Clean Technology

Fossil Fuel Divestment Pits Unity College against Harvard


Unity College in Unity, Maine, calls itself “America’s Environmental College”—and for good reason. In 2012, the 739-student school became the first institute of higher learning to commit to fossil fuel divestment.

School president Dr. Melik Peter Khoury said at the time: “It’s not a statement. It’s not symbolism. It’s walking the talk when it comes to creating a sustainable path for society.”

Within a year, Unity developed a fossil fuel–free portfolio for its $15 million in holdings. While the dollar amounts may be small, it helped kick off a national campaign for divestment.

The campaign was helped along by activist group, founded by Middlebury College scholar and author Bill McKibben. “The logic of divestment couldn’t be simpler: if it’s wrong to wreck the climate, it’s wrong to profit from that wreckage,” wrote McKibben in Rolling Stone.

To date, 811 institutions and over 58,000 individuals around the world, comprising $5.58 trillion in investments dollars, have divested from fossil fuels, according to Fossil Free, a project. Student movements have pushed the University of California, Stanford, Yale, Oxford, and other schools to divest.

Yet the largest target, Harvard, has so far proved elusive. Harvard has the largest endowment among US universities: $35,665,743,000 at the end of FY16—as big as MIT and Stanford combined.

Inspired by Unity, Harvard students started a fossil fuel divestment campaign in 2012, convening rallies and sit-ins, collecting 70,000 signatures, and even suing the university.

But the campaign has not succeeded.

Activists did celebrate a “pause” on fossil fuel investments announced in April 2017 by the head of natural resources for Harvard’s investment arm, Colin Butterfield. The natural resources investment tranche contains Harvard’s fossil fuel holdings, although it is primarily comprised of investments in timberland, vineyards, and other things related to agriculture. “I clearly feel that we are stealing from the future generations,” he said at a Harvard Business School event. “When you go out there and invest in natural resources, and you start looking at what’s happening in the world of natural resources, it’s pretty scary—we need to have more of these conversations.”

But it’s not clear whether Harvard’s pause is a response to the divestment campaign or because energy stock prices are doing so poorly. The value of coal stocks has plummeted as aging coal plants shut down in the face of competition from natural gas and renewables as and prices for crude oil have dropped by more than half since mid-2014.

The S&P 500 Fossil Fuel Free Index tracks the performance of big companies that do not own fossil fuel reserves. Performance over the past year has been stellar, rising 22.81% from December 2016 to December 2017, besting the S&P 500 Index, which rose at 21.28%. Meanwhile, the S&P 500 Energy Sector index fell 5.76% in the past year.

Despite these performance analytics, in 2013 Harvard president Drew Faust rejected calls to divest for fear that doing so would threaten the endowment. “Despite some assertions to the contrary, logic and experience indicate that barring investments in a major, integral sector of the global economy would . . . come at a substantial economic cost.” Yet Trillium Asset Management calculated that Harvard may have lost over $21 million between 2012 and 2015 by holding on to their fossil fuel investments.

Harvard lost $2 billion in 2016, with an investment return of -2%. This past year they finished last among Ivy League peers, gaining 8%. It cannot be determined how much of this drop is directly caused by fossil fuels. Harvard Management Company (HMC) CEO N.P. Narvekar noted that the “disappointing” performance was part of a larger problem: “The endowment’s returns are a symptom of deep structural problems at HMC and the resultant significant issues in the portfolio,” he said. However, he did note that the natural resources tranche of their portfolio experienced “a challenging year.” And then, of course, there’s Trillium’s analysis.

Meanwhile, Unity reports a 10.7% return on their endowment over the last three years, in line with its investment goals. Former Unity president Dr. Stephen Mulkey said Unity’s experience shows that colleges can move past purely dollars-and-cents arguments to achieve an endowment that creates a financial return without sacrificing the health of the planet.

“We know those two goals can coexist,” he said. “All it takes is leadership.”

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