To divest (fossil fuels), or not to divest? That seems to be the question plaguing many educational endowments and other investment organizations in recent years.
Of course, the fossil fuel divestment debate would be remiss without talking about climate change.
A recent publication by CFA Institute titled “David Swensen on the Fossil Fuel Divestment Debate” – to be published in the May/June 2015 Financial Analysts Journal – examines the divestment question, with a specific focus on Swensen’s emphasis on companies that consider the effects of climate change. Swensen is Yale University’s chief investment officer and has run the university’s $23.9 billion endowment since 1985.
“Many educational endowments and other investment organizations are struggling with the question whether to comply with the widespread demands of students and other constituencies to divest their fossil fuel stocks,” writes Robert Litterman, executive editor of the Financial Analysts Journal and author of the paper.
Some have already announced divestments – such as Stanford University, who announced in May 2014 that it was moving away from coal in the investment context and also recommending to its external investment managers that they avoid investments in 100 public companies for which coal extraction is the primary business.
The divestment debate has since grown beyond the U.S. and universities.
“The divestment movement started in the United States but has since expanded to become a global platform,” writes Litterman.
In October 2014, the U.K.-based Glasgow University and the Australia National University announced decisions to divest some of their fossil fuel stocks.
In addition to university endowments, Litterman points out that some foundations (such as the Rockefeller Brothers Fund in September 2014) and pension funds (such as Australia’s Local Government Super in October 2014) have also announced decisions to divest fossil fuel stocks.
Most recently, the California State Teachers Retirement System, one of the largest educator-only pension funds with a portfolio valued at $190.8 billion, entered the debate and has started to discuss whether or not to divest holdings in thermal coal companies.
Although Yale University said that it would not divest its fossil fuel stocks, it did take a decided stance on climate change.