Last night, Stanford’s Faculty Senate voted against a resolution presented by the University’s Student Association (ASSU) to halt all fossil fuel investments. With a 28 to 11 vote against the resolution, the faculty’s rejection could be harbinger of what’s to come when the Board of Trustees reviews a similar proposal from the student divest group during their June 10 meeting.
The resolution, written in collaboration with the student group Fossil Free Stanford, urged the Board of Trustees to freeze all new investments in the top 100 fossil fuel companies, as well as to fully divest from publicly traded fossil fuel companies within the next 90 days. However, faculty senators questioned the resolution, arguing that there were other more promising and effective actions to address climate change concerns.
This adds to the list of faculty members from other high level US universities that have questioned the effectiveness of divestment as a policy tool to combat climate change.
Some of the arguments presented by Stanford’s faculty against the divestment proposal include:
A case-by-case approach. Paul Brest, Professor Emeritus at Stanford Law School, cautioned against denouncing the entire industry under “collective guilt” claims; he suggested that a case-by-case approach would more adequately address specific concerns. Likewise, this would allow the endowment to discern between those companies that have established ambitious zero emission targets and have heavily invested in renewables energies already, without unjustly punishing them.
Stanford Management Company is best suited to deal with investments. Faculty senators also noted that SMC was the appropriate entity to manage the university’s endowment and other financial resources in a smart way. For instance, climate activists have exploited the current unfavorable market conditions for fossil fuel companies, casting them as unprofitable/poor investments in a bid to pressure other universities and funds to divest. However, existing trends indicate that fossil fuels investments have outperformed green funds, making oil and gas companies the most viable long-term financial decision.
Collaboration with fossil fuel companies produces valuable research. Senators were quick to acknowledge that the partnerships built with several oil and gas companies have driven research and innovation forward, with positive outcomes for the planet and environment. For instance, Geophysics Professor Dustin Schroeder noted that “funding from fossil fuels supports a lot of environmental and alternative energy research on campus.” Thus, ending these relationships would jeopardize the support for our students in their capacity to research this [climate change]” and would also undermine the university’s influence over these companies to reduce emissions and increase sustainability.
Responsible investing is already happening at Stanford. The faculty senate emphasized that the Stanford Management Company (SMC) has made “very substantial changes” to its portfolio over the last several years in order to improve its risk and return potential, and to ensure investments are in line with the Ethical Investment Framework adopted by Stanford in 2018. Indeed, Gene Sykes, Chair of the Special Committee on Investment Responsibility of Stanford’s Board of Trustees, said that SMC’s energy investment exposure – the amount of money Stanford has invested in the sector – has declined by 75%since 2011. Energy represents only 4%of the university’s total investments.
Stanford’s Board of Trustees already rejected fossil fuel divestment back in 2016, following an investigation by the Advisory Panel on Investment Responsibility and Licensing (APIRL). Although Stanford has divested from coal, the Trustees have maintained their policy of continuing engaging instead of divesting, acknowledging that “at the present moment oil and gas remain integral components of the global economy, essential to the daily lives of billions of people in both developed and emerging economies.”
Therefore, if the Faculty Senate’s vote, combined with prior positions, indicates a precedent, Stanford should continue engagement with the industry to find practical climate change solutions, programs and research initiatives, instead of pursuing empty gestures.
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