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December 12, 2017

Johns Hopkins “Divestment” Announcement Amounts To A Whole Lot of Nothing

Johns Hopkins University (JHU) just announced it is “divesting” from thermal coal, but with so many caveats included in the decision, one must wonder if the school will actually end up doing any divesting at all.

The Board of Trustees voted last week to cease buying stocks and bonds of companies that “produce coal for electric power as a major part of their business,” according to the university.  As expected, 350.org co-founder Jamie Henn sent out a celebratory tweet calling the move a “good step forward,” but students and divestment proponents were far more truthful in acknowledging that this was a case of fake divestment.

Shortly after the vote was made public, campus divestment group Refuel Our Future was quick to express their disappointment in the decision via a statement, reading in part:

“While we at Refuel Our Future are excited about the landmark decision to make this important change into how Johns Hopkins is challenging continued support of fossil fuel industries we are disheartened by the minuscule fashion that the Board of Trustees chose to act. While we don’t yet have technical specifications on the Trustees’ decision we can say that the decision to divest from coal companies is not nearly as robust a divestment strategy as we proposed over 2 years ago and the strategy that the Public Interest Investment Advisory Committee (PIIAC) recommended earlier this fall. In fact this divestment strategy is minimum at best.” (emphasis added)

Others went to Twitter to call out JHU for failing to unveil a new policy with any substance:

The University’s Students for Environmental Action group made sure to point out that the decision fell far short of what students were asking for:

The endowment will not immediately sell their investments, even though JHU’s president says the industry, “poses a unique threat to public health and to the environment,” but will instead unload these stocks “on a schedule that minimizes financial loss.”

Companies affected include those that earn more than 35 percent of their revenue from thermal coal burned to generate electricity, but the announcement makes no mention of companies that produce coal for manufacturing or other purposes.

JHU will not be divesting from the Carbon 200—as was requested by the campus group, Refuel Our Future—“in an effort to balance an important stand in the fight against climate change against a fiduciary duty to maximize support for the university’s teaching, research, and patient care missions.”  It seems the school subtly acknowledged that actual divestment would harm the $3.4 billion endowment’s returns over time.

A report released by the Public Interest Investment Advisory Committee (PIIAC) back in September, plainly stated that the endowment “currently has no direct equity investments in Carbon Underground 200 (CU 200) companies,” meaning no stock holdings.  The endowment does have $6.4 million invested directly in the CU 200 “solely from bonds in the operating cash accounts.”  Though, “the operating cash accounts are not a portion of the University’s endowment.”  Of course, these figures denote exposure to the full CU 200, but do not break down actual investments in thermal coal, which would no doubt add up to a minuscule amount when compared to the $3.4 billion endowment.

Therefore, this is a straightforward case of the “empty gesture” divestment announcement, all headline and no substance.  As we’ve seen in the past with similar announcements, like those from Salem State or Boston University it’s not uncommon for a school that “divests” from coal to not have any investments in the sector at the time of the announcement, or to simply pledge to “avoid” investments in the future.

In this case, JHU avoided what could be a costly decision.  Back when the campus was debating the issue, the school’s Provost, Sunil Kumar, called divestment a “serious matter,” underlining the flaws associated with the move:

“Divestment is a serious matter, because there are social as well as financial considerations we have to pay attention to. We have to make sure we get the best possible financial strategy to support the whole mission of the university—which involves funding student scholarships as well as supporting our research mission. But we also have to live up to our commitments to be stewards of the environment, and to show our values in our decisions.”

So instead, in order to maintain the financial viability of the fund, the school opted for another case of fake divestment.