unique threat to public health and to the environment,” as Hopkins President Ronald J. Daniels wrote in a Tuesday message to students, faculty and staff, and how much was because the school has a “fiduciary obligation to ensure that our investments protect and support the education and research opportunities we seek to provide for our students and faculty”? That’s hard to say. Only twice before has the Hopkins board chosen to divest — in tobacco and in companies that profited from South African apartheid — and both were clearly motivated by social responsibility. This isn’t the first time climate change and supporting renewable energy has been made a priority for the school. The university is currently working toward a plan to reduce greenhouse gas emissions by 51 percent by 2025.
Still, Hopkins could have gone further. A student group was pushing for the board to divest from fossil fuel companies entirely, which certainly should have made a more profound social statement but would potentially have put endowment returns at risk. Say what you will about Exxon-Mobil, but the energy giant is still rated a “buy” or “hold” by most Wall Street analysts. That the energy sector has under-performed the market overall this year isn’t seen as a permanent condition. Divesting in it now would clearly have been a riskier choice and likely an ineffectual one.
Did Hopkins act in the public interest? Yes. Did it also act in the school’s interest? Absolutely — but it doesn’t make the choice any less notable, only more logical. There are a lot of other institutions in this state that ought to be having similar conversations about investments and the foolhardiness of trying to profit off businesses that by their very nature have a poor long-term outlook. Some might call that political correctness. It could just as easily be called enlightened self-interest.
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