Dear Students, Faculty, Staff, Alumni, and other members of the Santa Clara University community,
In June of 2015, Michael Hindery, SCU’s Vice President for Finance & Administration, sent an email to all campus affiliates on the topic of fossil fuel divestment. This letter formally laid out the administration’s stance on the issue for the first time.
For the past two and a half years, Fossil Free SCU has advocated for the immediate cessation of new investments in fossil fuel extraction companies and complete divestment from these corporations within five years. The fossil fuel industry perpetuates an oppressive system that marginalizes the poor and disenfranchised communities our Jesuit values call us to protect. To fund this extractive economy is to perpetuate an unjust world in order to profit from the wreckage. In our many meetings with members of the Board of Trustees, Michael Hindery, President Michael Engh, CIO John Kerrigan and others, Fossil Free SCU members voiced their wide range of concerns in financially supporting the companies that contribute most to climate change.
The Administration’s current response to our call to divest, summarized from the letter, is as follows:
- Continuation of all current and future fossil fuel investments with no reduction commitments.
- A minimum $5 million investment in the Catholic Endowment Fund.
- $5-10 million investment in funds focused on sustainability and renewable energy sources, such as the recent Shared-X investment.
- Introduction of the Campus Sustainability Investment Fund.
While we support the new, sustainable investments, the University’s decision to not divest is unacceptable. In the following paragraphs, we respond to this decision.
A large part of the University’s decision rests on the fact that all of SCU’s fossil fuel investments are in commingled funds (no direct investments). The administration has maintained that individual investors cannot mandate that certain holdings be screened out of these funds. However, the University’s Socially Responsible Investment Guidelines already establishes a list of companies and industries to avoid, including those repeatedly cited for gross ecological violations or for harming human life. For this reason, we divested from South African Apartheid decades ago and Massey Energy in 2009. The fossil fuel industry, just like the focuses of past successful divestment efforts, violates many of the University’s preexisting socially responsible criteria. Therefore, it should already be excluded under our current investment policy. If we trust the Administration’s assertion that our commingled funds do not include any investments that violate our socially responsible criteria, implying they can sufficiently influence the composition of funds, why can’t fossil fuel extraction companies be included in our investment screens?
While fossil fuels are an undeniably lucrative short-term investment, they are also a stranded asset, meaning that they are overvalued in the long-term. In the near future, fossil fuel industry will be succeeded by renewable energies – the definition of fiscally unsustainable. Fossil fuel investments carry risk, as well. Take the recent example of Shell Oil, who after abandoning their plans for drilling in the Arctic lost billions of dollars. For reinvestment, Fossil Free SCU advocates for companies that have sustainable business plans, like renewable energies. In contrast to their oil, gas and coal counterparts, wind and solar returns are increasing at a growing rate, a highly profitable opportunity. We also strive to reinvest in funds that support cooperative, local, “living economies”, which helps to transition to a more just and democratic society.
This past November, SCU hosted “Our Future on a Shared Planet: Silicon Valley in Conversation with the Environmental Teachings of Pope Francis”, a conference focusing on the recent papal encyclical Laudato Si. The conference’s final panel (video recording available here) focused on the encyclical’s implications for Santa Clara’s mission, community, and social responsibility. The speakers discussed how a rapidly growing portion of the human family is being displaced by the negative consequences of climate change: sea level rise and flooding of ancestral lands, drought and resulting crop failure, and, as seen in southwest Asia, political instability and the rise of global terrorism. Climate refugees, and most people in the developing world, often do not have the resources or time to advocate for environmental justice. Consequently, as privileged members of the Western world, and as part of a wealthy, predominantly white Catholic institution, it is our duty to mitigate the effects of climate change for which we are most responsible. Santa Clara needs to show that it cares about the plight of our impoverished brothers and sisters when it actually matters, not only when it is fiscally convenient to do so. In this case, that action is to divest.
In agreement with the Administrative letter, the University has done well in campus sustainability. Our STARS report (Sustainability Tracking, Assessment and Rating System) is higher than many other schools in the nation. Yet, under the “Investment” category, we score a miniscule 0.76 points out of 7.0 points possible, a significant loss. Unfortunately, the University’s action on sustainability does not currently extend the boundaries of our campus to encompass the wider community of which we are a part. We are not a leader in climate neutrality, nor in sustainable practice, until we begin to take necessary progressive action like divestment.
Divestment from fossil fuels is a critical step in curbing irreversible damage to our planet, and showing through action, rather than through words alone, that Santa Clara University does not support the morals and practices of these corporations. By divesting, SCU will create an avenue for long term financial stability, return to its core values, and finally take its place as a leader among Jesuit universities in sustainable action and social justice. As Pope Francis writes, “Human beings, while capable of the worst, are also capable of rising above themselves, choosing again what is good, and making a new start.” It is time for Santa Clara University to begin that start.
Fossil Free SCU, a joint campaign by SCCAP’s BLEJIT program and the student-run GREEN Club.
Yesterday, Santa Clara University’s VP of Finance & Administration, Michael Hindery, sent a campus-wide email regarding divestment and sustainable investment. While committing to investment in several new socially just and sustainable funds in the next year (such as the Catholic Endowment Fund), Mr. Hindery also stated that the University would not be divesting from fossil fuel industry. Citing that SCU’s sole investments in fossil fuels were in commingled funds, divestment would “leave us in an irresponsibly un-diversified and financially unsound position.”
Fossil Free SCU will be continuing this dialogue with administration, students, faculty, and staff to incorporate a larger theme of environmental justice both on and off campus – goals that include completely divesting our portfolio from the fossil fuel industry, as well as socially just, sustainable reinvestment. In the coming days, Fossil Free SCU will be writing a response to the announcement. We invite you to read this USA Today article to learn more about the issue.
Santa Clara Continues to Invest in Fossil Fuels
Student coalition puts pressure on Chief Investment Officer, administration resists portfolio transparency
THE SANTA CLARA
December 8, 2014
Throughout the Silicon Valley and the nation, Santa Clara is recognized as a pioneer in advocating for sustainable practices, yet the institution remains invested in energy companies whose pollutants are a substantial cause of global warming.
On Monday, a panel of four individuals presented their professional views on the divestment debate at a discussion hosted by the Markkula Center for Applied Ethics.
Students, faculty and members of the panel urged the university to pull any money invested, in oil, coal and natural gas companies, also known as fossil fuel extraction companies. Chief Investment Officer John Kerrigan discussed the financial concerns of the university’s investment in the energy industry.
Previous Attempts for a Fossil Free Campus:
In the fall of 2013, two campus environmental justice groups formed Fossil Free SCU. The coalition has been pushing Santa Clara to join the ranks of other American college campuses that have divested funds from fossil fuel extraction companies.
The group’s ultimate goal is to prompt Santa Clara to freeze any new investments in fossil fuel extraction companies.
They also aim to convince the administration to divest from any direct and commingled funds, including fossil fuel stock and corporate bonds, within five years. Commingled funds are portfolios consisting of sums of money from various investors.
Students in the coalition have met with Chief Investment Officer John Kerrigan six times in the past year, according to senior Lisa McMonagle, a student leader in the Fossil Free SCU movement.
“We still don’t know what stocks we hold in fossil fuels, which we are still really, really interested in because we want to look into the companies that we hold (stock in) and see what they are actually doing,” said McMonagle.
According to Kerrigan, “well less” than half of the 15 percent Santa Clara has invested in real assets — or real estate, commodities and energy investments — is in the energy sector.
The university still has not pledged to divest, nor has it disclosed the sum of its investments or which companies it has invested in.
The Debate on Divestment:
At Monday’s panel, Kerrigan discussed the university’s endowment, which is the money the school makes from investing.
He read excerpts of the Investment Policy Statement, including a call “to respect the environment and preserve it for the well-being of future generations by not investing in corporations that have been cited for repeated or gross ecological violations.”
McMonagle represented Fossil Free SCU at the panel, stating that the coalition stemmed from a fossil free divestment movement that was started in 2012 by the organization 350.org.
“(Fossil fuel extraction) companies continue to put enormous amounts of carbon into the atmosphere without paying any price,” McMonagle said. “We, as young people, are going to be the ones to pay for it.”
She informed the audience that the divestment movement is largely based on the numbers 2 degrees Celsius, 565 gigatons and 2,795 gigatons.
Senior Krishan Allen, another panel member, said divesting from fossil fuel companies would not harm the corporations because other businesses would buy up that stock. Allen is one of three recipients of the Hackworth Fellowship. He was awarded a $4,000 stipend to create a guide for students on ethics and finance which covers various topics, including divestment.
“I think it’s tough to ask a huge endowment to remove investments from (commingled funds),” said Allen in an interview. “Ethically, it makes sense in a very obvious manner, but it is more complex than you think.”
According to Allen, commingled funds are “popular within institutions” because they come with huge tax benefits, as opposed to mutual funds.
Kirk Hanson, executive director of the Markkula Center for Applied Ethics and the fourth panelist, said Santa Clara previously divested from tobacco in the ’90s due to ethical concerns, and there is “always a struggle on the impact of divestment.” He urged the university “to be a part of the rising crescendo of (fossil fuel) divestment,” noting that Stanford divested its direct funds in coal energy, this past May.
Following the presentations, the forum opened up for the panel to voice their personal opinions and debate the issue with the attending faculty and students.
Kerrigan said that those who support divestment are hypocritical because consumers “technically” burn fossil fuels through driving cars, flying on planes and taking public transportation.
“I think demonizing and shaming a particular asset class in the investment world, the energy asset class, is kind of silly, given humankind, meaning you and I, benefit tremendously from this asset class,” Kerrigan said.
A member of the audience rebutted Kerrigan’s declaration, saying the movement is a call to find alternative energy and not to demonize the fossil fuel industry. She stated the problem is that energy is solely consumed from fossil fuels because it is “our only choice” of energy.
“Poor oil companies,” said Hanson mockingly. “You know, I want to say that there are other ways they might peruse their business. (There is) a lot of interest in how can we get oil companies to transfer more of their efforts into a variety of clean fuels. That’s not demonizing.”
Another audience member asked McMonagle about the effects climate change would have the human population if the average global temperature were to rise above 2 degrees Celsius.
McMonagle said sea levels would rise and flood out many island nations. Ocean acidification would kill off some marine species, impacting developing nations that rely heavily on the fishing industry for their main source of food supply. She also said climate change-related storms, such as Hurricane Sandy, would develop more frequently.
According to McMonagle, unstoppable negative feedback loops would occur once “we pass that 2 degree threshold,” such as ice melting in the tundra. Methane, the most potent greenhouse gas, is trapped below the tundra, and as the tundra ice continues to melt, more methane will be released, speeding up the process of global warming, she added.
A member of the audience asked Kerrigan why the university is not willing to theoretically give up money in order to maintain the Santa Clara’s Jesuit mission to build a just and sustainable world.
“We are taking a hit today in order to maintain the mission, to the extent that we have,” said Kerrigan.
However, when pressed by McMonagle, Kerrigan did not provide the audience with concrete examples of how the Investment Office specifically abides by the portion of the Investment Policy Statement on socially responsible investing to preserve the environment for the well-being of future generations.
“One of the things we have talked about is buying a fossil free index for the portfolio, just for its own sake,” said Kerrigan.
Why Transparency is Key:
Despite recent controversy over fossil fuel divestment, Santa Clara won the 2014 Acterra Award for Sustainability, an honor presented annually to one business in the Bay Area that portrays “exemplary environmental leadership.” This year, Santa Clara beat out finalists including Google and SunPower Corporation.
In addition, the Sustainability Tracking, Assessment & Rating System, a transparent, self-reporting framework for universities to measure sustainability performance, gave Santa Clara a Gold rating, which is the highest rating any university has received.
Santa Clara scored exceptionally well in categories such as sustainable curriculum and sustainable campus engagement.
However, this year, the university only received a .76 out of 7 possible points for the investment category of sustainable performance in the rating system.
“One of our weakest areas in STARS right now is in our endowment,” said John Farnsworth, senior lecturer in the Environmental Studies and Sciences Department. “It’s not transparent. We lose points for that.”
Farnsworth is a part of a small group of faculty members who sent a letter to the faculty senate the first week of November to spark up conversation about divesting and to help lead the Fossil Free SCU movement.
Kerrigan, however, does not agree with STARS’ methodology of “placing a high premium on transparency” in rating the sustainability of higher education institutes’ investment portfolios.
“If we were to publish our holdings it would be like, you know, Velcro for controversy,” he said at Monday’s debate. “And frankly our primary job is to invest for returns, not to spend our lives arguing.”
As the aftermaths of the debate linger on campus, McMonagle is eager to take further action in the upcoming winter quarter.
According to McMonagle, a lot of committed leaders of the movement are returning to Santa Clara’s campus next quarter from study abroad programs.