After years of dogged student advocacy, the University’s Investments Office has divested part of Yale’s endowment from the fossil fuel industry.

In a Tuesday letter to Yale’s Advisory Committee on Investor Responsibility, Chief Investment Officer David Swensen reported that after months of talking with Yale’s external investment managers about the potential risks associated with investments in coal and oil, around $10 million of the endowment has been removed from three publicly traded fossil fuel producers. Tuesday’s message follows a letter penned by Swensen in 2014, in which he asked Yale’s investment managers to consider climate change in their investment choices. Although Swensen did not release the names of the investment managers or companies involved, he said that by June 30 of last year — the end of fiscal year 2015 — Yale’s $25.6 billion endowment had only minor holdings in oil sands and thermal coal, which pollute more than other energy industries. Around 6.8 percent of the Yale endowment was invested in natural resources in fiscal year 2015, a drop from the 8.3 percent average of the previous four years.

The announcement comes after five years of sustained student activism, at Yale and across the country, calling for universities to divest completely from fossil fuels. At Yale in particular, students have pointed to the fossil fuel industry’s pernicious environmental and cultural impact, and the University’s stated commitment to ethical investment. While Swensen’s letter did not specifically mention the role of student voices, according to Fossil Free Yale member Nathan Lobel ’17, Swensen told the ACIR that the decision came at least in part due to student organizing.

“The Investments Office believes the risks of climate change, like any risks, should be incorporated in the evaluation of investment opportunities. This is not an easy, straightforward task,” Swensen wrote. “However, initiating and continuing a dialogue with our managers about those risks result in more thoughtful consideration of investment opportunities, higher quality and lower risk portfolios for Yale and better environmental outcomes.”

Several climate change activists criticized Swensen’s letter for grounding the decision in financial considerations rather than ethical ones. While Swensen’s letter demonstrates a willingness to engage with the issue of climate change, Yale’s endowment remains invested in some industries, such as natural gas, that student activists say are still a threat to the environment.

Several hours after the letter was released, members of FFY staged a protest — which had been planned weeks in advance without knowledge of Swensen’s letter — at a colloquium at Sprague Hall with United Nations Secretary-General Ban Ki-moon. FFY member Arabelle Schoenberg ’19, who opened a protest after Ban’s presentation, said that though it was a “huge day for divestment,” the decision to remove $10 million from a few companies was an economic tactic rather than a way to expose the harmful practices of fossil fuel companies.

“This is progress, but this is not divestment,” FFY Communications Director Chelsea Watson ’17 wrote in a statement to the News. She said the shift in Yale’s investment strategies is significant, but that FFY remains committed to achieving divestment for ethical reasons.

“Fossil Free Yale’s entire proposal on why Yale should divest is centered around the fact that the fossil fuel energy creates grave, ethically unsound social injuries,” FFY member Griffin Walsh ’19 said. “The idea that we should divest strictly on an economic basis is offensive to so many people in that it is saying that Yale cares more about its financial state than it does about the wellbeing of the people around the world affected by climate change.”

The letter highlighted two ways in which the University has shifted toward more environmentally conscious investments: taking the $10 million out of the thermal coal and oil sands industries, and avoiding new investments in overtly contaminating energy companies.

Yale’s investment strategy combines in-house endowment management with a host of external investment managers. The announcement that Yale’s external managers are shifting the University’s endowment holdings suggests that these external managers have listened to and showed support for the recommendations Swensen made in 2014.

After conversations with the Investments Office, two of Yale’s external investment-management firms sold their coal and oil sands holdings. The founder of one of the firms agreed that climate change and carbon pricing were “unknowable risks,” and that fossil fuel producers with significant carbon footprints were “declining businesses, a profile the firm preferred to avoid.”

In addition, since Swensen’s 2014 letter, new investments made by Yale’s investment partners have been in keeping with Yale’s investment approach, and Yale has not made any new investments in greenhouse gas-intensive energy companies since then, Swensen said. 

Beyond considering Yale’s holdings in fossil fuel industries, Swensen said Yale’s investment managers should also consider the implications of climate change when evaluating farmland acquisitions in southern locations or the risks of owning low-lying coastal real estate, which could be vulnerable to rising sea levels.

Although FFY criticized Yale’s decision for its apparent lack of ethical motives, Swensen’s 2014 letter explicitly recognized global warming’s “grave threat to human existence.” And a passage in the middle of Swensen’s Tuesday letter suggests ideological considerations as well. He described a recent incident in which Yale had traveled “very far down the path” to hiring a new energy manager, but eventually decided to break ties after what Swensen called a “divergence of views” between Yale and the manager over the risk of climate change and how to account for that risk when investing.

“In part as a result of those conversation, the Investments Office decided not to pursue that investment relationship,” he wrote.

Yale’s endowment saw a 11.5 percent return in fiscal year 2015.

  • Richard Reiss

    “The idea that we should divest strictly on an economic basis is offensive to so many people in that it is saying that Yale cares more about its financial state than it does about the wellbeing of the people around the world affected by climate change.”

    If you stop and think about it, it’s corrosive even to create the impression that it is normal for a place of learning to think that way. What, exactly, is the point of an education? To acquire more property?

  • Richard Reiss

    Insurance conference going on this week in San Diego, with NOAA relaying latest data.

    http://www.insurancejournal.com/news/national/2016/04/12/405089.htm

    “Margaret Davidson, NOAA’s senior advisor for coastal inundation and resilience science and services, and Michael Angelina, executive director of the Academy of Risk Management and Insurance, offered their take on climate change data in a conference session titled “Environmental Intelligence: Quantifying the Risks of Climate Change.”

    Davidson said recent data that has been collected but has yet to be made official indicates sea levels could rise by roughly 3 meters by 2050-2060, far higher and quicker than current projections. Until now most projections have warned of seal level rise of up to 4 feet by 2100.

    These new findings will likely be released in the latest sets of reports on climate change due out in the next few years.

    ‘The latest field data out of West Antarctic is kind of an OMG thing,’ she said.”

    • sy

      What NOAH and FFY won’t say: How high do they raise hydrocarbon fuel prices or a carbon tax to reduce X% use of the only existing fuels for heavy, long-distance transportation, winter heating, and a majority of electricity, to reduce what “sea levels could rise by 2050-2060. . . or by 2100? It’s not about shaming hydrocarbon fuels, it’s about raising their prices before bothering to invent any alternative fuel for jetliners, ships, trains, trucks, 200-mile autos, etc., that everyone uses, in particular FFYers, and their (our) fossil fuel utility plant at Yale.

  • ShadrachSmith

    This is an example of Alinsky’s People Power. With noting but human energy the Social Justice Warriors have extralegally controlled much $. Good, bad, discuss.

  • jd87

    The ethical decision of profiting from certain industries is a valid point of discussion, however, it doesn’t appear that many in the conversation understand how investing works at a most basic level. By investing in ExxonMobil’s stock, for example, no money ever goes to ExxonMobil for any uses at all. Similarly, a corporate management cannot spend an incremental dollar when its stock rises. Only buying new issues of a corporation feed the company’s coffers. The ethical dilemma of benefiting from the success of a certain industry is a separate consideration. Divesting from fossil fuel producers will not create the slightest pain for those companies. Therefore, investing in any stock is foremost a financial decision.
    The other side of the coin would be if Yale would short the stocks and other financial instruments in industries held in moral contempt in attempt to benefit from their downfall. Regardless of the outcome, it still wouldn’t inflict any direct pain on the companies, though it might help some of these students sleep at night.

  • Ferto

    $10 million, a drop in the bucket, but enough to quell FFY once and for all? Doubtful.

  • sy

    Why did Yale’s endowment decide that the only fuel for jetliners, ships, trains, buses, trucks, long-distance auto and winter heating still is ethical? Why did Yale also not divest its own profitable fossil fuel utility plant on campus, and not divest its unprofitable New Hampshire wind power?

    FFY now has a few years to invent alternatives to hydrocarbon fuels for transportation and heating (and for 65% of electricity, plus the 20% nuclear). Or also plant 5,000 New Haven elms for carbon sequestration, and use less hydrocarbon fuel themselves. I think the 5,000 elm trees would be a very good and ethical Yale investment in the former Elm City, but I will allow Swensen and the Corporation trustees to disagree with me. Imagine what 5,000 elms would look like at 2016’s 40th reunion, or even when some of us make it to their 25th.

    • Richard Reiss

      For better or for worse, the endowment didn’t make the decision on moral grounds, but on financial grounds. Fossil fuel stocks, led by coal, are bad investments as the world begins to scramble to stay under the 2°C target. (Or even if the world aims for a 4°C target.) As Swensen pointed out in the same message, Yale is also getting out of southern farmland and coastal properties, because the global economy has already burned enough fossil fuel to harm those assets over the long term. This is the paradox of an energy-hungry world still reliant on fossil fuel: half the things you own will destroy the other half.

      I’m with you on inventing alternatives. Electric vehicles are easy to produce, wind power is already cheaper than coal in some states, and nuclear should make a comeback.

      A great talk by Mark Carney, Governor of the Bank of England, gives context to what Swensen is doing:
      http://www.bankofengland.co.uk/publications/Pages/speeches/2015/844.aspx

      • yaleyeah

        where is the evidence that reducing emissions will have any impact at all on global temps?

        • Richard Reiss

          Mr or Ms Yaleyeah, step into my time machine:
          https://en.wikipedia.org/wiki/John_Tyndall

          Knowledge of CO2’s effect on temperature is as old as the industrial revolution, preceding the Wright Bros, Einstein’s Theory of Relativity, and even anonymous commenting on the internet. Internet comments are made possible by the same scientific method, which it’s true, not everyone loves equally. They like the buttons, but not the reasons behind the buttons.

          Richard Alley’s entertaining and vivid talk at AGU in 2013 will tell you everything you need to know.
          https://youtu.be/Z_-8u86R3Yc

  • yaleyeah

    meanwhile germanys energy minister declared their green energy industry to be on the brink of failure. should’nt we pay attention.