Social Investing

A story from the daily broadcast of the Alaska Public Radio Network's "Alaska News Nightly" for 29 Jan 09
( http://media.aprn.org/2009/ann-20090129-02.mp3 ),
cites the introduction in the Alaska State House of Representatives of three similar bills to consider divestiture of Permanent and Retirement Funds "in foreign companies doing genocide-related business in Sudan". These would be companies providing military supplies and services to Sudan and companies that pay oil and mineral royalties to the Sudanese government, for example. Governor Sarah Palin, whose administration last year opposed a similar bill for being too broad, says now that "...investment in companies with ties to the repressive regime in Sudan is inconsistent with the moral and political values of the people of Alaska."

Present State of Alaska law, under the Prudent Investor Rule, forbids divestiture of assets for any reasons other than those which strive to maximize return on investment. In other words, Permanent and Retirement Fund investors cannot consider issues outside economic gain or loss. Permanent Fund Executive Director Mike Burns dismisses consideration of any other factors as "social investing" which "carries the risk" of "expanding non-financial goals" for the Fund.


The case is often made that corporate organizations dedicated to business should base their decisions exclusively upon financial considerations. No surprise there. Of course, not a few observers would question that this must be necessarily so. Any debate between the two positions is likely to be heated, but that is not the question to be addressed in this entry, nor are related matters pertaining to the private and public roles of large corporations and companies in a world where the effects of doing business globally impinges upon the lives of people in so many non-economic ways. Those issues would be grist for a different discussion than this one.

No, I wish to take the discussion in a different direction--toward the role of a state in managing the investment of its liquid assets--assuming we are going to continue to affirm a necessity for states, for governance in economic and social affairs, and the ownership of economic assets by states. The goals of governments are very different than those of businesses. This key insight begs for emphasis: The goals and purposes of government organizations are very different than those of business organizations. (This is why it makes almost no sense at all to hear a candidate for elective public office--often coming to politics from a business career of sufficient success to afford the candidate scope to seek a second career in politics--tell us he or she intends to "run the government like a business." This sort of thing sounds earnest and impressive, but fails to understand that governments are very distinct entities from businesses.)

Governments, by their very nature, are commissioned to concern themselves with the well-being of people. Looking beyond the relatively narrow question of economics, government decision-makers and planners must necessarily take into account a wide range of social, environmental and legal issues, pertaining to the most local to the national--and even international. Surprisingly to some, this wide geographical scope for thinking is not limited only to nation states, but often must enter the awareness of even the most local of governing bodies.

Governments, unlike businesses, must be more concerned with the effects of competition upon the less fortunate than with successfully prosecuting strategies for successful competition. Governments must provide for commonly accessible infrastructure available for use by businesses as well as people. Governments must consider the direct and indirect effects of business activity—externalization, transportation and communication bottlenecks, land use, waste disposal and the like. The “business” of government is NOT the business of business. Governments (at least wise and enviable ones) are (and ought to be) concerned with the wide-ranging and complex issues of peoples’ well-being rather than the narrow goal of profit.

Accordingly, it makes complete sense for a government to proactively consider the effects upon peoples’ well-being of its investments, even if to do so demands significant financial sacrifice. Certainly, when the consideration of non-financial goals results in a reduction in return on investment amounting to fractions of a percent, the case in favor of embracing what Permanent Fund Executive Director criticizes as “social investing” should be open and shut. (Having asserted this, I should hasten to point to the observation that each of the present bills supported by the Palin Administration are written to narrowly constrain the basis for Permanent and Retirement Fund divestiture, and that a former bill was not supported because it was construed to be too broad.)

During the discussion of the bills now before the Alaska State House, Democrat Les Gara of Anchorage said, “... we should draw the line at genocide.” (“Genocide” has been a designation attached to the activities of the Sudanese government by the UN and the US Congress, and affirmed by both Presidents Bush and Obama.) State of Alaska Revenue Commissioner Pat Galvin said, “... the State has a moral imperative to act.” Granting that there is at least one kind of action at which we are committed to “draw the line”, and against which we have a “moral imperative to act", the question naturally arises: having admitted the necessity for divestiture in concept, are there any other sorts of actions from which we might flinch?

I suggest there are. This may not be the moment to attempt a comprehensive list, but certainly any designation of actions worthy of divestiture would include actions on the parts of governments and corporate entities that seriously impinge upon the social and economic well-being of a region’s people. If nothing else, to understand this is to understand that the label “genocide” often comes late to a conflict between unequal opponents, and is often preceded by decisions and manufactured events, though falling somewhat short of the definition of overt genocide, nevertheless have profoundly negative (even deadly) consequences for the people involved. I am ashamed to admit that history tells us of instances when US corporations were instrumental to just these sorts of events.

Putting a “tight fence” around the “risk of expanding non-financial goals,” upon closer inspection, turns out to be the opposite of what a government should do, whether or not it seeks a place of prominence in world affairs.

(Some might argue that though the case for “social investing” can be made, people far away in Sudan shouldn't concern us here in Alaska—that “social investing” must necessarily strive to be local. Such a declaration--if sincere--of allegiance to locality in a world of increasing globalization is laudable. In a world where money rapidly flows from continent to continent in an eyeblink, though, it makes little sense to understand multi-billion-dollar fund investments and divestitures in terms of any particular locale. The locus of concern for those devoted to relocalization presently lies in other directions.)

Copyright © DHales.

Natural Gas Dilemma

Taken from: http://oilsandstruth.org/2030-proposed-pipelines , this map suggests just about when the Alaska's North Slope gas pipeline can be expected to be built (2030), and for whom the gas is already earmarked. This map suggests why there is not now, and will not be, any rush on the part of industry to build a North Slope natural gas pipeline sooner than the determined target date, and why the pipeline will run, once it is built, where industry wants it to run. By 2030, the Canadian arctic gas field will be in depletion, but the strip mining of Northern Alberta for its tar sands will have just started. (Natural gas is a necessary, if not particularly efficient, energy source for the extraction of a petroleum-like substance from bituminous sand.)

If all goes according to plan, only after the Canadian arctic gas is going or gone, will it be time to suck Alaska's gas dry as quickly as possible.

Some might suggest that a 54-inch mega-pipeline built according to the long term schedule of a particularly dirty and inefficient Canadian energy industry--an industry with no ties or obligations to Alaska's people or land--wouldn't be in Alaska's best interest. (Perhaps we can be thankful that the Yukon Flats or the Kuskokwim Valley isn't underlain by huge bituminous sand deposits.)

What would be in Alaska's interest? Despite the reluctance on the part of the current governor to look toward a more domestic use of Alaska's gas, there is real merit in the suggestion that Alaska might use some of its own invested wealth to build a small-diameter natural gas pipeline down the Dalton Highway right-of-way to Fairbanks and thence down the railbelt to Anchorage and the Kenai--in one swoop answering a big part of the energy needs for three-quarters of the State's population. (We can envision a future in which vehicles in the railbelt might see conversion to natural gas, and in which various means for the supply of natural gas might reach out to larger bush communities.)

Natural gas is a non-renewable resource, but as a fossil fuel, it burns as cleanly as any fossil fuel can, and can be made to burn very efficiently. As a transition fuel to a different energy future, natural gas is ideal. It would give Alaska time to develop other, renewable energy sources. Properly priced, it would allow Alaskans to make a smooth transition to the sort of "times ten" efficiency that will be required in a post-carbon future. A domestic source of natural gas would forestall the urgent move toward some of the crazier "renewable" energy schemes, like converting 4 million acres of boreal forest in the vicinity of Fairbanks to solid fuel electrical generation, as has been suggested by the current mayor of the Fairbanks North Star Borough. (Was this only a trial balloon? Who can say?) Assuring a reliable and steady supply of natural gas available to companies investing in "green" alternatives for which energy to power manufacturing processes is of concern (e.g. photovoltaic panels) would both provide high-quality jobs to Alaskans and project Alaska toward the cutting edge of the new energy economy--without putting the State on the inevitable "boom and bust" exploitation-and-depletion curve. (A reliable energy supply in a friendly investment environment would also attract green businesses of the kind not yet invented, but which will come with inevitable innovation.)

Here is the dilemma, though, found in the history of the Cook Inlet gas field close to Anchorage. What would have been a century-long supply of natural gas to Anchorage--a city built in large part from its ready access to inexpensive gas energy--has been nearly exhausted in twenty years of massive exploitation by the Agram Fertilizer manufacturing facility. The heady mix of a few ardently defended high-paying jobs, lots of gas, and immense profits to be made from selling high-demand chemical fertilizers on the world market made for a quick depletion of one of Alaska's key resource pools.

Under the current zeitgeist of "anything goes" capitalism (in which there seems to be no such thing as a bad profit, or any such thing as an unwise externality), it is hard to see how inefficient or dirty industries such as those which manufacture plastic feedstock and make fertilizer would not be given carte blanche to take and use up as much North Slope natural gas as possible, as quickly as possible. It is hard to see how the State of Alaska in its current political incarnation would go out of its way to say "no" to a wasteful and polluting 19th-century industrial model while at the same time saying "yes" to transition-to-green-energy 21st century industries.

Instead of cleverly figuring out how to let a relatively inexpensive, steady and reliable transitional energy supply allow Alaska to join in the effort to grow the green economy of the future, today's Alaska would inevitably instead take the easy and familiar path of the known and deplete the resource in decades (and do so in the worst possible way), instead of efficiently husbanding it for centuries.

For some of us, Alaska's land and water has been trashed quite enough, with little or no reason or gain. (For example not one of our "managed" fisheries can honestly be said not to fall on a depletion curve.) As bad as it will be, for the long term health of our northern land, and the people who will remain up here, come what may, perhaps allowing Canadian or other non-Alaskan energy companies to strip and ship our North Slope natural gas outside as quickly as possible is the best way: At least it won't be going to further foul the nest here, where we hope our distant descendants will still live, unto the seventy-times-seventh generation.

Copyright © DHales.