REED: The ethical investor?

Last November, the majority of Yale’s student body voted in a referendum asking Yale to divest its endowment from the worst fossil fuel companies.

At its annual open meeting this January, the Yale Advisory Committee on Investor Responsibility announced it was ready to take the first step in the Fossil Free Yale proposal, asking companies to disclose their greenhouse gas emissions. The ACIR is an advisory body, composed of faculty, staff, alumni and students. The ACIR makes recommendations to the Yale Corporation Committee on Investor Responsibility (CCIR), which has decision-making power.

Following the January open meeting and continued conversations with Fossil Free Yale, the chairman of the ACIR, Professor Jonathan Macey, drafted a letter that was to be sent to companies requesting disclosure of greenhouse gas emissions.

On Feb. 22, the CCIR held its annual meeting with the ACIR. The CCIR did not make any decisions at the meeting, and instructed the ACIR to refrain from sending any letters requesting that companies disclose emissions at that time. The meeting ended inconclusively, with the Committee citing a need for more time to deliberate.

While we trust that the CCIR has a genuine desire to take appropriate action, by delaying this initial gesture, the Corporation members seem to lack the appropriate sense of urgency about the issue. The International Energy Agency’s 2012 World Energy Outlook Report declares that “if action to reduce CO2 emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in by energy infrastructure existing at that time.” The 2010 World Bank Development Report and the 2010 United Nations Environmental Programme Report on the emissions gap confirm the need for action, setting a similar action deadline of 2020.

It is puzzling that the members of the CCIR did not immediately accept the recommendation of Macey, who has been carefully considering fossil fuel investment questions. Macey is an expert in corporate law and securities regulations, and he has written publicly about matters of corporate disclosure. At the January open meeting, Macey said he did not expect the CCIR to disapprove of the requests for disclosure. He even suggested that his jurisdiction to do so would not require express involvement of the CCIR. Evidently, CCIR members must have felt strongly about prohibiting this initial gesture.

It is confusing to me why the CCIR would feel so strongly that requests for disclosure would be unwise. It is hard to imagine any financial risks or negative press attention that could come from requesting that a set of companies voluntarily disclose emissions metrics. The metrics discussed were the same metrics specified in the Fossil Free Yale proposal. These metrics were successfully subjected to expert Yale faculty review last semester. Requesting that companies disclose emissions would simply provide investors with more information to evaluate the sustainability or climate risk of these companies.

Although the CCIR’s meetings are open to neither students nor the public, the CCIR has committed to continue conversation about the proposal. As the Corporation members consider how to best take action regarding Yale’s investments in the most emissions-intensive fossil fuel companies, this week the United Nations’ Intergovernmental Panel on Climate Change released its Fifth Assessment Report on the impacts of climate change. Among the categories of impacts are rising global food prices, decreasing usable water, increased risk of extreme weather events and exacerbation of global economic inequality.

In the interest of full transparency, here is what we at Fossil Free Yale know about the CCIR: There are currently three members. The chairman, Neal Keny-Guyer, leads the international disaster relief nonprofit Mercy Corps. Committee veteran Paul Lewis Joskow is professor emeritus of economics and climate policy at the Massachusetts Institute of Technology. The third CCIR member, Catharine Bond Hill, is president of Vassar College. Although none of the trustees has publicly commented on the Fossil Free Yale proposal for responsible energy investment at Yale, Hill’s administration rejected Vassar students’ more aggressive proposal for divestment last year, and Joskow has previously served on the Board of TransCanada, the large Canadian oil company behind the Keystone XL pipeline.

Given their backgrounds, I am sure that the CCIR members are aware of the impacts of climate change and the urgent need for solutions. Although I am perplexed that they have delayed the innocuous first steps proposed by Macey, I commend the trustees for continuing the conversation after their first meeting with the ACIR. I hope that, in the past month, they have had time to carefully review the unique Yale student proposal for responsible energy investment. As a volatile future approaches, we ask that the University does for investments what it has done through campus sustainability efforts: Take an ethical stand to mitigate the risk that climate change poses to our world.

Patrick Reed is a junior in Branford College and treasurer of Fossil Free Yale. Contact him at patrick.reed@yale.edu .

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