Board of trustees to discuss divestment from fossil fuel companies

The board of trustees will discuss divesting the university endowment from the fossil fuel industry at the request of Lehigh’s Green Action club at the board’s March 1 meeting.

Green Action president Andrew Goldman, ’19, said the club has been calling on Lehigh to divest from the industry for five years.

Last October, members of the club submitted an 18-page report to Lehigh’s board of trustees. The report, which had been in the works for over a year included a call for Lehigh to divest a percentage of its $1.16 billion endowment from top polluting fossil fuel companies.

Divestment – the opposite of investment – is the process of removing capital from stocks, bonds or funds. Since 2010, a growing national movement for fossil fuel divestment has called for institutions, including universities like Lehigh, to pull their money from fossil fuels – mainly oil, coal and gas industries ­– for moral and financial reasons.

However, Lehigh University President John Simon said current political or social issues that may concern populations within the university or that may be a high priority to individuals at the university ­– whether they are faculty, students or staff – do not influence the decisions of the Investment Office.

Goldman said Green Action is asking the university for an immediate freeze on its investments in any of the top 200 most polluting fossil fuel companies, as defined by the Carbon Underground 200 – a list of the top 100 coal and top 100 oil and gas reserve holders in the world, as determined by their carbon emissions. The club is also asking Lehigh for gradual divestment from these companies over the next five years.

Simon said initially the board of trustees had no process to consider a request for divestment from the endowment. After a meeting with Green Action and a corporate trustee, Simon then made a pledge to work with the investment subcommittee and corporate board to devise a process that would allow such requests to be considered. Once the trustees finalized a plan for this process, Green Action submitted its report.

The report comes after a handful of efforts made by Green Action and other university community members to garner support for divestment from fossil fuels.

In October 2016, Green Action held a divestment protest on the UC Front Lawn. Approximately one month later, club members met with administrators, including Simon, to discuss ethical investment policies.

According to Lehigh’s 2016 financial report, 4 percent, or $46 million, of the $1.16 billion endowment is allocated to natural resources.

Chief investment officer Kristin Agatone, who has managed Lehigh’s investments for more than a year and a half, said this 4 percent includes all energy-related investments.

Agatone said she could not disclose a breakdown of Lehigh’s investments in renewable and nonrenewable resources because private investment managers do not share this information with the public.

Goldman said in Green Action’s 2016 meeting with administrators, club members were told that 1.93 percent of the endowment, roughly $22 million, is invested in the fossil fuel industry. Simon could not comment on how much of the endowment is invested in fossil fuels, and The Brown and White was unable to independently verify Goldman’s claim.

Agatone said her office follows an investment policy statement outlined by the board of trustees but the policy does not include guidelines for divestment. This is one reason Lehigh has never divested in any particular industry before.

“There are no policies that guide how (Agatone) would invest or choose to invest the endowment based on those discussions occurring on campus,” Simon said.

Goldman, however, said Lehigh has a responsibility to uphold its Campus Sustainability Plan and its Principles of Our Equitable Community.

He said Lehigh has made some efforts toward sustainability so far with the installation of the LEED Gold Certified STEPS building and the implementation of the sustainability plan itself in 2012.

However, the sustainability plan states the university must “adopt a purchasing policy that will minimize or reduce greenhouse gasses through the purchase of products that save energy in their production, transportation and operation,” and Goldman believes this should also include the purchase of stocks and bonds.

Goldman said the university’s investments also violate Lehigh’s Principles of Our Equitable Community, which states Lehigh is “committed to developing the future leaders of our changing global society.”

He said Lehigh itself is not assuming a global leadership role by investing in industries that contribute to climate change.

Albert Wurth, a political science professor and the adviser to Green Action, said Lehigh should have an investment guidance policy for social, political and humanitarian concerns.

“If universities can’t take the lead in developing science-based policies, it’s a threat to human progress,” Wurth said. “There’s a difference between leadership and completely ignoring the problem.”

In her Kenner Lecture on Feb. 6, Mary Robinson, the former president of Ireland and former UN High Commissioner for Human Rights, called for universities to take the lead, both in their communities and nationally, in divesting from fossil fuels and reinvesting in clean energy.

She acknowledged the process of divestment is difficult, but necessary.

“I do think that universities have a real possibility of being most practiced in their communities of sustainability,” Robinson said, “and that has to include divestment because if you’re investing in the fossil fuels that are part of the problem, then you’re not really speaking with accountability for the future.”

Delicia Nahman, Lehigh’s sustainability officer, said at this point, the university has not committed to any diversification of its investment portfolio.

“If this were a very simple and straightforward challenge with a simple and straightforward solution, I think the university would be open to addressing it,” Nahman said. “I think investment portfolios have always been a challenge to address because there are multiple ramifications.”

Board member Karen Schaufeld, who is an advocate for renewable energy growth in Virginia, said Lehigh must carefully maintain and grow the endowment because many university operations – including financial aid – depend upon it. She said this is just one of the competing ethical challenges that divestment presents.

“It would be very unusual and not particularly productive to switch very quickly form one type of investing program to another one, so these things tend to be gradual,” Schaufeld said. “So I’m sure it will be a very considered, diligent discussion and movement toward where the world is going, and the world just does happen to be going towards a renewable energy sector.”

Some institutions, however, have already made the move to divest.

A report by Arabella investment advisors found that as of December 2016, at least 688 institutions and 58,000 individuals worldwide have committed to divesting from fossil fuels, and an estimated $5.2 trillion has been dedicated to selling off fossil fuel assets.

Stanford University divested from coal companies in 2016. The University of California system and Boston University both divested from coal and oil sands.

“It turns out that investing in fossil fuels isn’t even a good investment at this point,” Goldman said. “We can’t continue to invest in this industry because it’s not going to be profitable. It’s not even profitable right now.”

In a study conducted by Morgan Stanley Capital International between November 2010 and September 2017, researchers tracked two divestment portfolios – one that included companies that owned fossil fuel reserves and a second that excluded these companies, but otherwise remained the same. The study showed that the fossil free portfolio outperformed the fossil inclusive portfolio, and over the seven-year period, the fossil free-portfolio grew 12 percent more than the fossil inclusive one.

Wurth said economic wisdom alone should be enough for the university to move away from investing in fossil fuels.

“The change in the investment is cost free in the sense of the return on the investment,” Wurth said. “We can’t avoid the political costs, or in other words, it may well be that Lehigh does not want to divest from fossil fuel companies because it doesn’t want to alienate the fossil fuel companies, like Exxon, for instance.”

Goldman believes politics is one aspect keeping Lehigh from divesting in fossil fuels.

“Yes, (Lehigh) was built by industrialization and fossil fuel energy, but that doesn’t mean we have to continue to do that,” Goldman said. “You should honor and respect your roots, but there’s a certain point where you need to say, ‘OK, it’s allowed us to get this far, but we can’t let it hold us back.”

Simon said Green Action members helped the administration and trustees identify that the university needed to develop a process by which the board could consider requests regarding investments.

He reiterated that the board is not in the position to consider all requests.

“We think we’ve provided (the board) with a complete, valid and sound argument,” Goldman said. “The ball is in their court now.”