UBC, SFU may drop oil investments
Campaigns part of worldwide movement to channel money from fossil fuels to sustainable energy
Groups at both the University of B. C. and Simon Fraser University are pushing for the schools to divest their endowment funds of investments in the oil and gas industry.
The campaigns are part of a growing movement across the country that saw the Concordia University Foundation in Montreal announce last week a partial re- investment of $ 5 million of its assets into sustainable investments that don’t include fossil fuels, weapons or tobacco.
Opponents of divestment argue that resource- sector jobs could suffer and students will pay higher tuition fees because the return on investment will not be as high in a portfolio that doesn’t include oil and gas assets. Proponents argue that divestment is the right thing to do to lessen society’s dependence on oil and gas consumption, and say studies show that returns can be as good or better in a divested portfolio.
At SFU, a campaign called Divest SFU is calling on the university “to immediately freeze any new investment in fossil- fuel companies, and to divest within five years from direct ownership and from any commingled funds that include fossil- fuel public equities and corporate bonds.”
The university’s faculty association has voted to encourage a divested option in its pension plan and to encourage the university’s endowment to divest. The faculty association does not run the pension, however, so it can only make the request, the association’s executive director Brian Green said in an email. So far, the pension’s trustees have agreed to strike a committee to look at offering a divested option.
More than 100 faculty members have signed an open letter asking the board of governors to stop investing in fossil fuels with the university’s endowment money.
A student group presented to the university’s board of governors in April, but the board did not commit to divestment, student organizer Tessa Ramburn said. Instead, in July, the board signed on to the United Nations Principles of Responsible Investment, which Ramburn said is a “very positive first step.”
The United Nations Principles for Responsible Investment Initiative calls for investors to commit to incorporate environmental, social and governance issues into investment decisionmaking processes.
“Research by other universities, including Harvard and Oxford, has shown that divestment has relatively little impact in the financial markets, while investor activism can be an important mechanism to change corporate behaviour,” SFU’s vice- president of Finance and Administration Pat Hibbitts said in a news release at the time.
Hibbitts said in a more recent interview that SFU is now working on becoming transparent by making a list of its investments public.
The money from the school’s $ 200- million endowment is used to fund research and scholarships, and the board of governors has a fiduciary responsibility to protect the value of the endowment, Hibbitts said.
“Turning on a dime and divesting may not be the right thing to do,” Hibbitts said, noting that the price of oil is low right now so many investors may be divesting for financial, rather than environmental, reasons.
At UBC, a group called UBCC350 is making a similar call. Made up of students, faculty, staff, and alumni, it has put forward a motion to the faculty association calling for the university’s complete divestment of all its holdings in fossil fuel assets, which will be voted on in a referendum in early 2015. If successful — the referendum requires a simple majority of at least 20 per cent of eligible voters — the divestment recommendation will then go to UBC’s board of governors, who are ultimately responsible for any decision to divest.
UBC’s endowment fund is worth $ 1.2 billion, and direct investment in fossil fuel companies is estimated by UBCC350 at $ 100 million.
A motion about the UBC faculty pension plan is expected in April at the next all- members’ meeting, said Mark MacLean, president of the UBC faculty association. The motion may ask for full divestment or a divestment option for the pension plan, he said.
Divesting won’t hurt returns, according to a brief prepared by the UBC group, which cites a 2014 study by Bloomberg New Energy Finance.
“This study performed socalled ‘ back tests’ where they separate fossil fuel stocks out from a well- known financial index, and then compare the fossil free index with the standard index. When Bloomberg did this for the S& P 500 for the past decade, it found that the fossil free index ‘ performed on par’ with the standard index,” the brief states. “An increasing number of studies have examined the impact of divestment on endowments and other financial holdings, and show a surprising degree of consensus that the impact of fossil fuel divestment on returns is negligible and in some case marginally positive.”
Deb Abbey, CEO of Canada’s Responsible Investment Association, confirmed those studies, but said it is more difficult to achieve the same returns in an all- Canadian investment portfolio. Nonetheless, she said divestment campaigns are helpful because they raise awareness, but they don’t necessarily reduce demand.
Murray Leith, an investment analyst and vice- president at Odlum Brown, says the difference in financial return would depend on the time frame.
Investor activism can be an important mechanism to change corporate behaviour. PAT HIBBITS SFU VICE- PRESIDENT OF FINANCE AND ADMINISTRATION
“Energy is an important portfolio diversifier and it is my belief that investors who do not own energy and energy- related stocks will struggle to beat their benchmarks over time, particularly in Canada,” Leith said in an email, adding that in the early 2000s, energy led the market in terms of returns on investment.
The UBC brief says that although divestment by one individual or organization may seem mostly symbolic due to the size of the global fossil fuel industry, it’s the symbolism that gives divestment its power. The movement is modelled after the anti- apartheid movement of the 1980s, which created a stigma against companies doing business in South Africa , the brief says.
If the referendum passes at UBC, the board of governors will consider the proposal based on criteria that includes at least two university constituencies supporting divestment. Students already voted 77 per cent in favour.
Among the criteria that the board must assess is a proven social, political, economic or environmental rationale, evidence that divestment is an effective way to achieve the desired outcome, such as a change in behaviour within an industry, an absence of alternative policies that are as effective at lower cost or more effective at the same cost, consistency with the university’s legal obligations as trustee, and consistency with its other university relationships.
If UBC and SFU were to divest, they will join a growing list of organizations that include 15 universities ( Stanford, the University of Glasgow and the Australian National University in Canberra among them), 32 cities and counties ( including San Francisco and Seattle) and more than four dozen religious institutions. It also includes the $ 860- million philanthropic Rockefeller Brothers Fund, the wealth of which came from Standard Oil. In all, according to a September 2014 article in the New York Times, some 180 wealthy individuals, institutions and philanthropies so far have divested themselves of $ 50 billion worth of fossil fuel assets.