On Wednesday, the UC Board of Regents refrained from taking the stance that many universities and other investors have: divesting from fossil fuel companies. While we hope to see the university take concrete steps toward divestment from fossil fuel companies in the near future, we applaud the university’s decision to move its funds toward more sustainable investment opportunities.
We understand this decision does not come lightly and that divestment could potentially lower the university’s return on investments. Still, we believe that the university must begin gradually moving away from fossil fuel companies. While the extent of monetary harm divestment will have on the university is unclear, the impact fossil fuel companies have on the environment is not.
The university’s decision affirmed a recommendation from the UC Task Force on Sustainable Investing. The majority of the task force, which included financial experts, UC faculty and student representatives, felt that divestment would not significantly contribute to alleviating the effects of climate change. The task force advocated for a framework for sustainable investment, which the regents later adopted, integrating more environmental factors into the university’s portfolio.
Out of the university’s $91 billion in investments, $10 billion lies in the energy sector. Within that sector, about $3 billion is invested in companies with high fossil fuel reserves. We trust that this considerable investment was made on the basis of the high returns it will yield and that financial managers may see other investments as less profitable. But this loss of returns on the university’s investments is a small price to pay; fossil fuels’ harmful effect on the environment outweighs this loss.
We hope that ruling out these companies will lead to a more expansive and focused search for investment opportunities. We can lessen the impact on the university by slowly and gradually pulling out investments from fossil fuel companies while simultaneously looking for other profitable investment opportunities. If the university does lose significant revenue due to divestment, we recognize that students might bear some of the costs, but we hope the regents implement a plan to distribute the burden fairly across all levels of the UC system.
Gradual divestment is important not only because it is the responsible and sustainable course of action but because it will affect other institutions’ decisions. We hope that the effect of the university’s fossil fuel divestment might spread beyond its perimeters and that the university will stand among the other universities and other organizations who have already made the commitment to divest.