Over 40 post-secondary institutions across Canada, the United States, and the United Kingdom are divesting their endowment funds from fossil fuels. Primarily led by students, the divestment movement uses moral and environmental arguments to encourage university administrators to take a position on climate change issues, look at their risk exposure, and wield their public clout to make an impact.
A symbolic gesture
“It’s more symbolic than substantive, yet symbolism is important especially with entities such as academic institutions.”
Larry Gerston, professor emeritus of political science at San Jose State University
Divesting funds from fossil fuels is more of a symbolic act than a financially punishing one for the targeted stocks and companies. Collectively, the largest 15 universities in Canada hold $11 billion in their endowments, and only an estimated 10% to 20% of that ($1-2 billion) might be held in fossil fuel/energy stocks. The direct financial impact of complete divestment by universities would hardly be felt in Canada’s $400-500 billion (2013) fossil fuel sector, much less in the $5 trillion global market. Instead, and perhaps more importantly, the momentum of the divestment movement is a powerful indication of the popular support for a clean energy future.
Investing in carbon neutrality
What of the hundreds of institutions that have not yet fully divested from fossil fuels? A closer look at the University of British Columbia (UBC), with a $1.3 billion endowment, reveals that their hesitation to divest is not a vote of confidence for the fossil fuel sector. While UBC has so far resisted calls from students and faculty to divest, they are nonetheless adopting robust ESG criteria for their investments.
From a strategic point of view, it’s possible that UBC sees divestment as only a small piece of a long term transition away from fossil fuels. UBC is already decades into a complex institutional shift towards a carbon neutral campus. Not only have they met Kyoto’s GHG reduction targets for 2007, but are planning on beating that by another 33% by next year, and 67% by 2020.
It seems reasonable to conclude, based on their investment priorities for infrastructure and research, that UBC is not betting on a fossil future. As an institution, UBC is putting its money where its values are, and investing in a future where fossil fuels are obsolete.
“The choice is clear: either invest in a dying fossil fuel industry that will commit us to environmental destruction, social injustice, and economic failure, or we can invest in our futures.”
Kelsey Mech, National Director of the Canadian Youth Climate Coalition in Victoria
Regardless of the success of divestment as a campaign tactic in the post-secondary sector, when we “follow the money” in other areas of institutional spending, the trend away from fossil fuels, and the risk of holding fossil fuel stocks in a portfolio is clear.
For a complementary educational session on divesting, please contact Nicole Neuert, Manager, Fossil Free & Impact Solutions. For more information, go to Genus Capital’s Fossil Free investment solutions.