The UoA Foundation are Finally Talking about their Fossil Fuel Investments. Now it’s time to divest
By the Staff Group for Divestment
Friday 22 September 2017
Students and staff at the University of Auckland have been campaigning for almost three years for the University Foundation, who invest the University’s endowment of $180 million, to divest from fossil fuels. At their meeting on 23 June this year, the University Foundation tabled an open letter calling for divestment, signed by 244 academic and professional University staff members.
On 27 June, the Foundation responded to the letter. Below, we present our analysis of the Foundation’s response, with the Foundation’s words in quotation marks. Following this section, you can read the response that staff sent directly to the Foundation in full. We have since been advised that the Foundation will consider our response at their September meeting, although we have not been permitted to speak to it (or indeed the open letter) in person.
Analysis of Foundation Response to Open Letter
“The Board of the University of Auckland Foundation considered this matter at its meeting of 23 June, as indeed it has done on previous occasions, and has advised the Vice-Chancellor, Professor Stuart McCutcheon, of the outcome of those deliberations.”
This is the first time the University Foundation has communicated with staff directly in two and a half years of calling for divestment, despite previous requests on our part for them to engage.
“The Foundation has a primary obligation to secure the maximum financial return for its investments so that its donors’ philanthropic intentions can be most effectively supported.”
The Foundation should reread the open letter, in which we state that:
- Analysis is showing that pension funds and Universities alike have received lower returns than they would have had they divested.
- Moreover, there is a strong risk that many unburned fossil fuel reserves will turn into stranded assets, given that their current valuation is based on the presumption that they will in fact be burned.
“The Foundation does not invest directly in fossil fuel companies and its indirect exposure (via its investment managers) is minimal and currently approximately 1% of its portfolio. Furthermore, the Foundation has placed about 25% of its global equity investments with a manager (founded by Al Gore) that specifically excludes fossil fuel investments.”
We acknowledge, and indeed are happy to hear unequivocally, that the exposure of the University’s endowment to the fossil fuel industry is relatively limited. Using figures from the University’s 2016 Annual Report, the endowment stands at at least $180 million, of which 1% is still a reasonable sum at $1.8 million. More importantly, however, as we note in our response to the Foundation:
A divestment commitment demonstrates, in a way that quietly and gradually removing funds from fossil fuel companies does not, that the University Foundation (and by extension the University itself) accepts that in this time of climate change induced by fossil fuel emissions it is unwise and perhaps reckless to further invest in the fossil fuel industry.
The divestment movement is effective because institutions make both a practical and a principled commitment to divesting. Given that the Foundation emphasize their already low levels of exposure to the industry, and considering that they already work with investment advisors who have demonstrated willingness to discuss divestment options, divestment is both a realistic, and a straightforward, ask.
“As fossil fuels continue to be an important, though decreasing, part of the world’s energy mix, the Foundation’s other managers are aware of the associated risks (e.g. stranded assets) and opportunities (e.g. renewable energy) and act accordingly. All of the investment managers with whom the Foundation is invested are signatories to the United Nations Principles for Responsible Investment.”
The UN principles for Responsible Investment, however, are merely “a “voluntary and aspirational set of investment principles”, which come with no binding commitments. Thus, it is impossible to track their implementation in practice.
“For donors who prefer their support to be invested with zero exposure to fossil fuel companies, the Foundation currently has two qualifying investment pools, namely its Current Use Investment Pool (which holds all of the annual appeal scholarship gifts, along with other gifts) and its Specified Investment Pool #2 (Fossil Fuel-Free Endowment) for endowed gifts. Donors are welcome to direct their donations to either pool depending on the nature of their gift.”
Fossil free options are a good step in the right direction but fundamentally, they do not amount to full divestment from fossil fuels (as defined in the open letter). In our response, we ask the Foundation how they intend to let donors know about the existence of these fossil free funds. We also enquire as to why, if donor choice is their central concern, they would favour an opt-in approach to fossil free funds, over an “opt-out” approach of an otherwise fossil free endowment.
“The Board considers that these arrangements most appropriately balance its obligations to its donors, the beneficiaries of its support, and the future of the planet.”
We consider that donors in no way oblige the Foundation to invest in fossil fuels, and that the Foundation appears to be using excuses about potentially adverse impacts on returns to avoid making a divestment commitment. Thus, above all, we urge the Foundation to join the divestment movement. They are taking steps in the right direction in terms of their limited exposure to fossil fuels; it is now time to accelerate the shift away from these investments both in principle and in practice.
Response of UoA Staff Group for Divestment to Foundation
10 August 2017
Thank you for considering the matter of fossil fuel divestment at your meeting of 23rd June. We are pleased that the Foundation is able to confirm that it has no direct exposure, and less than 1% of indirect exposure, to fossil fuel companies. We also understand from your response that the Foundation now plans to offer all donors the option of having their donations invested in the ‘fossil free’ pool. We are encouraged to see that the Foundation desires to accommodate the concerns of donors who would prefer their gifts to be invested in a ‘fossil free’ pool. In light of these new commitments, we note that:
- There is no virtue in making a ‘fossil free’ investment option available to donors unless donors are aware that it exists and are easily able to make use of it. At a minimum, all donors, new and existing, should be given the opportunity to opt into the ‘fossil free’ pool. Could you please advise how the Foundation intends to make donors aware of their choice?
- Requiring donors to opt into the ‘fossil free’ pool will inevitably create a ‘default effect’ that ensures the vast majority of Foundation assets will remain in the pool that includes (indirect) investments in fossil fuel companies. To counteract this, we propose that all donations should be invested by default in the ‘fossil free’ pool, and that donors be given the opportunity to opt out of this pool if they so desire. This should apply to donations already received as well as future donations. Such an arrangement would preserve the freedom of choice that the Foundation wishes to offer to all donors. But it would be more consistent with the University’s mission and values, since it would better align investment practice with the goals of sustainability and human well-being. Could you please advise whether the Foundation is willing to take up this suggestion, and if not, on what grounds it believes the current arrangement is to be preferred?
- As part of the information presented to donors and potential donors, it would be useful to publish data on the performance of the ‘fossil free’ pool in comparison to the other pool(s) in the Foundation’s portfolio. This would enable all donors to make a more informed choice about how they want their money to be invested. Could you please advise whether the Foundation agrees to provide this information in its annual reports and in summary on the Foundation website?
These are practical first steps. However, we still believe that the Foundation must move towards fully divesting from fossil fuels as a matter of principle. A divestment commitment demonstrates, in a way that quietly and gradually removing funds from fossil fuel companies does not, that the University Foundation (and by extension the University itself) accepts that in this time of climate change induced by fossil fuel emissions it is unwise and perhaps reckless to further invest in the fossil fuel industry.
We ask that you please consider this letter at your September meeting. We also wish to ensure we provide as much clarity as possible around our requests, and to that end we would appreciate the opportunity for one staff member and one student to be present at the meeting.
Please kindly confirm whether this letter will be tabled at the September meeting and whether two delegates may attend. Thank you.
Matheson Russell, Alistair Woodward, and Niki Harré
On behalf of the Staff Divestment Group