The University of Utah has taken an initial step toward divesting its billion-dollar endowment from fossil fuels with the release this week of a draft report saying such a move would align more closely the school’s financial portfolio with its values.
The debate about whether the state’s flagship university should reinvest its holdings in companies linked to climate change has long divided the campus community, while also fueling a spirited discussion over the purpose of the endowment.
That conversation achieved a crucial milestone with the release of 67-page report recommending the U. phase out such investments. Produced at the behest of the school’s academic senate, the document spells out eight recommendations toward reinvesting the endowment’s estimated $60 million to $90 million that are currently in fossil fuels.
“The university should shift its energy-related investments to companies that reduce emissions of greenhouse gases by generating, distributing, and using clean and renewable energy, or to other investments that promote environmental sustainability,” states the ad hoc committee’s report, which is the fruit of a student-driven process initiated a year ago. “This should be done as quickly as feasible, but in a manner that continues to manage the endowment pool responsibly to support the university and its students, faculty, staff, and programs.”
The campus community is invited to comment on the recommendations, which are to be the subject of a virtual town hall meeting April 12 and then be voted on by the academic senate April 26. The U. board of trustees will make a final decision at one of its future meetings.
“We wanted to start with a preliminary draft so that we could continue to gather feedback from all perspectives at the U. on this topic, rather than defending a position,” said Allyson Mower, a librarian at the Marriott Library who led the committee. “Our shared governance culture at the U. means the academic senate, the administration and the board of trustees all participate together in making decisions about the future of this institution. We all hold a stake in it and want it to succeed.”
Previous divestment effort failed
The U. has been here before. Five years ago, a narrowly divided academic senate voted in favor of divestment, but the trustees declined to adopt that strategy.
“Like many other major universities around the country, we are not convinced that divestment from fossil fuel-heavy funds in the next five years, as the senate has recommended, is the best method for addressing these challenges [associated with climate change],” then-U. President David Pershing said at the time. “We prefer to focus on the positive investments that can be made in a variety of contexts.”
Critics of divestment pointed out that research universities like the U. practically owe their existence to fossil energy. Coal has powered the U.’s labs, natural gas heats its buildings, and oil gets students and faculty to campus.
But last year, students and campus employees amped up pressure on the administrators to reevaluate this position. The U.’s student association unanimously adopted a resolution calling on the school to withdraw its investments in companies associated with greenhouse gas emissions, such as extractive industries, coal-fired power generators and pipelines that move oil and gas.
The academic senate responded by forming a 16-member committee to investigate divestment and offer recommendations. Three of the panel’s 11 voting members are students, as is one of its ex officio members.
Its first order of business was determining how much of the endowment is wedded to fossil fuel companies, which turned out to be tricky. Most of the endowment, whose proceeds underwrite U. programs and scholarships, is handled by independent fund managers who are moving money in and out of various equities in ways that are difficult to track. The report estimated that between 6% and 9% of the endowment is with companies that traffic in coal, oil and gas.
Divestiture might not fit neatly with the investment policies outlined for state institutions. The policy of the Utah Board of Regents, which oversees higher education, calls for school endowments to be managed in a strictly fiduciary manner, according to Mower, and state law requires they be invested in the way a “prudent person” would.
Her committee’s report looks at the U. endowment as something more than just a money machine.
“Maybe it represents communication of the institution’s values,” Mower said. “The recommendations are grounded in the university’s mission statement and existing policies. This is not just a statement about what would be good for society, but something that is framed by what the institution has already committed itself to.”
That mission statement pledges the U. to, among other things, “advance rigorous interdisciplinary inquiry, international involvement, and social responsibility, and integrate global and sustainability goals and principles across the institution.”
Seeking a balance on climate change
The report recognizes the threat climate change poses to the environment and human civilization and affirms the scientific consensus that the main driver is the combustion of fossil fuels, which has increased the concentration of carbon dioxide in the atmosphere to dangerous levels.
Unless these emissions are curtailed soon, global temperatures could increase to a point at which rising sea levels would inundate coastal cities and alter weather systems, leading to droughts and catastrophic wildfires in some places, already seen in the American West, or violent weather in other places.
The committee struggled with how to identify which companies to divest from, since some power companies that rely on coal, such as PacifiCorp, for example, also develop or buy large amounts of power from renewable sources.
“We wanted to balance both companies that have reserves with companies that have greenhouse gas emissions,” Mower said. “We want to make it as broad as possible within existing structures so it wasn’t this extreme one-sided statement and best of luck to the people that have to implement it.”
Heading the list of recommendations is selling all public equities listed on the Carbon Underground 200, a list of the top publicly traded coal, oil and gas companies, ranked by the carbon emissions embedded in their reserves, and all private equities in the upstream and midstream side — in other words, the production and refining end of the fossil energy industry.
This money, along with an “appropriate portion of existing uninvested capital,” would be put into “positive sustainable investments.”
The report also recommends dedicating a seat on the U.’s Investment Advisory Committee to the school’s chief sustainability officer.
According to the report, eight of the U.’s sister Pac-12 schools, as well as nearly a third of the those in the American Association of Universities, have some fossil fuel divestment, although policies vary widely.
During its deliberations, the committee heard concerns that divestment would alienate some of the U.’s corporate donors to the detriment of some faculty and programs that receive grants from fossil energy companies. But the report found no compelling evidence that such a reinvestment policy would have a negative impact.
“Indeed,” it said, “there is evidence that fossil fuel companies are maintaining relationships with schools that have divested.”