This week, Harvard became the first American university to adopt UN-backed guidelines for responsible investment. The guidelines require the Harvard Management Company to consider environmental factors when managing the university’s $33 billion endowment, the largest in the country. In addition, Harvard agreed to join the Carbon Disclosure Project and to cut greenhouse gas emissions 30% from 2006 levels by 2016.
But the university stopped short of committing to a further green action: selling its holdings in fossil fuel companies. According to recent SEC filings, Harvard has $34.6 million invested in the top 200 fossil fuel companies, such as Exxon Mobil and ConocoPhillips. It also has millions invested indirectly in the industry.
Since 2012, a Harvard student group has repeatedly called on the university to divest its fossil fuel holdings and to reinvest in socially responsible funds. In the words of the group, the top 200 fossil fuel companies are “directly linked to accelerating global warming”. If they burn more than 20% of their reserves, “our planet will likely be locked into irreversible warming at a rate above two degrees Celsius”. Furthermore, many of the companies have “spent millions of dollars on…disinformation tactics that seek to confuse the public on global warming science” and “actively undermine the conclusions of our research and education”. By investing in the industry, the university is complicit in these actions.
Harvard President Drew Faust, however, opposes divestment on several grounds. Foremost, she argues that the endowment exists solely to advance Harvard’s academic mission, “not to serve other purposes, however worthy”. Limiting investment options could “significantly constrain investment returns”, which funds over 1/3 of university operations. Secondly, Faust maintains that universities own a “very small fraction of the market capitalization of fossil fuel companies”. Thus, divestment would have a “negligible financial impact” and would diminish Harvard’s influence over the industry. Third, Faust notes that fossil fuels remain essential, fueling everything from our lights to our computers. She suggests that boycotting the industry would therefore prove hypocritical. Finally, Faust asserts that there are more effective ways for Harvard to address climate change. In particular, she cites the university’s teaching and research.
But Faust’s arguments don’t hold water. First, if universities have “very small” holdings in fossil fuel companies, divestment should not significantly constrain investment returns, nor jeopardize universities’ influence over the industry. At the same time, divesting the holdings could greatly impact fossil fuel companies by spurring other investors to dump their shares. Certainly, achieving such outcomes is not the primary goal of Harvard’s endowment. However, the endowment has divested from other companies in the past for political purposes, including tobacco companies and those linked to apartheid. Lastly, our current dependence of fossil fuels does not justify our continued investment in the industry. If anything, it creates an added incentive to invest in renewable solutions. This can compliment other initiatives, including climate change teaching and research.
Groups in 300+ American universities agree and continue to push for fossil fuel divestment. To date, groups at 10 universities have succeeded, including Green Mountain College, Unity College, and Hampshire College. According to Paul Foteyn, President of Green Mountain College, “We see this as another step in an ongoing effort to connect our investment decisions with our ideals”. Stephen Mulkey, President of Unity College, adds “In the near future, the political tide will turn and the public will demand action on climate change. Our students are already demanding action, and we must not ignore them.”
In sum, Harvard’s decision to adopt guidelines for responsible investment is a step in the right direction. However, given the catastrophic threat of climate change, the decision fails to go far enough. It’s time for Harvard and other universities to heed the resounding calls of students. It’s time to fully divest from fossil fuels.