Some universities are shifting their endowments to more low-carbon investments
Under pressure from student groups and others, an increasing number of universities are setting objectives to reduce the carbon footprint of their investment portfolios.
Environmental issues have been a hot topic of discussion in the academic world for some time. Now, an increasing number of Canadian universities – most notably in Quebec – are taking action to reduce their carbon footprint, which includes reviewing their investment policies.
The Fondation de l’Université du Québec à Montréal, for one, claims to be the first university foundation in the country to have fully withdrawn all its investments in fossil fuels, which it did this past September, making it a pioneer among Canadian universities. “Honestly, we thought it would take us a lot longer,” said Pierre Bélanger, the foundation’s executive director. “But in the end, the change only took a few months. We took a risk and it ultimately paid off.”
UQAM is not alone. The Concordia University Foundation recently declared its intention to put an end to these types of investment by 2025. In addition, the university has committed to doubling its investments – from five percent to 10 percent of its endowment – in businesses, organizations and funds that aim to achieve measurable social and environmental impacts, while still maintaining strong financial returns. Université Laval also recently announced its goal of reducing the carbon footprint of its investments by 30 percent within the next five years, and by 50 percent by 2030.
Likewise, in December, McGill University’s board of governors approved the recommendations of a report that the university’s investment committee “reduce the overall carbon emissions of the endowment portfolio,” noting that this would include “a reduction of exposure to the highest carbon-intensive companies in the portfolio, including some within the fossil fuel industry.”
Seeking a consistent approach
Universities elsewhere in Canada are also increasing their efforts – through both their foundations and their pension funds – to lower the carbon impact of their investments. This may take the form of a complete stop to all fossil fuel investments or may involve paying closer attention to specific types of investments, with the explicit goal of reducing the greenhouse gas emissions associated with those investments.
In early December, the University of British Colombia board of governors announced that it supports divesting from fossil fuels and, in the interim, plans to transfer $380 million of university funds from its main $1.71-billion endowment pool to a fossil-free, low carbon fund. The board of governors at Simon Fraser University, meanwhile, recently committed to reducing the carbon footprint of the university’s $900-million investment portfolio by 45 percent below a baseline set in 2016, and to achieve this reduction by 2025.
That’s music to the ears of Mr. Bélanger at UQAM. “Right from the beginning of our transition, we felt there was something happening that was bigger than ourselves,” he said. “You can see it all across the country – it’s a fundamental shift.”
Of course, universities have been subject to increasing pressure to act over the past few years from their students, faculty and the general public. In Quebec, this pressure intensified in 2019 with the rise of a new student movement called La Planète s’invite à l’université. The group’s objectives include a demand that educational institutions be more transparent with regard to their investments and that they eliminate all their investments in the fossil fuel industry.
“Universities need to set an example, and above all they need to be consistent,” said Alizée Girard, a spokesperson for UdeM sans pétrole, the group calling for Université de Montréal to divest from fossil fuels. “Educational institutions in Quebec adopted declarations of a climate emergency this past fall,” she said. “That’s great, but now it’s time to put those words into practice. The climate crisis won’t be resolved with signatures; it will require concrete action.”
Mr. Bélanger at UQAM is in general agreement. “It’s clear that universities have a duty to lead by example, both with regard to their students and society in general,” he said. “It would be difficult for us to defend these types of investments today, just as it would be for the tobacco or arms industries, for example. People quite rightfully expect institutions of higher education to take this kind of position.”
The sticking point here is that some universities have enormous funds to administer. U de M, McGill and UBC – unlike UQAM – manage multi-billion-dollar portfolios. “We can’t just divest millions of dollars overnight,” says U de M’s assistant vice-rector of finance, Matthew Nowakowski. “The risks are too great and, as a university, we have certain performance obligations, especially to our professors. It’s important to remember that some of these funds are there to pay for their retirement.”
In the short term, then, U de M does not intend to withdraw from the petroleum and gas industries. “However, we have signed the United Nations’ principles for responsible investment,” said Mr. Nowakowski. “That forces us to remain vigilant, and to ensure that our new investments have a social and sustainable impact – because, for us, the crisis isn’t limited to environmental changes alone.”
Keeping a seat at the table?
Certain university administrators also believe that by remaining active in the fossil fuel industry, they have a great chance of making their voices heard. “People tend to underestimate financial leverage as a vector of change,” said Denyse Rémillard, vice-rector of administration and sustainable development at Université de Sherbrooke. “But we have a greater ability to influence things from the inside than you might think. By keeping a seat at the table in this industry, we hope to be actors for change.”
U de Sherbrooke, therefore, has no immediate plans to end its fossil fuel investments. Nevertheless, the institution did adopt a “responsible investment” strategy last year and is maintaining a dialogue with the university community to determine where changes can be made in the short, medium and long term. “For now, the goal is to evaluate what the current carbon footprint of our investments looks like,” Dr. Rémillard explained. “We don’t even have that information yet. So before we make a 180-degree turn from our current course, we first want to be sure we have all the right information to do it properly. Then we can look at setting ambitious targets, and we fully intend to.”
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1 Comments
After retiring, over six years ago from the University of Victoria, I withdrew my funds from their management because they were nowhere near divesting from fossil fuels–despite a majority of faculty supporting that option. Since then my portfolio has done significantly better than it did under their management, which it should be said, actually had reasonable returns. Universities have a fiduciary responsibility which most of them do not take lightly–it is often their rationale for retaining investments in what they always refer to as “the energy sector”. Well, the energy sector includes many entities that are NOT based on the extraction of fossil fuels, their shipment and their combustion. I didn’t give up diversification by omitting oil, gas and coal from my portfolio; I gained it by doing what foundations like the Suzuki foundation have done. I put my funds into equities that are far more in touch with what our earth needs. And that is the biggest dividend of all. The idea often put forth that its risky to leave fossil fuels behind is more ideological than factual. It doesn’t have to be that way at all.