University Asserts Divestment Will Only Be Symbolic

University’s divestment from the fossil fuel industry minimal impact on the companies it would potentially be divesting from...

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By Sofia Hu, via the Cornell Daily Sun, 04/09/14

Chief Investment Officer A.J. Edwards discussed the feasibility of divesting from fossil fuels at a University Assembly Meeting Tuesday.

Chief Investment Officer A.J. Edwards discussed the feasibility of divesting from fossil fuels at a University Assembly Meeting Tuesday(Photo Cornell Daily Sun)

The University’s divestment from the fossil fuel industry would likely have a minimal impact on the companies it would potentially be divesting from, according to Chief Investment Officer A.J. Edwards.

At a University Assembly meeting Tuesday, some senior administration officials said divestment would be “symbolic,” instead of significantly affecting climate change policy or the University endowment. Other officials, however, argued that Cornell’s divestment may start a social movement across universities.

The 200 companies with the largest carbon reserves have a combined value of $3.95 trillion, Edwards said. In contrast, the Ivy League schools have a combined $100 billion of assets and Cornell’s share of public energy stock is an estimated 0.0048 percent of that $3.95 trillion.

Approximately 9 percent of the University’s long term investments are in energy, with about a third in public stocks and the rest in private investments, Edwards said. The private investments are mostly illiquid, and any potential divestment would only affect those public stocks, which consist of approximately 3 percent of the endowment.

Investment in these public energy stocks increased the University’s endowment by approximately $100 million over the last ten years, Edwards said.

Prof. David Shalloway, molecular biology and genetics, however, said that divestment would have minimal financial risk.

“Actually, the risk for continuing to invest in fossil fuels would be much greater,” Shalloway said.

If divestment was implemented over a 21 year period, there would be “no predictable difference” in the endowment income in the long term, according to Shalloway. Full divestment by 2035 would cause a small long-term increase in endowment income variation, Shalloway said.

“Ten years ago, if we had phased in divestment, we would have broken even. Five years ago, if we had completely divested, we would have made a profit of around $8 million per year,” Shalloway said. “It’s hard to make predictions. Whatever the additional annual variation is, it’s in the millions, which is tiny compared to the billion dollar scale of variations without divestment [of the University budget].”

According to Joanne M. DeStefano, vice president for finance and chief financial officer for Cornell, even small variations can affect the University budget.

“Our [budget] projections are a $950,000 balance for the end of June this year,” DeStefano said. “Even a one million impact would mean we would have to raise tuition or cut something out of the university.”

In addition, DeStefano said divestment would be purely “symbolic.”

“Divesting does not directly accelerate Cornell’s progress towards carbon neutrality,” DeStefano said. “Focus on where, as a university, we can have the most impact. Can’t we decide to focus our attention on real things rather than empty gestures?”

Even if divestment may not affect policy change, Shalloway said he hopes that it would start a movement at other universities.

“My dream is that Cornell will divest, and other Ivy League schools will follow,” Shalloway said. “We need a social movement. We can help lead other universities.”

Beyond divestment, the University has committed to achieve carbon neutrality by 2035, The Sun previously reported. According to Don Roth, director of the Campus Sustainability Office, the University is on track to reach that goal.

Cornell has decreased its greenhouse gas emissions by 32 percent from 2008 to 2012, Roth said. The University still emits about 218,000 tons of carbon dioxide annually.

“The achievements [in carbon emissions] we have already made are essentially low-hanging fruit — things that sound like large capital investments but actually have a large bottom line return,” Roth said. “The work ahead to get to carbon neutrality is much more risky, much more ambitious.”

In order to reach carbon neutrality, the University will need to prioritize large scale actions that have long-term institutional value and fewer short-term economic returns, Roth said. These include developing a district-scale deep geothermal system, bio-energy and wind, along with aggressive energy conservation and higher energy standards for new buildings and renovations.

The U.A. did not vote on or thoroughly discuss whether and how to respond to the Faculty Senate’s Feb. 2014 resolution calling for divestment, which President David Skorton rejected.

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