Climate Change

NC Reinvest Coalition: Case for Divestment of the UNC Systems Endowments

Authors: James Smith, Meredith Bain

As world leaders met in Katowice, Poland for COP24 following the recent G20 summit in Argentina, it seems that international momentum toward climate action is growing, despite President Trump being the only leader at G20 not to sign onto an agreement reaffirming commitment to the Paris Climate Accord.  In fact, Trump’s administration held a sideshow at COP24 to promote “clean coal,” detracting from the global action on climate change.  

The urgency of climate action was made clear by the recent IPCC Report on Global Warming of 1.5ºC, and the even more recent National Climate Assessment. The responsibility for US action on climate change lies on leaders in the US with the power to make change. Because university endowments often invest heavily in the fossil fuel industry, top-level administrators in higher education have the potential to be these leaders.

Fossil fuel divestment targets polluters who have ravaged the environment and accelerated climate change. Divestment has already shifted $6.24 trillion away from fossil fuel companies.  The premise is simple: institutions with investments in fossil fuels remove their holdings from such companies and reinvest them in climate solutions like renewable energy or sustainable agriculture.  Notable divestment commitments include Ireland, New York City and London, and many systems of higher education across the globe. In the US, some public university systems that have divested from fossil fuels include the University of Massachusetts, University of California, and University of Maryland systems.  

In the state of North Carolina, Warren Wilson and Brevard colleges have both divested, citing the moral obligation for systems of higher education to discontinue profiting off of climate destruction.  While these are great steps, they do not address the combined UNC System endowment, which totaled a collective $5.4 billion as of June 2017.  This sum includes the endowments of 17 institutions in the UNC System. Students from UNC Chapel Hill, NC State, UNC Asheville, UNC Wilmington, Western Carolina University, and Appalachian State University have united to form the NC Reinvest Coalition, recognizing both the moral imperative behind fossil fuel divestment as well as the promising financial returns that have been demonstrated by sustainable investing.  We are committed to ensuring that the UNC System’s investments are aligned with its values; we cannot condone our institutions’ environmental destruction and contributions to the climate crisis.

Administrators in the UNC System suggest that divesting would negatively impact returns on investment, but that is not the case. In fact, at NC State University, a portion of the endowment is already invested exclusively in socially and environmentally responsible (SRI) funds. Since its inception in 2015, this $50 million portion of the endowment has consistently outperformed its traditionally invested counterpart, according to Bloomberg and publicly available information on both funds. If one acknowledges that addressing climate change means ending use of fossil fuels as we do today, then fossil fuels pose a long-term investment risk; therefore, they are financially unsuited for university portfolios, which aim to preserve long term returns.  

Furthermore, divestment is inconsistent with the missions of our institutions. How can institutions that express a commitment to “incorporate economic, social and environmental sustainability into our institutional practices” invest in companies that are doing just the opposite? How does contributing millions of dollars to dirty fuel companies help build a just and sustainable future? How can a university tout “Environmental Sustainability” as one of its guiding principles, yet simultaneously use its endowment to prop up oil and coal?

The decision to divest is not just one that has to be embraced by universities within the UNC System. Jon King, the president of the UNC Management Company, which invests the UNC System endowments, has expressed firm resistance to fossil fuel divestment and sustainable investing. The lack of transparency and commitment to client satisfaction from UNC Management Company is shocking. UNC System schools do not receive any information about where our money is invested apart from what is publicly available online.  This is almost unheard of, especially considering that the UNC System schools are clients of the UNC Management Company.

NC Reinvest Coalition and UNC System students are demanding that universities remove their endowed holdings from UNC Management Company if UNCMC refuses to become a signatory to the United Nations Principles of Responsible Investment (UNPRI), and grant a fossil fuel divestment request.  Beyond fossil fuel divestment, we ask that UNC Management Company incorporate SRI approaches into their management strategy; if not, a new management company should be considered.  

In October 2018, UNC Asheville released a Request For Proposal seeking an investment manager who has the ability to provide necessary returns on system endowments while incorporating sustainable investing into their investment approach.  Such a company would have the capacity to invest the UNC System’s assets in a socially and environmentally responsible manner. We applaud the steps that UNC Asheville has taken to bring its investment policies into step with its institutional values, and we hope that UNCMC and the rest of the institutions in the UNC System follow suit shortly. The social and environmental health of North Carolina depends on it.    

Contact:

reinvestnc.org

NC Reinvest Coalition on Facebook & Twitter

James Smith jsmith18@unca.edu

Meredith Bain mbbain@ncsu.edu

 

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