Next week the Yale College Council will administer a referendum in which students can demonstrate their stances on fossil fuel divestment. This initiative by the College Council provides me, as Chair of Yale’s Advisory Committee on Investor Responsibility, with the opportunity to describe the role of the ACIR on campus and to provide an update on our work on the fossil fuels issue.

The ACIR follows an approach to investment outlined in “The Ethical Investor,” a book that suggests factors the University’s investors should consider other than maximum returns. The Yale Corporation has adopted the guidelines in “The Ethical Investor” and the ACIR relies on the guidelines in carrying out its responsibilities, which include making recommendations to the Corporation Committee on Investor Responsibility, which can then recommend policies regarding issues such as proxy voting and divestment to the Yale Corporation.

With respect to our policy on divestment, we focus initially on the concept of “social injury.” Social injury is “injurious impact that the activities of a company are found to have on consumers, employees, or other persons.”

Speaking for myself, though I believe that my colleagues on the ACIR share this view, climate change is occurring and is caused by human activities. Both on our own and working with the group Fossil Free Yale, which has made several excellent presentations on the scientific evidence supporting global warming, it has become clear to us that the hypothesis that human factors are causing global warming has been rigorously tested and is valid. Human activities currently release over 30 billion tons of carbon dioxide into the atmosphere every year, far more than from natural sources. For example, human activities release more than 135 times as much carbon dioxide as volcanoes each year.

Thus, it appears clear to me that reducing fossil fuel emissions is an important, and likely the most important strategy for confronting the problem of climate change. The issue, then, is how divestment by Yale would lead to reducing fossil fuel emissions.

Recently, Brown University declined to divest from coal companies. There were two bases for this decision. First, the president held that “a cessation of the production and use of coal would itself create significant economic and social harm to countless communities across the globe.” Second, she wrote that “divestiture would not have a direct effect on the companies in question.”

Harvard also declined to divest recently, though apparently for different reasons. Its president, Drew Faust, defended their decision on the grounds that the money in their endowment was given “to advance academic aims, not to serve other purposes however worthy.” President Faust appears to reject categorically the use of the endowment as “an instrument to impel social or political change.”

Here at Yale, I believe that our situation is different from that at Brown and Harvard in that our students understand the University’s policy of working within the guidelines established by “The Ethical Investor.” Consistent with these guidelines, any recommendation by the ACIR regarding divestment would come, if at all, after a process of engagement with the relevant company. It also is our policy to recommend divestment only as a last resort, and then only if we thought that divesting has the prospect of producing something of benefit in the struggle against climate change.

In recent meetings with Fossil Free Yale, the ACIR has agreed with the students that the next stage of our process should be to encourage energy companies who do not already do so to disclose the environmental impact of their activities in their annual reports and proxy solicitations. In order to begin asking for disclosure, however, we must develop a common metric or set of metrics that would allow the environmental impact of energy companies’ activities to be measured and compared. Working with the students, we have identified metrics that we find promising. We are in the process of communicating with faculty experts to obtain a peer-reviewed evaluation of these metrics.

If a consensus emerges that these metrics actually enable investors to compare investments based on their environmental impact, we will then consider next steps. In particular, we will consider recommending that we write to energy companies whose shares are publicly traded to ask that they voluntarily disclose their performance based on these metrics so that investors can compare among investments on the basis of their environmental impact.

We also are monitoring closely the Securities and Exchange Commission’s (SEC) requirements regarding environmental disclosures. While the SEC has several regulatory provisions that require public companies to disclose environmental information, none of the existing disclosure rules mandates the disclosure of information that permits useful comparisons among companies to be made.

The ACIR continues to work with the Yale community on ethical investment issues in general. We are particularly focused at the moment on our work with Fossil Free Yale.

Jonathan Macey is the Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law and the Chair of the University’s Advisory Commitee on Investor Responsibility. Contact him at