Divestment – why some universities are scared to act
Cameron Jewell | 1 February 2017
The fossil fuels divestment movement started on university campuses, with students calling out their institutions for talking up innovation, technology and sustainability, while simultaneously investing in the least innovative and sustainable forms of energy possible.
Students have agitated, and very publicly lobbied for universities to put their money where their mouths are and divest from fossil fuel investments. Investing in a company, activists argue, is to give tacit support to its activities and business model.
Many universities across the world have listened, among them huge institutions like Oxford and Yale. Universities who divest are well aware that reputation is everything in attracting the best and brightest, and that lucrative investments can be made in business activities that don’t condemn the planet. It’s the same logic that has seen so many funds get rid of stocks in tobacco and munitions.
With top students and reputation on the line, being sustainable is a big deal for institutions.. Sustainability reports are routinely accompanied by a flurry of media activity to help market the university as a home of innovation and forward thinking. But it’s often the case that behind a university’s action on sustainability on campus or in research, there’s an investment portfolio that’s anything but green.
Take the University of Melbourne, for example.
It has $1.9 billion in investments with an estimated $57-96 million directly invested in 21 companies that appear on the Carbon Underground 200 list of the world’s top publicly listed coal, oil and gas companies, according to action group Fossil Free Melbourne University.
Last week the university released its sustainability plan, highlights of which include becoming carbon neutral by 2030, achieving net zero emissions from electricity by 2021 and achieving a minimum 6 Star Green Star or equivalent rating for new buildings by 2020.
There was even a statement that said the university would by 2021 “have divested from, or be in the process of divesting from within a reasonable period, any material holdings that do not satisfy the requirements of the university’s sustainable investment framework for managing material climate change risk”, which is to be finalised this year.
Is it greenwash?
The report, however, was immediately labelled greenwash, with divestment action group Fossil Free MU saying there was no guarantee of divestment from the 21 fossil fuel companies nor an indication that the plan would align with the university’s commitment to the Paris Agreement.
“Despite the university’s claims, the plan does not outline the university’s response to the strong community support for divestment,” Fossil Free UM activist Lizzie Nicholson said. “The commitments made in the plan mean that the university has delayed making a decision about divestment in favour of yet another year of bureaucratic processes and ‘consultation’ with a community that has already made up their mind.”
Comments by the university’s vice-chancellor Glyn Davis in a 2014 opinion piece for the Australian show that calls for full divestment would be unlikely to succeed, with Davis citing “higher management costs, and likely lower returns, of customising a portfolio that excludes certain types of investment”.
Other major Australian universities that have stalled or refuse to commit to divestment include the University of NSW and the University of Queensland.
There are a number of reasons why this is the case, according to 350.org Australia’s national campus divestment coordinator Ray Yoshida.
Fear of backlash
One reason is a fear of conservative backlash. Yoshida got into the divestment gig working on a campaign to get the Australian National University to divest from fossil fuels, the first such action in the country. The action was partly successful, with ANU in 2014 committing to divest $16 million from seven fossil fuel companies.
However, conservative media, the effected companies and even then federal treasurer Joe Hockey went on the attack, with increasingly shrill condemnations of what was an extremely modest action.
ANU’s Frank Jotzo, director of the Centre for Climate Economics and Policy, called the reaction “astonishingly intense” and showed the power of the idea of divestment.
“My guess is they were scared,” he told The Fifth Estate. “They were seeing the start of something new, and thinking about what role universities play in public life, and didn’t want it to grow. I think they decided to make a public example of ANU, and by making that example they were hoping other universities wouldn’t follow suit.”
Yoshida says that, to an extent, it has had its intended impact. Divestment action in Australia trifles in comparison to that happening overseas. While just six of around 40 Australian universities have committed to some form of divestment action, in the UK 43 universities have divested, representing almost a third of the sector.
Universities such as UNSW have flatly refused to even meet with students calling for divestment, Yoshida says.
Too close to fossil fuel interests
Another reason he gives is the relationships many universities have with fossil fuel interests.
“I think what’s valuable is looking at what are the countervailing forces,” he says.
Fossil fuel interests, he says, have strong ties with many areas of universities, from funding academic posts, providing research funding and other forms of sponsorship.
“A lot of universities won’t say this publicly, but they don’t want to compromise this.”
Instead they tend to cite the costs involved and the fact that engaging in divestment is a purely symbolic move that won’t have any material effect on a company’s operations.
UNSW’s former vice-chancellor Professor Fred Hilmer, for example, said addressing climate change through partnerships with industry would have more effect than “token political actions”.
Yoshida counters that symbols have power.
“Symbols drive how we see the world; what we think is important. That’s precisely the reason [conservative commentators] were responding to it.”
Yoshida sees two key points of divestment – one concerned with moving money out of fossil fuels, and another around changing broader social values.
In the university sector, it’s this second area – changing the ways fossil fuels are valued and perceived – that’s the real goal, with the endgame being the removal of the fossil fuel industry’s social licence to operate.
“By focusing on universities, which are traditionally the moral compasses of society, it brings up the question, ‘Do we want this industry in our future?’”
The biggest leaders in the space currently are La Trobe University and Queensland University of Technology, which Yoshida says have made a full commitment to divest from coal, oil and gas.
“We really congratulate them and applaud them for listening to students, staff and alumni.”
Meanwhile ANU, Monash, Swinburne and the University of Sydney have made partial commitments to divest.
Some of these include commitments to reduce the intensity of carbon in the investment portfolio.
Divestments from tobacco and munitions much easier to achieve
While they have been celebrated as good first steps, to many it’s still not good enough. Where decisions to fully divest from companies involved in producing products known to be dangerous to human health, such as tobacco and munitions, have been made without much soul-searching, fossil fuel investment continues.
As ANU’s Luke Kemp wrote in The Conversation, “it’s hard to imagine universities during the apartheid era bragging about reducing their “racism intensity” while stopping short of a full embargo”.
As serious commitments continue to be made to put governments and organisations in line with the Paris Agreement, Yoshida hopes divestment action can gather pace. In March 350.org will be hosting its inaugural national “fossil free convergence” of university action groups, where it hopes to reinvigorate Australian university divestment action.
Where the universities stand
La Trobe University – full divestment
The university council in May 2016 made a decision to fully divest from fossil-fuel related company investments over the next five years while also committing to increase transparency regarding the carbon footprint of companies in its portfolio.
“We are committed to divesting from the top 200 publicly traded fossil fuel companies ranked by the carbon content of their fossil fuel reserves within five years,” La Trobe University Vice-Chancellor Professor John Dewar said.
Queensland University of Technology – full divestment
In September 2016 QUT committed to divesting its shares in fossil fuels. In a statement to staff, vice-chancellor Professor Peter Coaldrake said: “We have reviewed QUT’s investments relative to climate risk and instituted changes to the university’s investment strategy.
“QUT is committed to an orderly and considered transition away from investment in fossil fuel companies.”
The Queensland Investment Corporation, which looks after QUT’s $300 million portfolio, has been issued with a directive to ensure there are no direct fossil fuel investments or fossil fuel investments of “material significance”.
Australian National University – partial divestment
ANU was one of the first Australian universities to divest – a minuscule $16 million from seven resource companies that nonetheless had conservative media squealing in protest. Its investment strategy:
- Excludes companies that draw more than 20 per cent of revenues from coal.
- Weights the portfolio to reduce carbon intensity (tonnes of CO2 produced per $1 million of revenue) to ensure that it is at least 25 per cent lower than the ASX 200.
- Ensures that the portfolio demonstrates a 10 per cent improvement in the overall Environment, Social, Governance rating relative to the ASX 200 benchmark
The CO2 intensity of the ANU portfolio has decreased by a factor of 2.3, meaning it has more than halved since the policy took effect.
It was also reported that ANU saved money with some of the excluded resources stocks tumbling in the year after the university’s divestment.
Divestment activists have been lobbying for a further $45 million to be divested.
Monash University – partial divestment
Monash in March 2016 released a draft statement saying it would “require fund managers to identify, assess and reduce [investments in companies whose primary activity is coal production] over the next 12 months”, according to 350.org Australia.
Finalising the statement in December, president and vice chancellor of Monash University, Professor Margaret Gardner, said: “Already, Monash has no direct investments in companies whose primary ongoing business is production of fossil fuels. Further, Monash has been successful in excluding companies whose primary activity is coal production from more than 90 per cent of our indirect investment portfolio. The university will be working with fund managers to exclude all companies whose primary activity is coal production from our indirect investments.”
Swinburne University – partial divestment
At the end of 2015 Swinburne announced it had adopted a responsible investment charter.
“The charter commits the university to take account of environmental and social impacts in the investment choices that it makes,” a university statement said.
“The university will consult with its advisers, investment managers and the university community to implement these objectives, giving particular consideration to the development of appropriate approaches including, potential divestment processes in respect of companies that generate significant revenues from activities inconsistent with these aims, such as:
- fossil fuels extraction or where such fuels are used for power generation
- tobacco production
- cluster munitions and anti-personnel landmines.”
University of Sydney – partial divestment
The University of Sydney in 2015 announced a plan to reduce its investment carbon footprint by 20 per cent over three years.
“The new strategy balances the university’s obligation to manage funds wisely on behalf of our students, staff, donors and alumni with its desire to address climate change and protect Australia’s heritage,” the university’s vice-principal (operations) Sara Watts said.
350.org said it was a good first step, however called on the university to divest from all fossil fuels.
“Already more than 20 universities have completely divested from fossil fuels,” Fossil Free USYD spokesperson Clodagh Schofield said at the time, “yet Sydney University’s announcement will only see a handful of companies shed. We also don’t know how they plan to define and implement the target nor which companies will be divested.”
Universities from the prestigious “Group of Eight” that haven’t made any divestment commitments include:
- The University of Queensland
- The University of Western Australia
- The University of Adelaide
The University of Melbourne has said it will divest from stocks that do not meet a yet-to-be-finalised sustainable investment framework.