Universities have come under increasing pressure in recent years to divest from problematic investments. One of the most prominent among them being fossil fuels, due to the ongoing climate crisis and increased student activism.
University Endowments
Endowments are collections of assets which mostly originate from charitable donations made by both individuals and organisations. They are used to support the university’s educational and research mission. It should be noted that most endowments do not consist of one fund but are in fact an aggregation of several funds which are used for several different purposes. To ensure the long-term health of the university, a large proportion of these funds will be invested in stocks, bonds, real-estate and other assets.
The reason that endowments are so important is that they provide security for the future and allow the university to fund vital day-to-day student services and research.
Why is there a Growing Movement to Divest from Fossil Fuels?
The growing alarm at the ongoing climate crisis has led to increased pressure on well-known public institutions to divest from fossil fuel companies, only 20 of which are responsible for almost a third of all emissions. There is particular pressure from students, as they will live to see the worst consequences of climate inaction. A recent incidence of this occurred in February 2022, where student-led campaigns filed lawsuits at Yale, MIT, Princeton, Stanford and Vanderbilt. Additionally, the ongoing effects of climate breakdown means that to fulfil the primary aim of an endowment – ensuring the long-term financial health of the university – they must consider divestment from a financial health perspective as well.
Universities have largely taken this pressure on board, with over 101 UK universities promising to divest. This comprises 65% of institutions with endowments worth roughly £18 billion. This trend can also be seen abroad, where in the US, Harvard, Princeton and Cornell have all pledged to divest. Harvard alone has reduced their total fossil fuel investments by 80% since 2008.
It should be noted that divestment does not always mean selling all of your fossil fuel assets. It could mean just divesting from particularly problematic ones – such as tar sands – or strategically holding some fossil fuel assets to influence company behaviour through boardroom activism. An example of this being Yale, who are taking a staggered approach where they will never wholly divest. They will highlight bad actors banned by their investment policy by investing in ones that meet certain standards, such as those that disclose their greenhouse emissions.
Moving forward with Divestment
Given the huge social and economic pressures to divest from fossil fuels, in addition to the obvious environmental benefits, it has never been a better time to do so. In terms of further guidance, the University of Edinburgh have created an online Q & A explaining divestment and their method for doing so. Invest for Change, a campaign that is calling on Universities to divest from industries at the forefront of social and environmental harms, starting with arms and fossil fuel companies, has excellent advice on this topic.