Yale Daily News

After years of student advocacy for fossil fuel divestment, the University on Friday released more stringent principles for investment in the fossil fuel industry and announced that it will publicly name and divest from the companies that fall short of the standards.

The Yale Corporation — the University’s highest governing body — approved the principles last week. University President Peter Salovey convened a faculty committee, called the Committee on Fossil Fuel Investment Principles, in October following a February 2020 Faculty of Arts and Sciences Senate meeting in which students and faculty members advocated for divestment. Salovey charged the committee with generating a new set of ethical principles for investment more suited to the climate crisis, which include divesting from companies that generate high levels of greenhouse gases relative to the amount of energy they supply.

By June, Yale’s Advisory Committee on Investor Responsibility will recommend specific companies for Yale to divest from or not to invest in. The committee will publish the company names online. The Yale Investments Office estimates that 2.6 percent of Yale’s endowment — about $800 million — is invested in fossil fuel-producing companies. The committee’s chair, Jonathan Macey LAW ’82, could not specify an exact timeline for divesting from the companies, as it is up to the Investments Office. But in the past, the Investments Office has moved quickly on these matters, Macey said.

“I don’t think there is a problem in the world today more serious than climate change,” Salovey said in an interview with the News. “It is clear that human action contributed to it and human action is going to address it.”

There are five new principles that companies must adhere to in order to be eligible for investment from the Yale endowment. These guidelines include requiring companies to avoid exploration and production of fossil fuels that generate high levels of greenhouse gas emissions relative to energy supplied and minimize greenhouse gas emissions in their operations. Companies are also required to support government policies on climate change and must provide accurate information about climate science. The final principle requires that the companies are transparent with Yale and its investment office regarding their compliance with the preceding principles.

According to the report produced by the committee outlining the new guidelines, the University is likely to divest from coal companies given that they produce the most carbon dioxide per unit of energy of all fossil fuels. Coal production accounts for 60 percent of power plant carbon emissions in the United States yet produces only 20 percent of U.S. electricity. 

The report starts with the central premise that climate change is an existential threat and humans contribute to it. The report further acknowledged that the continued dependence on fossil fuels and producers of fossil fuels are particularly responsible for climate change.

The committee found that a targeted approach to divestment from fossil fuels was better than pulling out Yale’s money from the industry en masse. There is a huge amount of variation between fossil fuel companies, Macey said. Though they are all bad, some are far worse than others, he added. The ACIR will identify a list of companies that do not adhere to Yale’s standards, and will publish their names online to publicly shame them, Macey said.

“The basic point is that if you’re blaming everybody — which is what blanket divestment is — you’re blaming nobody,” Macey said. “We are naming names.”

Additionally, the committee was concerned that if investors withdraw from all fossil fuel producers, some of the more responsible ones will go out of business and be replaced by worse actors.

Kenneth Gillingham, associate professor of environmental and energy economics at the Yale School of the Environment and a committee member, added that the group wants to reward companies that are moving towards cleaner energy sources. If a company stops its harmful practices, it could be taken off the list. According to Macey, the ACIR plans to first name the company and take questions from the businesses after. But companies who have long spread disinformation about climate change will have the “burden of proof” to show they have changed their ways, Macey said.

The committee’s report highlights the University’s past adoption of the ethical investing principles outlined in the 1972 book “The Ethical Investorwritten by Yale professor John Simon and former Yale professors Charles Powers and Jon Gunnemann. The book still guides Yale’s investment practices today.

Salovey said that the new principles grow out of those outlined in the book. 

“We’ve been having an ongoing conversation from before 2014 to the present about how to reconcile the immediacy of the climate change emergency with the kinds of situations that John Simon’s [The] Ethical Investor anticipated,” Salovey said. “I just don’t think he anticipated this kind of a global crisis and so phrases like ‘grave social harm’ are just difficult to interpret.”

In forming its principles, the committee met with the chair of the FAS Senate, members of the Yale College Council, the Graduate Student Association and the Graduate and Professional Student Senate. Additionally, they met with experts on public health and environmental justice and conducted focus group meetings. Through an online form available to the Yale community, more than 250 individuals weighed in on the University’s fossil fuel investment policies, the report reads.

Yale students have been active in pushing the University to divest from fossil fuels. Students from Fossil Free Yale, and members of the Yale Endowment Justice Coalition, pushed petitions and led sit-ins at the Yale Investments Office and Woodbridge Hall over the past six years. Yale students also joined with Harvard activists when they interrupted the annual Harvard-Yale football game in 2019 to call for divestment. Members of the Yale Endowment Justice Coalition also attended the Faculty of Arts and Sciences Senate meeting in February 2020 to advocate for the same cause.

In 2014, Chief Investment Officer David Swensen wrote a letter to Yale’s active external investment managers and asked them to consider the consequences of climate change and greenhouse gas emissions when deciding how to invest. But that same year, the Yale Corporation’s Committee on Investor Responsibility voted not to divest Yale’s holdings in fossil fuel companies.

“This represents a major shift in the University’s thinking,” Macey said about the new set of principles.

Salovey said he sees the new principles as more of an “evolution and a complementary approach to what we had announced previously.” The new principles give direction to the Investments Office as it decides which fund managers to work with and are better suited to the immediacy of climate change, Salovey added.

Macey called for further action, saying that he would like to see more committees address areas of divestment beyond fossil fuels. Students have also previously called for Yale to divest from Puerto Rican debt. At the December 2018 sit-in at the Yale Investment Office, students were protesting not just Yale’s investment in fossil fuels, but Yale’s stake in the island’s debt. As of 2017, Boston-based fund manager Baupost Group, which Yale uses to invest the endowment held over $1bn in Puerto Rican debt. 

Macey also suggested creating a separate committee to monitor the ACIR’s progress to ensure it quickly forms the list of companies that fall short of Yale’s standards.

“I think student pressure will be great,” Macey said. “I want to be prodded into faster and better action.”

Yale plans to be carbon neutral by 2050.

Rose Horowitch | rose.horowitch@yale.edu

Philip Mousavizadeh | philip.mousavizadeh@yale.edu

ROSE HOROWITCH
PHILIP MOUSAVIZADEH
Philip Mousavizadeh covers the Jackson Institute. He is a first year student in Trumbull College studying Ethics, Politics, and Economics