August 30, 2018

Questioning Sierra Club’s Divestment Prediction for Seattle U

In the Sierra Club’s annual publication of their “Coolest Schools,” the group selects 20 schools it views as the most ecofriendly. Coming in eighth place in this year’s ranking is Seattle University, which the Sierra Club claims is “on track to approve divestment this fall.” Yet a deeper dive into this bold claim finds Seattle U may be ready to reject costly divestment once again.

Past Actions on Divestment

Back in 2013, the student-led Sustainable Student Action group (SSA) circulated a petition for Seattle U to freeze its direct and co-mingled investments with 34 fossil fuel companies and divest from these companies entirely within three years.

The following year, the university rejected SSA’s proposal by issuing a formal response which stated that it wasn’t ready to move forward with SSA’s plan or a sustainability study on fossil fuel divestment. The university instead asked SSA to go back to the drawing board and continue to think of ways to deepen the schools pledge to sustainable practices. Connie Kanter, the school’s CFO, laid out Seattle U’s thought process on divestment saying:

“Using endowment funds entrusted to us by donors for a purpose other than their original intent is an extraordinary step. As some participants in SSA’s recent forum noted, divestment from fossil fuels will neither impact the finances nor change the behavior of affected companies. We believe there are more effective ways to address climate change. For these reasons, we are not prepared to move forward on a feasibility study of divestment from fossil fuel companies.”

Divest Recommendations Don’t Add Up

In 2015, at the behest of a student government approved-resolution, a subcommittee was formed to examine fossil fuel divestment.  The Socially Responsible Investments (SRI) Working Group, a group consisting of student government members, Academic Assembly members and representatives from the school’s Investment Committee, issued its findings this year and recommended that Seattle U commit to “fully divest the marketable portion of the endowment from any investments in companies owning fossil fuel reserves” by 2023. Yet many of the groups justifications for doing so don’t add up. At the beginning of the report, the SRI task force discusses its strategies:

“They include aligning investment decisions with the mission, integrating environmental, social and governance factors into those decisions, partnering with others to engage companies on moral choices and impacting the greater good through investments with positive social impact. “

How does the task force expect to engage companies on these issues if it removes all investments in them? One is only allowed to participate in shareholder votes that influence company policy if they are actually shareholders of the company. If Seattle U chooses to divest completely, it will lose its ability to interact with companies in a way that could bring about any sort of meaningful change.

Further down in the findings report, the group admits that the university’s endowment could suffer if it is no longer invested in fossil fuels:

“The university’s investment advisor, Cambridge Associates, indicates that an illustrative roster of managers that exclude fossil fuels has underperformed the university’s current managers. Assuming that similar relative performance patterns continued, the exclusion of fossil fuels could reduce future investment returns as described in the Investment Implications summary that follows.”

By definition, the endowment fund at Seattle U exists to provide “a continuing and stable funding source to support the overall mission of the University.” This means that it’s investments should generate returns and provide for the long-term health of the school’s accounts. If the SRI task force is concerned that divestment could reduce future returns — and reams of academic reports support it will — then the board should not vote in favor of divestment.

Finally, the SRI findings list other organizations that have divested in attempt to make a case for a fossil fuel-free endowment. The shortlist has only three universities noted as fully divested, indicative of the larger trend of colleges saying no to costly empty gestures.

Regional Actions

In one of the task force’s many presentations on the issue, the group touts the city of Seattle as another example of likely divestment, yet Seattle has made it  clear that divestment isn’t coming any time soon – if at all. The board even cited its fiduciary duty to pension holders as one reason for voting against divestment.

Further south, the state of California and its pension boards have dealt with divestment calls from activists, and the results have been similar. Pensioners have made it clear that the state should prioritize the financial security of its workers before it makes any investment decisions that prioritize social policies.

Looking Ahead

Seattle U’s board of trustees is expected to vote on the matter in the fall of this year, following an assessment from the school’s Investment Committee. But while the Sierra Club seems to think that divestment at Seattle U is imminent, we aren’t so sure. The school board’s past reaction to divestment, along with some shaky reasoning in the SRI task force’s recommendations leave room for doubt. If the board takes the financial health of the school’s endowment seriously, then it will likely reject full divestment once again come fall.