Solomon Medintz: U-M has $1 billion invested in fossil fuels. Let the PCCN talk about it.
A couple weeks ago, my colleague Timothy Spurlin wrote a great article explaining why fossil fuel divestment is necessary and why the University of Michigan should divest. He is right, but I want to go over some of the logistical barriers that are preventing U-M from divesting. In the column, Spurlin says that divesting is complicated. He’s not wrong that the process of divestment would be difficult, but President Mark Schlissel could take the clear and obvious first step of letting the President’s Commission on Carbon Neutrality discuss divestment.
On Oct. 4, 2018, President Schissel created the PCCN. He charged the commission to recommend a path for the University to achieve carbon neutrality and to contribute to a “sustainable and just world.” While the commission’s charge is nominally ambitious, it is also contradictory; the PCCN was created to get the University to carbon neutrality, but it cannot engage with some of our biggest sources of carbon, including the expansion of the Central Power Plant and investments in fossil fuels. Schlissel has explicitly banned the commission from discussing these issues. This ban is especially egregious because the University has at least $1 billion of its endowment invested in fossil fuels extraction. And that number is rapidly increasing. Our tuition money is directly bankrolling the very industry creating the climate crisis. Refusing to even discuss the possibility of extricating U-M money from the fossil fuel industry means the University, even if it achieves carbon neutrality on its campuses, will continue footing the bill for the extraction and burning of fossil fuel around the globe. For this reason, Schlissel should let the commission discuss divestment.
How do we know the University has $1 billion invested in fossil fuels? Of the University’s $12.4 billion endowment, 8.2 percent of that money is devoted to “Natural Resources,” which brings the total to over $1 billion. The University is somewhat secretive about where the money from its endowment is going. We only have access to the most recent years of investments, but here are some of the highlights: In April 2018, the University invested $75 million into Kayne Private Energy Income Fund II, L.P., a natural resources private equity fund that “will take advantage of increased long-term demand for natural gas … and … will acquire large, long-life gas assets.” They also committed $50 million to PetroCap Partners III, L.P. to invest in “strong operators in oil and gas projects.”
The University also says that the “Natural Resources” category of the endowment is not just oil and gas. They recently changed the section name from “Energy” to “Natural Resource” to suggest they are transitioning their investments to renewable energy sources. However, when comparing the relative returns of U-M’s investments to market-wide standards, they compare it to “the MSCI World Energy Sector Index, as energy is by far the largest component of this asset class.” “Natural Resources” really just means “Oil and Gas.” And the transition from oil and gas to renewables, if it is happening at all, is going slowly. The recent endowment reports show that of the 11 recent “Natural Resources” investments, 10 are in oil and gas and one is in renewables.
Why should the University divest? Besides the University’s own goal of carbon neutrality, the most recent reports from the Intergovernmental Panel on Climate Change say that humans need to nearly halve global greenhouse gas emissions by 2030 to avoid the worst consequences of the climate crisis. If we trust these scientifically-based limits on greenhouse gases, it makes no sense to continue investing in fossil fuel projects that only encourage further extraction and burning of fossil fuels for the next 30 years. We need to undo these investments, stop making the investments altogether or at the very least have a conversation about it. But President Schlissel won’t allow the PCCN to have the conversation.
Also, fossil fuels meet the University’s own criteria for divestment. When asked about divestment by both faculty and students at the President’s Special Town Hall on Carbon Neutrality on April 9, Schlissel said, “Essentially, we don’t divest,” and ended the conversation. He is mistaken. The University has actually divested twice and even has an explicit policy for divestment, though it is insufficient and unclear, as I wrote last April. Despite this lack of clarity, fossil fuels meet the policy’s three criteria for divestment.
The first criterion is that “The concern to be explored must express the broadly and consistently held position of the campus community over time.” There is absolutely broad student and faculty support for divestment right now. On the student side, more than 10,000 people came to the Washtenaw County Climate Strikes in March and September, respectively. After the March 15 strike, students conducted an extended study-in at the Fleming Administration Building for three weeks, calling for — among other things — divestment. On the faculty side, more than 300 staff members signed a letter last year calling for the University to divest from fossil fuels. Not only is there broad consensus right now, but there has been consensus for a long time. The Daily wrote editorials calling for fossil fuel divestment in 2014 and 2015.
The second criterion is that, “There must be reason to believe that the behavior or action in question may be antithetical to the core mission and values of the University.” The only way that fossil fuel investments do not meet this criterion is if you believe that investing in fossil fuels does not accelerate the climate crisis, or that contributing to the climate crisis is not antithetical to the University’s core values. Schlissel created the PCCN to recommend a path to carbon neutrality for U-M and to contribute to a sustainable and just world. This mission statement shows that the University recognizes its contributions to the climate crisis as antithetical to its core values. The University’s investments in fossil fuels are one such significant contribution, and should be treated as incongruent with its core values.
The third criterion is that, “There must be reason to believe that the organization, industry or entity to be singled out may be uniquely responsible for the problems identified.” One hundred fossil fuel companies are responsible for 71 percent of global emissions. Furthermore, fossil fuel companies like Exxon Mobil were aware of climate-changing risks from burning fossil fuels as far back as the 1970s, but concealed that science while undertaking massive, expensive disinformation campaigns to sow doubt in our society about the independent scientific evidence of climate change. This industry is uniquely responsible both for creating the climate crisis and for concealing its risks for decades.
So, the University has reason to divest from fossil fuels to follow its divestment policy, accomplish its goal of carbon neutrality and help the world meet the IPCC’s scientifically-required reductions in greenhouse gases. The University also has experience with divestment. When the University divested from South Africa during Apartheid and from the tobacco industry, it created committees to discuss and recommend whether or not to divest. The commission could serve a similar purpose, but U-M explicitly forbid its members from discussing divestment.
Finally, Schlissel should let the commission discuss divestment because it is a reasonable thing to do! Schlissel says he is no expert in carbon neutrality, which is why he appointed the commission. And to members of the Climate Action Movement, he says that we should trust the process and recommendations of the commission. But by silencing the commission on divestment, Schlissel shows that he does not trust it and is not committed to the political and financial steps required for U-M to achieve full carbon neutrality. The University should trust its experts on the commission to make decisions about our entire carbon footprint, not just the carbon sources that are convenient to eliminate. What is frustrating about this for me personally is that it would not be logistically hard to allow the commission to discuss divestment. All Schlissel has to do is give the order and the process would start. And while I don’t know this for sure, I speculate the expert members of the PCCN would be excited to hold productive discussions on divestment.
The PCCN could even look to peer institutions for guidance. Many universities have already divested, both for moral and financial reasons. In September, two officials from the University of California co-authored an op-ed explaining they are divesting for financial reasons (though it was more likely organized pressure from students and faculty). They said, “We continue to believe there are more attractive investment opportunities in new energy sources than in old fossil fuels.”
Syracuse University, which also moved towards divestment from fossil fuels in 2015, reported that divesting from fossil fuels did not hurt the endowment. The University of Massachusetts, University of Maryland and Smith College have also divested. Letting the commission talk about fossil fuel divestment would align with the University’s stated value of carbon neutrality. This would allow the University’s divestment guidelines to work as intended, give appropriate weight to the severity of the scientifically-established, ongoing damage from the climate crisis and bring U-M into alignment with peer institutions working on carbon neutrality.
Solomon Medintz can be reached at firstname.lastname@example.org.