July 5, 2016

University of Utah Delivers Another Divestment Defeat

Following on the heels of major divestment rejections from NYU and Cambridge last month, the University of Utah’s Board of Trustees recently announced that it will not get rid of the school’s fossil fuel investments.

Despite pressure from student activists and a resolution from the Academic Senate calling on the school to divest its $715 million endowment, university leaders are not convinced that divestment is an appropriate strategy to address climate change.  According to a statement issued by University President David Pershing and the Board of Trustees, the school intends to instead focus their efforts on engagement, rather than pursue a strategy like divestment that has no tangible effect on targeted companies or energy development. The statement reads:

“Environmental challenges are multilayered and complex, which make them especially difficult to solve…Like many other major universities around the country, we are not convinced that divestment from fossil fuel-heavy funds in the next five years, as the Senate has recommended, is the best method for addressing these challenges.”

As Utah’s board highlights, many other universities have also rejected divestment in favor of more useful policies of engagement. The University of Michigan, Vassar and Stanford are just a few of the institutions that have highlighted the importance of engaging over divesting, pointing to the existing efforts of oil and natural gas companies in developing alternative energy sources.

Not only are the costs of divestment clear, but the Board also acknowledged the undeniable financial benefits and contributions made by the fossil fuel industry towards finding practical solutions to climate change. From the comments:

“Our efforts have benefited from longstanding relationships and continuing support from many entities, including the fossil fuel industry, and we appreciate their partnerships in addressing these difficult problems.”

Many other universities have also highlighted the crucial partnership between university and industry to advance research. According to MIT President Rafael Reif:

“We believe that divestment — a dramatic public disengagement — is incompatible with the strategy of engagement with industry to solve problems that is at the heart of today’s plan. Combatting climate change will require intense collaboration across the research community, industry and government.”

These universities have also found that rejecting divestment is also the best way to maintain a fiscally responsible and healthy endowment portfolio. A report by Prof. Bessembinder of Arizona State University evaluated the transaction and management fees associated with divesting and maintaining a divested portfolio and found that a medium sized endowment like the University of Utah could stand to lose between $52 and $298 million in frictional costs over a 20 year timeframe.

According to sources like POLITICO, the fossil fuel divestment campaign has been “largely rebuffed” as activists face increasing resistance from institutions across the nation. But instead of admitting defeat, activists have tried to assert divestment wins at UMass and the University of Maryland by utilizing the “Syracuse model” — claiming to divest while having little to no direct investments to begin with. But instead of placing symbolism over pragmatism, the University of Utah – a public institution with a mission to support its students — has chosen to engage in real solutions over an empty and costly gesture like divestment.