October 16, 2020

Divestment In the Garden State

New Jersey has become a recent hotbed of divestment activity, with activists now targeting several school endowments as well as the state pension. But while environmental groups are trying to ramp up the pressure, statements by those overseeing these institutions seem to suggest the movement isn’t going very far.

Let’s start with Princeton.

Princeton University’s Council of the Princeton University Community (CPUC) is expected to release their recommendation on divestment during their next meeting on November 9. The CPUC took up the issue after student protests in February and following the receipt of a formal proposal by Divest Princeton around that same time.

The school has largely dodged the issue on campus to a greater extent than its peers at Harvard, Yale and Columbia.  To date, no Ivy has fully divested – mostly due to a resistance of taking up political causes in making financial decisions.

Officials and professors at Princeton have spoken out in pretty plain terms against the policy.

In 2017, University President Chris Eisgruber made his position on the matter relatively clear. Not only does Eisgruber reject divestment, he also opposes the university taking political positions on controversial topics. Rather, Eisgruber chooses to uphold one of Princeton’s key principles of being a public forum for intellectual discourse:

“In this era of polarized politics and heated argument, alumni and others regularly suggest that Princeton take a stand about one or another public controversy. For the most part, we decline. One of my principal obligations as Princeton’s president is to ensure that the University remains a forum for vigorous, high-quality debate.”

Fast forward to 2020, President Eisgruber is still holding out strong on his anti-divestment position. During a Council of the Princeton University Community (CPUC) meeting in February, President Eisgruber yielded questions on the State of the University, one of them being on fossil fuel divestment:

“The answer is right now, we do not have any such plans [to divest]…We make a difference in the world through our teaching and research and the quality of that teaching and research, rather than by taking a symbolic stance with our endowment.”

Princeton has also consistently been actively engaged with leaders in the industry to engineer solutions to the challenges imposed by climate change instead of political empty gestures. Princeton’s own Andlinger Center for Energy and the Environment acts as a hub for industry-leading renewable energy research, which is funded largely by industry.

Stephen Pacala, the Frederick D. Petrie Professor in Ecology and Evolutionary Biology and director of the University’s Carbon Mitigation Initiative, argues the premises of the whole divestment campaign are not morally sound:

“Both investing in and buying fossil fuel products puts money in the hands of the people I don’t like. So ethically, I cannot find a consistent reason why I would divest and not boycott, or boycott and not divest.”

Rutgers just began its climate journey.

Heeding to demands by activists similar to Princeton, this past summer officials at Rutgers released a 145-page report that outlines the university’s specific approach to action on climate change.

Rutgers is the state’s largest public university with an endowment size of nearly $1.6 billion. Of the $1.6 billion, roughly 6 percent is invested in oil and natural gas assets.

The interim report released this summer was released by Rutgers President Jonathan Holloway’s Task Force on Carbon Neutrality and Climate Resilience. As a part of the report, the Task Force will consider requests to divest from fossil fuels.

The divestment consideration process for Rutgers will also be a long, arduous process. Rutgers’ Board of Trustees and Board of Governors’ Joint Committee on Investments plans to create an ad hoc committee to look into the possibilities of divesting the public university’s endowment. After the ad hoc committee arrives at their decision, it will then make recommendations to both Boards.

In terms of the current timeline, the Task Force plans to make its recommendations to both Boards between March and June 2021. Divestment may or may not make it into the list of recommendations by the Task Force, since the ad hoc committee is separate from the 7 working groups in the Task Force.

New Jersey’s Pension is Another Target

New Jersey state lawmakers Sen. Bob Smith and Sen. Linda Greenstein are taking up the fossil fuel divestment banner in Trenton, introducing legislation and resolutions which solely focus on divestment, instead of proposing tangible actions to address climate change concerns.

The bills, introduced both at the Assembly and Senate level, call the New Jersey State Investment Council (SIC9 and the Treasury Division of Investment (DOI) to divest the State’s pension plans from the top 200 publicly traded fossil fuel companies, including oil, gas and coal.

Senate Bill S330, which would require the state’s pension programs to divest from fossil fuels, has died in committee all three times it was introduced since 2018. Nonetheless, law makers continue to reintroduce the same bill year after year, similar to the student-led divestment efforts at Princeton, advocating for the same old empty gesture.

In 2018, Gov. Phil Murphy vetoed several pieces of legislation that sought to divest the state’s public pension program from certain companies and areas of commerce. In his response to vetoing two divestment bills put forth in the state legislature, Gov. Murphy recommended empowering the investment council to use negotiation to influence the actions a company takes:

“While I agree that divestiture is an appropriate penalty in certain instances … I do not believe that it should be the only available response when companies in which the state has invested pension funds behave poorly.”

Moreover, Gov. Murphy cautioned against divestment measures, stating that the financial costs associated with monitoring the divestiture process can cost taxpayers millions of dollars:

“The state has spent more than $23 million monitoring the divesture of holdings as a result of recent statutory mandates to divest pension system assets from companies that do business with Iran and companies that boycott Israel and Israeli businesses.”

Gov. Murphy has also indicated he’d rather focus on actionable solutions to climate change rather than taking a political stance on the matter.  In January, his office unveiled the state’s Energy Master Plan which outlines steps to reduce emissions and increase conservation.

Likewise, New Jersey’s pension officials have agreed with Governor’s vision, noting skepticism on eschewing fossil fuels so quickly, especially as they continue providing affordable energy access and solid job opportunities for New Jerseyans. In fact, Jennifer Sciortino, spokesperson for New Jersey Treasury, and responsible for managing the pension fund and overall investment decisions, argues that engagement is preferable over divestment:

“Divestment, in contrast, eliminates the division’s influence as a shareholder and, consequently, its ability to effect positive change that may lead to favorable investment returns.”

As we know, this is a far more effective way to address climate change than divestment, which Moody’s recently classified as “not a significant factor” in impacting the oil and gas sector.

Conclusion

All things aside, New Jersey has for the most part stood firm on its anti-divestment approach. Government and institutional leaders, as seen with Princeton and Gov. Murphy, stand for the principles with which their funds were created on. Rather than opting for politicized policies that do nothing to reduce carbon emissions, New Jersey is one of many who continue to opt for instead finding viable solutions to carbon reductions.