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August 21, 2017

Nine UK Universities with Empty Pockets Deliver “Empty Gesture” Divestment Pledges

Lined with empty pockets, nine UK universities used the “Syracuse model” to divest a whopping total of zero dollars this month.

As the Times Higher Education reports, Canterbury Christ Church University, University of Chester, University for the Creative Arts, University of Cumbria, Newman University, Wrexham Glyndwr University, York St John University, Writtle University College and the University of Winchester have all signed a pledge to not invest in fossil fuels. What’s most interesting? None of these universities have endowments to begin with.

The divestment pledge was composed jointly by People and Planet and the National Union of Students (NUS). Andrew Taylor, co-director of campaigns and communication at People and Planet, told Times Higher Education that, “although these institutions do not have endowments, their decisions are significant nonetheless…because it is important to have divestment commitments in place before universities ‘start making those financial decisions.’” Yet if the universities have no endowments to speak of, why is this decision categorized as a divestment?

This announcement follows on the heels of an “empty gesture” divestment vote last year by one of the largest endowments in Britain, the University of Cambridge. The 2016 vote restricts Cambridge from investing in coal or oil sands moving forward, but the endowment has no direct holdings in either to begin with, and only a small amount of coal investments in co-mingled funds.  Cambridge’s announcement highlights that divestment is both counterproductive, instead opting for engagement, but also highly difficult given the role of external money managers. From the announcement:

“As is the case with many other charitable institutions, the University holds most of its investment portfolio indirectly. The overwhelming majority of investments (outside individual property assets) are managed on a discretionary basis by external investment managers selected and monitored by the University’s Investment Office, with the oversight of the Investment Board. In this context, the direct exclusion of individual investments that are otherwise legal is considered to be neither an appropriate ethical, nor indeed a practical, policy. Indeed a tokenistic approach may be counterproductive, as there is no guarantee that a desired outcome could be achieved merely by selling a particular share or other investment. Instead, the University intends where possible to pursue a constructive process of engagement and, given the Office’s intermediated investment model, reliance will be placed on working with its selected investment managers.”

Cambridge also highlighted the investment of many traditional energy companies into technology to reduce emissions. From Times Higher Education:

“Simon Redfern, professor of mineral physics and head of Cambridge’s department of earth sciences, expressed alarm about climate change. But he said that ‘the fossil fuel industry hosts the very organisations currently at the forefront of research, together with us, into mitigating carbon emissions through endeavours such as carbon capture and storage, a pathway to negative emissions.’ He argued that the way to achieve positive outcomes was ‘through cooperation and engagement, not disinvestment and disengagement.’”

As Redfern highlights, divestment is not only ineffective but removes investments from companies supporting new energy development.

Numerous studies have concluded that fossil fuel divestment would result in significant losses on endowment returns. Luckily for the students and faculty at these nine universities, “divestment” will have little impact on their tuition or experience since there is no endowment in existence.  But for the countless others that rely on endowments for their scholarships, research opportunities, salaries and more, these empty gesture announcements should be cautioned.