Originally published 13 November 2012. As relevant today as it was then. Your questions are welcome.
On the 5th of November 2012, the Unity College Board of Trustees voted unanimously to divest our endowment from fossil fuel industries. While one might think that this was logical for a college where Sustainability Science structures the academic program, it was not easy. Naturally, the Board’s committee on investment carefully reviewed the potential fiduciary impact of this action. Some members of the Board were uncomfortable with the choice to close off this source of revenue at a time when the College needs every penny. In the end, the Board embraced our ethical obligation to stop supporting an industry that has repeatedly demonstrated a lack of commitment to future generations. I write this letter to urge you to raise this crucially important issue with your governing body.
Why should colleges and universities divest? It is increasingly clear that climate change will be the defining environmental factor of what I believe will come to be seen as the environmental century. Recent work at the National Center for Atmospheric Research indicates that our current rate of emissions will carry us beyond 7°F average global warming by 2100. Other studies show that warming may be more than 9°F.
Regardless, this level of warming is catastrophic. The current generation of college students will experience a dangerously disrupted climate by mid-century. We must provide strong incentives for fossil fuel industries to invest their gargantuan profits in alternative and renewable energy rather than in the development of new and increasingly marginal sources of fossil fuels.
Your institution must not be on the wrong side of this issue. Given the recent decade of extreme temperatures and catastrophic weather, America is waking up to the urgency of addressing climate change. In the near future, the political tide will turn and the public will demand action. Our students are already demanding action, and we must not ignore them. As college presidents, we are committed to the highest standards of honesty and integrity. Failure to provide ethical leadership on an issue that has the potential to be the most profoundly negative factor in the lives of our students is unacceptable.
Financial managers may complain that divestment will be complicated and insurmountably onerous. However, it takes no more effort to manage a portfolio for minimum exposure to fossil fuels than it does to manage for maximum market return – and these two goals can coexist. Admittedly, markets are more complex today than in the time of divestment from companies associated with apartheid. Depending on your particular mix of investment tools, achieving an absolute zero fossil fuel return may be difficult. Unity College has chosen to strongly bias its portfolio away from such investments, and we are confident that we can achieve a negligible exposure to fossil fuels. We also believe that under current market conditions our overall portfolio will generally not perform more poorly than the market average while holding true to our promise to divest. In fact, the industry and peer reviewed literature show quite conclusively that divestment is immaterial to performance.
All board members are acutely aware of their fiduciary responsibilities to the institution, and they will want assurances that investment practices bring an appropriate return. While endowments must be managed to insure growth, we must turn away from the embedded acceptance of the notion of profits at any price. Even if a divested portfolio underperforms during a period of high market value for these companies, this does not mean that divestment per se is the cause of lower returns. There are thousands of financial products with limited exposure to the fossil fuel companies. Thus, the performance of a divested portfolio is always to some extent depended on wise choices.
Regardless of financial considerations, we must demand the highest ethical standards from our universities and colleges. Surely one would not invest in, say, African blood diamonds simply because they might have a high rate of return for investors. This comparison is apt given the enormous consequences of climate change. It is ethically indefensible that an institution dedicated to the proposition of the renewal of civilization would simultaneously invest in its destruction. In this respect, divestment is not optional. As presidents, you do not control your institution’s investment policy, but you do have great influence. Urge your board to take a stand and make it possible for your institution to speak from a position of integrity.
Unity, ME 04988