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The University of Michigan Board of Regents voted to discontinue investments in companies engaged in oil reserves, oil extraction or thermal-coal extraction at Thursday’s Regents meeting. The board also committed to a net-zero investment portfolio by 2050 and approved $140 million of new investments in renewable energy sources.
The University will no longer directly invest in companies that are the largest contributors to greenhouse gases, which are defined as the top 100 coal and top 100 oil and gas publicly traded companies in the world, as compiled by the Carbon Underground 200 list. The University will also discontinue investments into funds that have ties to oil reserve depletion or extraction. This strategy will be paired with investments into infrastructure and utilities that support or correlate with a transition to a carbon-neutral economy.
The vote was unanimous, though Regents Katherine White (D) and Ron Weiser (R) were not present at the meeting. Weiser, who faced controversy and calls for his resignation in January over his initial response to the Capitol insurrection, has yet to attend a Regents meeting in 2021.
This vote comes after years of sustained activism by community members criticizing the University’s investments in fossil fuels, and after repeated pushback by the University’s administration claiming disinvestment from fossil fuels would harm the University’s financial sustainability. By making the commitment to discontinue investments tied to fossil fuels, the University joins other top institutions of higher education that have made similar commitments like the University of California, Brown and Columbia.
The board temporarily froze fossil fuel investments in February 2020 and studied the issue over the next year before pursuing the more aggressive approach announced Thursday.
In its statement, the Climate Action Movement, the main group that had pushed for divestment, claimed this as a “hard-won victory” but criticized the long-term divestment approach.
“U-M’s partial divestment and commitment to reinvestment in renewable energy are crucial steps toward toppling this malignant industry, and one driven by almost a decade of student activism, during which the administration arrested and charged peaceful students rather than meet to address U-M’s inaction on climate,” the statement read. “However, the lack of a rapid timeline for selling its existing fossil fuel holdings and continued allowance of investments in so-called natural gas is utterly unacceptable, at a time when we must do everything we can to halt all extraction of fossil fuels.”
CAM also criticized the plan for continuing to allow endowment investment into natural gas, a type of fossil fuel, through private equity funds and for not addressing the “structural deficiencies that led U-M to finance such immoral entities in the first place.”
“These shortcomings underscore the critical need for the implementation of basic, ethical guidelines that ensure U-M’s investments are not detrimental to human rights and for oversight of endowment management through the establishment of a Standing Committee for Responsible Investment (SCRI),” the statement read.
Regent Jordan Acker (D) addressed students after the announcement was made. Acker praised student activists for their diligence in pushing the University to move towards divestment, saying activism on this matter has made the University a better place and he was “proud to vote yes” on the effort.
“Likely, there are moments that you felt that you were yelling into the void about the most important issue of our generation, the threat of climate change,” Acker said. “Your activism matters. Your voice matters. Your passion matters. And yes, your viewpoint matters.”
Later, Acker tweeted that the $140 million in carbon neutral investments was a “good start”, and that the University “should and will do much more.”
The University’s commitment to a net zero endowment is the first from an American public university, Regent Mark Bernstein (D) said at the meeting.
“It’s been said that we are the first generation to feel the effects of climate change, and the last generation that can do something about it,” Bernstein said. “This is a big and complicated problem, and the University of Michigan is in the business of solving big complicated consequential problems; leaders don’t shy away from hard challenges. We must do this, as President Kennedy once said about a different daunting challenge, ‘We have to do this not because it is easy, but because it is hard.’”
University President Mark Schlissel said the University is committed to this shift in investments, which can be seen through the magnitude of the $140 million investment.
“So make no mistake, we’re serious about the change in direction,” Schlissel said. “This strategy is informed by the growing risk of investments in fossil fuels during the essential transition to a lower carbon economy.”
The board approved three separate investments totalling up to $140 million, with the first being a $30 million investment to renewable energy projects from D.E. Shaw, an investment firm.
Schlissel provided specific details into the $140 million the University will invest in renewables. Later in the meeting, The Board of Regents approved the investment requests unanimously.
“U-M will shift its natural resources investment focus away from oil extraction reserves toward renewable energy investments with an attractive risk adjusted return profile,” Schlissel said. “We also will pursue infrastructure and services investments that support more efficient resource utilization, as well as investments into other emerging technologies that support the transition to a carbon neutral economy. The research investments into renewable energy and sustainable infrastructure development will be presented shortly for a vote of the board.”
University Chief Financial Officer Kevin Hagerty said the University would be the only endowment investor in the fund, as D.E. Shaw has not historically pursued foundations or endowments as investors.
“We think we will be able to help this manager identify technological improvements over time, creating additional upside for both the endowment and the environments,” Hagerty said.
Hagerty also requested the committal of $50 million to an investment firm called Aplomado Partners. Aplomado is an investment manager that works with solar developers to help maximize their efficiency in utility solar projects.
“Working with Aplomado allows solar developers to use their time and capital much more efficiently, which enables solar projects to be built far more quickly than is typical,” Hagerty said.
The Board then approved a commitment of up to $60 million, from the University’s long term investment portfolio, to Cresta Sustainable Infrastructure. Cresta Fund Management, a firm based in Dallas that focuses on infrastructure, transportation and sequestration, is an existing U-M investment manager.
“The fund has a broad investment scope, all of which is focused on developing energy transition strategies and technologies, and sustainable infrastructure,” Hagerty said. “We anticipate, for example, that the first two projects the fund will actually make will be a renewable gas project, and a carbon sequestration project.”
The President’s Commission on Carbon Neutrality released last week a series of 50 recommendations to move the University towards complete carbon neutrality in the coming decades. Schlissel said Thursday he will announce action on the items in the coming months.
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