Health systems urged to divest fossil-fuel stocks as UK doctors act

A March editorial in BMJ, the British Medical Association's journal, said that the science of global warming is undeniable and that climate change is “the greatest threat to human health of the 21st century.”

The authors, who are physicians and public health advocates, urged healthcare organizations to sell their investment holdings in companies involved in the extraction and production of coal, oil and gas “completely and as quickly as possible.”

“Those who profess to care for the health of people perhaps have the greatest responsibility to act,” the BMJ authors wrote.

In June, the British Medical Association heeded that call and voted to transfer all its investments in fossil-fuel producers to renewable-energy companies. No other major healthcare organization in the world is known to have taken such an action.

“The vote represents a clear sentiment from the medical community that society needs to wean itself from its dependence on fossil fuel,” said Dr. David McCoy, a primary-care physician in London who co-authored the BMJ editorial.

Several U.S. colleges and universities have also announced their intent to shift their energy investment strategies away from the large fossil-fuel companies. That in turn is putting pressure on university-affiliated hospitals and academic medical centers. In addition, several religious organizations and churches have pledged to remove fossil fuels from investment portfolios. But faith-based healthcare organizations have not taken a position.

Some observers predict more healthcare organizations will move to align their investment practices with their mission of improving the health of their communities. “Over the next three to four months, we will start to see the first hospitals at least freeze or divest” assets from fossil-fuel companies, said Gary Cohen, president of not-for-profit Health Care Without Harm, which works with hospitals on environmental issues. “Because of healthcare's mission, they should not be investing in technology that actually contributes to the biggest public health crisis of our time.”

Cohen said his group is in discussions with several providers on the issue, but he could not disclose which organizations are considering divesting.

Representatives of the American Hospital Association, American Medical Association and Healthcare Financial Management Association all said their organizations do not track or have a position on fossil-fuel company divestment. The Catholic Health Association said it “supports socially responsible investing,” but takes its lead from the Interfaith Center on Corporate Responsibility, which has said divestment is only one approach to social and environmental investing.

One concern for hospitals in considering divesting from fossil-fuel producers is that such a move might draw uncomfortable attention to the fact that hospitals are among the heaviest users of carbon fuels in their communities, and many operate their own power plants.

“In terms of getting off fossil fuels altogether, that would take a huge investment,” said Dan Doyle, chairman of Grumman/Butkus Associates, an engineering firm in Evanston, Ill., that works with providers on energy audits. “And the feasibility of doing that, especially in some of the urban campuses, is not really realistic.”

Whether it's the right thing to do for patients and the planet, dumping the stocks of companies such as BP, ExxonMobil Corp., Peabody Energy Corp. and Royal Dutch Shell would hardly be an easy decision financially for healthcare providers. Energy stocks have been consistently solid performers. And investment income has helped hospital systems weather slumping patient volumes and reimbursement cuts.

But there is some precedent. If disinvesting in fossil-fuel companies gains momentum, it would be similar to the movement for healthcare providers and other institutional investors to pull out of tobacco stocks. The medical profession first had a public impact on tobacco use 50 years ago when U.S. Surgeon General Dr. Luther Terry warned that smoking caused lung cancer. Beth Israel Deaconess Medical Center in Boston and Yale-New Haven (Conn.) Hospital were among the first healthcare organizations in the early 1990s to divest from tobacco, saying it didn't fit with their values. Several other hospitals, including many in Maine, later followed suit.

The same argument is being made today for fossil fuels. Strong bodies of evidence, including the latest National Climate Assessment, show the extraction and burning of fossil fuels have led to extreme shifts in temperature and weather patterns, which has exacerbated public health problems such as heat stress, vector-borne diseases and water shortages. Pollution from fossil fuels has led to higher incidence of chronic health conditions such as asthma and chronic obstructive pulmonary disease.

In May, Stanford University said it will divest all endowment funds from coal companies. But the school's affiliated healthcare providers—Stanford Hospital & Clinics and Lucile Packard Children's Hospital—are legal corporations separate from Stanford. Hospital officials there didn't respond to requests for comment on whether the university's policy will apply to them.

At the University of Wisconsin at Madison, advocates have urged the school, its foundation and its affiliated healthcare system to adopt a divestment policy already approved by Dane County, where the university is located. UW Health, an entity that is independent from UW-Madison, declined to comment. But David Walsh, board chair of the UW Hospital and Clinics Authority, said the hospital is “open and transparent” to all suggestions, but fossil-fuel divestment hasn't become a priority for the organization yet.

Dr. Bruce Barrett, a family physician in the UW School of Medicine and Public Health, said divestment would be a morally and financially sound strategy for the university, foundation and health system. “I would be surprised if (divestment) doesn't become a big deal because of the huge cobenefits in terms of human health,” he said.

Many hospitals already are leaders in reducing their carbon footprint by making their facilities greener. Systems including Renton, Wash.-based Providence Health & Services, Kaiser Permanente and Gundersen Health System in La Crosse, Wis., have emphasized renewable energy and energy efficiency in their strategic planning. Many within the industry believe that goes in tandem with the divestment movement.

“If hospitals become leaders in renewable energy, that will create great momentum,” said Health Care Without Harm's Cohen. “They are a huge part of the economy, and they can drive the transition toward a low-carbon future.”

That future has begun to weigh more on the minds of faith-based shareholders, said Susana McDermott, a spokeswoman for the Interfaith Center on Corporate Responsibility. ICCR members—including Ascension Health, based in St. Louis; Advocate Health Care, based in Downers Grove, Ill.; and Catholic Health Initiatives, based in Englewood, Colo., among several others—evaluate a variety of investment strategies.

These include filtering out specific stocks—a step shy of full divestment—or asking companies to meet specific demands. “Clearly, in light of new climate data, fossil-fuel companies need to do more, and faster, to find and fund green energy solutions, and for this reason our company 'asks' are increasingly tougher,” she said.

Tom McDonagh, chief investment officer for Providence Health & Services, said investment decisions must be thoroughly evaluated on a case-by-case basis. He said new strategies on energy companies at Providence, a Roman Catholic-based system that doesn't invest in tobacco companies, would require extensive analysis with investment managers, board members and other executives. But McDonagh was noncommittal about the fossil-fuel divestment issue. “We try and balance all our investment selections with our core values as an organization and the mission of the organization,” he said.

The fossil-fuel industry, meanwhile, downplays the divestment movement. “The oil and natural gas industry is one of the few bright spots in our economic recovery … and these investments have outperformed most other investments,” said Zachary Cikanek, a spokesman for the American Petroleum Institute.

Selling stocks would be a misguided idea for hospitals, said Jason Hayes, associate director of the American Coal Council. “The divestment movement is ultimately self-defeating as a hospital's effort to divest only means (companies) are going out to find another purchaser for their stock,” he said. And if hospitals switched fully to renewable-energy sources such as wind or solar power, Hayes warned patients would be at risk if the wind stopped blowing or clouds blocked the sun. Coal, he said, provides hospitals “essential energy to keep their patients alive.”

Indeed, divesting energy stocks could mean at least short-term financial pain, as highly profitable energy companies have contributed to healthy stock returns. Stewart Glickman, an energy equity analyst with Standard & Poor's, said that stocks of the largest energy companies this year were up significantly more than the S&P 1500, which includes almost the entire market.

But while he is bullish on energy stocks in the short term, Glickman said over the past five years fossil-fuel companies have actually traded behind the booming market. The five-year compound annual growth rate for energy stocks was 13.3%, lagging the 15.2% rate for all stocks.

Data on how much hospitals have invested in the energy industry or other sectors are sparse, said Bill Jarvis, managing director at the Commonfund Institute, which works with not-for-profits on investment education and research. Energy stocks conceivably could constitute 1% to 2% of a health system's investment assets, and perhaps more depending on the mix of equities, he said.

According to Providence's 2013 financial statements, for example, the system held about $35 million in domestic energy securities, which made up less than 1% of its total cash and investments. That total did not include any energy holdings within mutual funds.

Regardless of how much healthcare organizations have invested, shedding energy stocks would send a strong leadership message that the U.S. needs to reduce carbon production and mitigate climate change as quickly as possible. “By divesting from fossil fuels and by making a loud noise about such a decision,” BMJ author McCoy said, “healthcare organizations can help send a signal to politicians and the wider community about the need to rapidly invest in and scale up other sources of energy, while also reducing overall energy consumption.”

Follow Bob Herman on Twitter: @MHbherman