University of California DIVESTS in fossil fuels, but why?
Graphic by Sydney Huang
In the wake of climate change and global warming, fierce new faces and initiatives have been taken up in an effort to prevent the impending death of our planet. Proving to be no exception to this, the UC have chosen to disinvest in fossil fuels, as stated in an LA Times opinion article written by UCOP Chief Investment Officer and Vice President of Investments Jagdeep Singh Bachher and chair of the UC Board of Regents’ Investment Committee Richard Sherman.
“We believe hanging on to fossil fuel assets is a financial risk,” Bachher and Sherman said, furthering that the UC’s $13.4-billion endowment and $70-billion pension would both be “fossil free” by the end of Sept.2019.
Though it was stated quite matter-of-factly, UC’s decision to disinvest in fossil fuels actually had its roots planted in 2014 when Bachher and Sherman were newly engaged in their roles as the university’s investors and fiduciaries.
“[There] was no structural approach to sustainable investing,” their LA Times article stated. Bachher and Sherman continued on about the implementation of environmental, social and governance (ESG) factors in their investment decision making and how they enabled a complete change in the growth capacity of the UC’s investments and finances.
It was also in 2014 that the UC signed onto the United Nations Principles for Responsible Investing, becoming the first public university to do so. A year later, UC published its own Framework for Sustainable Investing.
The Framework for Sustainable Investing, which includes the eight most fundamental ESG factors identified, addresses a common misconception in the world of finance: “‘fiduciary duty’ prevents [those in charge from] considering any values that are more intrinsic than the best possible risk adjusted returns available in markets.” Fiduciary duty implies that earning the most money is at the forefront of all other factors, “regardless of the “moral” dimension of the source of those funds.” The framework emphasizes the importance of the “certain core sustainability values” and how the UC plays a significant role in responding to “new and dynamic market conditions” and ensuring the best return on investments.
However, in the recent LA Times article published three years after the framework, there is less of a stress on the environmental concerns surrounding fossil fuels. Instead, there is a focus on the question of sustainability and financial security.
“We want to ensure that the more than 320,000 people currently receiving a UC pension actually get paid, that we can continue to fund research and scholarships throughout the UC system,” the article said.
It just so happens that they believe the financial future of UC is secured in clean energy. But what if it wasn’t?
With there being so much emphasis on the importance of renewable energy and sustainability in the world today, does it really matter why the UC decided to divest in fossil fuels if the end result is one that is best for both the planet and the people?
This now becomes a matter of whether the ends justify the means since this is rather telling of how the UC might react to other areas of investment that don’t necessarily reap the most financial gain for them but constitutes the “morally” right decision.
Both Bachher and Sherman realized that their reasons may not be the “moral imperative that many activists embrace,” but nevertheless stressed that their priorities lie in “helping to ensure the financial viability” of UC. This takes into consideration the varying perspectives that the UC’s stakeholders have on an issue, “even one as terrifyingly consequential as climate change.”
What if the defining perspective was one that disregarded the “terrifying” consequences of climate change? It is a privilege to be able to say that they have “chosen to invest for a better planet, and reap the financial rewards for UC, rather than simply divest for a headline.”
Alana Tse is a second year literary journalism major. She can be reached at firstname.lastname@example.org