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The Carletonian

Reinvestment at Carleton

<ring 2013, the CSA passed a transparency resolution for Carleton’s endowment. Students were not allowed access to information about the college’s public equity holdings, aside from the top 10 largest holdings. Late fall term, the resolution was accepted by the administration and students can now have access to a complete listing of all of Carleton’s public equity holdings on the treasurer’s website. This step towards transparency is a big achievement for us as students and as an institution in becoming smarter and more responsible investors. As a leading institution of higher education, with endowment transparency now in place, Carleton should take the next step as sustainable and socially responsible citizens and investors by reinvesting its holdings in fossil fuel into clean, renewable energies.

Firstly, what is reinvestment? And how is it different from divestment? Many of you may be aware of a rapidly growing fossil fuel divestment movement which started in 2010. According to a study conducted by the University of Oxford, fossil fuel divestment is the fastest growing divestment movement in history. Since 2010, a total of 41 institutions including 9 colleges, 22 cities, and 2 counties, have pledged to divest from fossil fuels while hundreds of other institutions continue to pursue divestment. Coordinated by 350, a grassroots environmental group, this movement calls for institutions to remove their public equity holdings from the top 200 fossil fuel companies. The main goal of divestment is not to make a sizable financial impact on the fossil fuel companies, but rather to create a culture where supporting fossil fuel companies is no longer acceptable. We may all be consumers of oil and gas, but in addition to making individual behavioral changes to lower our consumption, we also need to make changes at higher institutional levels and use our dollars to invest in the alternatives and solutions for the future. We cannot all consume clean energy on a large scale if the supply doesn’t exist or is too expensive — and these supplies and technologies will not be developed until there is sufficient investment in these technologies. This is where reinvestment comes in.

Recognizing the power of using our money to invest in a healthy future for ourselves and future generations, Climate Justice Coalition (CJC), believes that Carleton College should use its $700.5 million dollar endowment in line with our values of sustainability. We believe that rather than profiting off of our investments in fossils fuels, the main cause of climate change, we should be investing in the solution — renewable energy. According to the transparency results published last week, Carleton currently has $5.8 million of holdings in the top 200 oil and gas and coal companies. We believe that this $5.8 million should not be invested in fossil fuel companies but in other companies that are making positive progress towards a clean energy and low-carbon future.

Many actors are worried about the negative financial impact of pulling out of fossil fuel companies. However, multiple studies have found no statistical negative impact from removing fossil fuel holdings (HIP Investor, Aperio Group, Impax Asset Management). And institutions that have already started to divest have so far not seen any negative impacts. For example, since starting to divest in 2008 and gradually decreasing its fossil fuel holdings, Unity College’s portfolio has not had any problems meeting their benchmarks. Maintaining investment returns is extremely important, but such findings show that fossil fuels are not necessarily vital to achieving a desired return on investment and thus Carleton should think more seriously about reinvesting.
Furthermore, reinvestment is not just a radical idea pushed by extreme environmentalists.

Non-environmental actors in the financial sector have been increasingly paying attention to financial risks of climate change. In order to limit global warming by 2 degrees celsius, the internationally agreed upon goal, no more than one-fifth of current carbon reserves can be burned. Yet fossil fuel companies continue to find and develop new reserve, with the top 200 fossil fuel companies spending $674 billion on exploration and development in 2012 alone (Ceres). Considering that much of these reserves may be unburnable in a necessary low-carbon future, investors are growing more attuned to the possibility of fossil fuels becoming stranded assets. For example, in October 2013, a group of 70 global investors whose collective assets are over $3 trillion in an initiative called the Carbon Assessment Risk, sent letters to 45 fossil fuel companies to assess the risks that climate change poses to their businesses by early 2014.

Climate change unarguably affects the lives of everyone and as the generation that will face the greatest risks, we must start to work towards creating great change towards a culture where a fossil fuel future is no longer acceptable and rather renewable energy alternatives are embraced. Traditionally, institutes of higher learning were leaders of social change. Carleton College has committed itself to core values of sustainability, pledging to play its role in combating the global challenge of climate change. Carleton has taken tangible steps in the past several years by signing the American College and University Presidents’ Climate Commitment (ACUPCC) in 2007, passing its Climate Action Plan in 2011, and installing two wind turbines. However Carleton should do more. In addition to focusing on individual behavioral changes, Carleton should also make decisions that reflect its identity as a leader in sustainability by responsibly investing in markets that reflect its values. Thus CJC believes that Carleton College should commit to reinvesting its public equity holdings in gas and oil and coal companies into renewable energy and that the Carleton Responsible Investment Committee should take a more proactive role as shareholders in pushing companies to make reforms.

The author is a member of the Climate Justice Coalition

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