UC money plan aids environment, but divestment uncertain
A UC panel proposed Tuesday that environmental and social issues should influence how the system invests its $91 billion in endowment and retirement funds. But the group stopped short of endorsing the sell off of holdings in the fossil fuel industries that student activists are seeking.
Entering a debate about environmental responsibility that has roiled college campuses nationwide, the new UC plan has sections that are crafted to please social justice activists and environmentalists. For example, it includes an ambitious goal of investing $1 billion in UC funds over the next five years in renewable energy, energy efficiency and sustainable agriculture.
But the issue of divesting from companies with large reserves in coal, gas and oil as a way to slow climate change clearly was divisive for the UC Task Force on Sustainable Investing. The group was formed by UC leaders in part in response to students’ demonstrations for divestment.
In an early draft of its report, the panel of UC regents, administrators, faculty and students took a stronger stand against such divesting, saying that it could hurt the university’s finances and not slow climate change much.
The final compromise version, however, calls on the UC system to evaluate all investment strategies for achieving environmental and social goals “as soon as practical, including whether to use divestment.”
The two students on the 11-member panel cast the only opposing votes to the report Tuesday, officials said. The report will be reviewed and voted on by a UC regents committee on investments Friday and by the full board of regents at a meeting next week which student protesters say they will attend.
The regents may consider changing the report to include a plan to divest specifically from just the coal industry, as Stanford University recently announced it would. Gov. Jerry Brown, who is a UC regent, has expressed support for coal divestment.
The task force acknowledged the difficult balancing act faced by universities. They need lucrative investments to help fund financial aid, faculty pay and pensions while student protesters demand that something be done about the climate impact of burning fossil fuels.
The report said the goal is “a holistic” approach to ensure the best possible financial returns “on behalf of current and future students, faculty, and retirees”‘ and for UC to have “a demonstrated commitment to sustainability.”
In an interview before the final task force vote, UC’s chief investment officer Jagdeep S. Bachher, said that some carefully targeted sell off of investments in fossil fuel holdings was possible.
“Could we potentially see ourselves over time changing the nature of the portfolio to address carbon risk? The short answer is yes,” said Bachher, who took the job in April.
He emphasized that UC first needs to develop a detailed framework for socially conscious investments over the next year. And he said that such issues as water usage, human rights, companies’ treatment of employees and possible corporate corruption will be just as important as climate change as UC examines which stocks and other investments to buy and sell.
“Implementing that in a $91 billion portfolio takes a thoughtful exercise,” said Bachher. About $67 billion of that is in pension funds and retirement savings plans, the rest in UC endowment and other funds to support daily operations.
Baccher estimated that about $10 billion of those funds are in various direct and indirect holdings in the fossil fuel and energy industries. These include about $3 billion UC holds in the 200 firms that the Fossil Free UC group have targeted for divestment because of the firms’ control over very large reserves of coal, gas and oil.
About $500 million is in coal investments, he said.
Alden Phinney, a UC Santa Cruz student who was one of two student representatives on the task force, said he was disappointed that the report did not more strongly advocate divestment. He also said activists were not given sufficient time to detail the economic risks of fossil fuel investments.
But Phinney said he was happy that the report was changed to at least encourage the study of such a sell-off of stocks. A member of the Fossil Free UC group, he said he expects students to demonstrate for divestment at next week’s regents meeting in San Francisco and to push for at least selling off coal holdings “as a very beneficial first step.”
UC is not a stranger to financial divestments linked to political and social causes. Over the past decades, it withdrew funds from tobacco and gun companies and those firms seen as aiding South African apartheid and genocide in Sudan.
Beyond the Stanford move, other universities and colleges are divided in their responses to the push for climate change divestment. Pitzer College, San Francisco State and two community college districts in Northern California are among about a dozen schools nationwide that have taken steps for the wider fossil fuel divestment.
Other schools such as Harvard have resisted such steps, saying divestment might hurt their financial returns too much, although faculty protests continue.
Baccher and the task force are recommending that UC sign onto the United Nations Principles for Responsible Investment, a document which emphasizes social and environmental goals. The enormous retirement systems for California public employees and teachers already ascribe to that.
Follow me on Twitter: @larrygordonlat.
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