UC Regents vote in favor of sustainable investment over divestment
on September 18, 2014
The University of California Board of Regents voted Wednesday to add several environmental responsibility initiatives into its investment portfolio, but declined to act on student fossil-free coalitions’ demands that it divest from fossil fuel companies.
In a one-hour discussion led by the Committee on Investments, the Regents agreed to integrate “Environmental, Social and Governance” (ESG) factors into the university’s investment portfolio and to invest $1 billion in renewable energy over the next five years. The Regents will also sign onto the United Nations-supported Principles for Responsible Investment, making UC the largest university, and the first public university in the United States, to do so.
But the Regents’ decision to keep its fossil fuel holdings, which currently amount to about $10 billion of UC’s $90.6 billion portfolio, was met with disapproval from the several dozen members of the Fossil Free UC campaign who attended the meeting.
Holding orange construction-paper signs and chanting, “ESG doesn’t work for me unless you go fossil free!”, the Fossil Free UC activists vowed to continue their campaign.
“We’ll try working things differently,” said Alyssa Lee, an organizer with Fossil Free UC who graduated from UCLA in May. “We will be escalating.”
The confrontation at the UC Regents meeting is the latest in the ongoing battle between university leaders on the one hand, and fossil-free advocates from both faculty and the student body on the other. The university leaders maintain that the university’s investments ensure the UC system’s economic viability, while the fossil-free advocates argue that fossil fuel investments are risky for both investors and the environment.
UC Regents have questioned whether the university’s investment portfolio is an appropriate place to make moral or political statements. Fossil-free advocates see divestment as a crucial way to build momentum toward breaking oil dependency, pointing out that UC is widely credited with tipping the scale in a successful divestment campaign against South African apartheid in the late 1980s. Major Bay Area cities such as Richmond, Berkeley, San Francisco, and Oakland have expressed support for divesting public employee portfolios from fossil fuels.
The Regents’ decision on Wednesday followed the recommendations of the UC Task Force on Sustainable Investing, a group that was formed in June in response to student demonstrations calling for divestment. The 11-person task force included faculty and student representatives, experts in finance and sustainability from both within and outside the university, and UC Regents Norman J. Pattiz, Bonnie Reiss, and Paul Wachter.
While the task force unanimously agreed that climate change must be addressed, the task force’s two student representatives were the only members to oppose continued investment in fossil fuel companies, according to student representative Victoria Fernandez.
Fernandez said she and fellow student representative Alden Phinney were left out of a late-hour amendment of the task force recommendation that added the sentence, “The majority of the Task Force concluded that divestment in and of itself would not meaningfully impact climate change” along with a statement that divestment would hurt the university’s investment portfolio. The sentences were stricken from a revised recommendation after fossil-free activists’ outrage resulted in an emergency task force meeting, Fernandez said.
Many of the Regents at Wednesday’s meeting expressed wariness about divestment, citing UC’s “fiduciary responsibilities,” such as pension payments for UC employees.
“It is clear to me, and from the homework that I’ve done, that [divestment] actions will have financial consequences on all of us and our portfolio,” said UC Chief Investment Officer Jagdeep Singh Bachher. “We believe there is an opportunity to make a difference by investing in opportunities that enhance sustainability while earning us a suitable return on investment.”
Bachher added that the adoption of an ESG framework does not exclude divestment as a future option.
In her opening remarks at the UC Regents meeting, UC President Janet Napolitano said that UC has a responsibility, as a public institution, to be an environmental steward. She talked of UC’s decision last week to sign a 25-year solar energy purchase with Frontier Renewables – the largest solar energy purchase by any higher education institution in the U.S. – and her initiative, announced last fall, to achieve carbon neutrality by 2025.
“How we invest is in part a reflection of our institutional values,” Napolitano said. “At the same time, we as an institution must be mindful of all our investments as a whole. Strategic, sustainable investment writ large is the goal – not divestment on a case by case basis.”
Student Regent Sadia Saifuddin expressed strong support for coal divestment alongside sustainable investment. “I don’t want the $1 billion [we’re investing in renewable energy] to overshadow the work that divestment does fuel,” Saifuddin said. “Our goal is not to move the needle on climate change. We’re not trying to bankrupt coal companies. What we’re trying to do is galvanize legislative restrictions.”
Fossil-free advocates have pressured the UC Regents to divest for years, calling on them to join other colleges and universities that have committed to doing so, including the Peralta Community College District. Earlier this month, the UC Berkeley Faculty Association released a statement urging the Regents to divest from fossil fuels.
Richmond’s city council voted to support divestment in April 2013, launching the Fossil Free city divestment campaign along with nine other U.S. cities.
“I was very disappointed that [The Regents] have declined to divest in fossil fuel holdings,” said Richmond Mayor Gayle McLaughlin, whose city is host to the second largest oil refinery in the state. “Climate change is a major threat to us all, and future generations depend on us moving away from oil and coal now.”
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