College Divestments Not Hurting Oil and Gas
Colleges and universities divesting from fossil fuel companies are not affecting large electric, oil, and gas companies, Bloomberg reports.
This is because college and university endowments represent less than one percent of total global invested assets – about $1 trillion of $150 trillion total invested assets. The schools choosing to divest have not been impacted financially, either.
For example, shifting investment away from large fossil fuel companies has not negatively affected investment returns for Unity College, in Unity, Maine. The portfolio has met its benchmarks over the past five years, Bloomberg said.
Unity is one of the five colleges – including Green Mountain College, College of the Atlantic, Hampshire College, and Sterling College – that have made the divestment commitment. Across the US there are 308 more colleges and universities with fossil fuel divestment campaigns, Bloomberg reports.
In May Green Mountain College decided to divest its $3.1 million endowment from fossil fuels. Of the $3.1 million, 1 percent is currently invested in 200 fossil fuel companies that own most of the world’s coal, oil and gas reserves. The board of trustees also voted to align future investments with social, environmental and governance goals, according to 350.org.
350.org is the organization behind a nationwide campaign pushing for divestment at the state and city level. The campaign has picked up steam at more than 100 cities and states, the group said.
A January report by financial advisory firm Aperio Group found that carbon divestment carries a statistically irrelevant amount of risk. The study finds that divesting completely of the oil, gas, and consumable fuels industry creates an incremental portfolio risk of 0.01 percent. A divestment from just the most pollution-intensive corporations creates a risk of 0.0006 percent.
The ACCO said that university endowment funds account for more than $400 billion in combined assets, while pension funds account for trillions of dollars in investments. But with education costs increasing annually, the number of endowments and pension funds applying principles of environmental, social and corporate (ESG) governance are in decline.
Among the challenges, outlined in a May 21 webinar from the Association of Climate Change Officers, are commingled funds within portfolios that make it difficult for schools to isolate and exclude specific investment, and the costs associated with making changes to accounts.
Though the actions are consistent with the schools’ values, with many of the divestment decisions driven by student campaigns, schools may want to look at alternatives within the energy sector, Bloomberg said.
Considering that the energy sector represents 10 percent of all global equity market capitalization, organizations do not have to consider a complete exit from the sector to divest from fossil fuel holdings. An alternative to a broad divestment strategy is for colleges and universities to make new, proactive investments in clean energy and other climate change solutions, Bloomberg said.
According to the ACCO presentation, a survey of 831 private and public institutions found that 18 percent apply some form of principles of environmental, social and corporate governance criteria to their portfolio holdings. Social criteria were the most broadly applied with 15 percent following this practice. Environmental criteria were applied at 5 percent of the institutions.
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