Faculty push pension fund to divest from fossil fuels

Student activists have been demanding for more than a decade that higher education institutions turn over their endowments to fossil fuel companies. Now, as more and more institutions are moving towards sustainable investing, a group of professors are asking their pension fund to go green.

About 300 clients of the Teachers Insurance and Annuity Association of America–College Retirement Equities Fund (TIAA), which hundreds of higher education institutions use to invest faculty members’ pensions, are asking the fund to divest the companies which they believe contribute to climate change. They also demand that the TIAA “establish a moratorium on new fossil fuel investments,” “end its existing fossil fuel investments by 2025,” and “stop land grabbing leading to deforestation,” according to one. press release emailed to Inside Higher Education.

The group, which is made up of faculty members whose pension funds are managed by the fund, also filed a formal complaint with the United Nations’ Principles for Responsible Investment Initiative, asking it to remove TIAA from its list of ethically invested portfolios.

TIAA, which was founded in 1918 to manage teachers’ retirement funds, has grown to become one of the largest fund managers for employees of educational, cultural and medical organizations, many of which are nonprofits.

“Unlike a lot of general banks and pension funds, TIAA has a nonprofit bent, a bit of a public service history,” said Caroline Levine, professor of literature at Cornell University and TIAA fund participant. who signed the complaint to UNPRI. . “What does it mean to me to have had an entire career devoted to creating the conditions for students to live happy and fulfilling lives and then to retire in a way that undermines and mocks that work?”

In an email to Inside Higher Educationa spokesperson for TIAA, who preferred not to reveal his gender, rejected participants’ characterization of his investments and argued that the fund complied with UNPRI recommendations.

“TIAA takes sustainable investing seriously,” they wrote. “However, after careful consideration, we believe that a broad divestment from fossil fuels does not provide TIAA with an optimal means of influencing the policies and practices of the issuers in which we invest, nor the best way to generate value long term for our investors and other stakeholders.

But Bill McKibben, a prominent environmental activist and TIAA member who signed the letter to UNPRI, argued that divestment is a crucial tool for mitigating the climate crisis.

“It’s about removing the social license from fossil fuel industries and hampering their access to capital so they can’t expand with new infrastructure, a task that scientists have told us time and time again is absolutely essential,” he said.

“A logical next step”

In recent years, what was once seen as a fringe and radical demand by student activists has begun to bear fruit. Dozens of institutions have pledged to cut endowment investments from coal, gas, shale and other fossil fuel companies. More than 15% of the more than 1,500 institutions that have divested from fossil fuels are educational institutions, according to a database maintained by divestment advocates.

Large public systems like the University of California and the University of Michigan are fossil fuel free. Harvard acquiesced last fall after decades of student activism, a watershed moment for the movement. Two weeks ago, Princeton said it would “divest” from fossil fuel companies.

McKibben, a Schumann Distinguished Scholar in Environmental Studies at Middlebury College, is a leading figure in the national divestment movement, which targets college endowments as well as private investors and public pension funds. Middlebury, located in Vermont, was an early adopter, selling out in 2019.

“So many of the institutions we work for have divested,” he said. “TIAA is a logical next step.”

Cornell pulled out of fossil fuels in 2020 after a successful activist campaign, which Levine participated in. She said the win at her own institution made her more confident to push for TIAA divestment, a sentiment she heard from other professors who are TIAA divestment supporters.

TIAA is a bigger fish than the fossil fuel divestment movement is used to chasing. Harvard’s endowment, the largest in the country, was $53 billion in 2021; TIAA operates a $1.2 trillion pension fund. Levine doesn’t find that number intimidating; in fact, it is constrained by the potentially disproportionate impact of selling such a colossal sum.

“When I realized that TIAA had $78 billion invested in fossil fuels, I thought, ‘That’s an order of magnitude bigger than even the biggest university endowment. That’s where the fight has to go. move,” she said. “Also, TIAA invests my money. I’m a client, which is different from working for an institution…so it was intolerable to see this happen without protest.

“The fact that all of these universities have made this commitment has put TIAA even more on a limb here. And other huge pension funds also divested,” McKibben said, referring to public funds in New York state and Quebec. “At some point they lack an explanation other than inertia, that it’s just the way they’ve always done it.”

Going green, in more ways than one

Beyond environmental liability issues, market trends increasingly suggest that divestment from fossil fuels may be the smartest financial move for long-term funds. For more than a decade, fossil fuel companies have been among the worst performing stocks in the market. As for the outlook for the future, the CEO of ExxonMobil predicted in June that by 2040, every new car sold would be fully electric.

Tom Sanzillo, director of financial analysis at the Institute for Energy Economics and Financial Analysis, has consulted with TIAA divestment advocates throughout their current campaign. The IEEFA has been advising investors to divest for years and in 2018 published an influential paper on the financial case for green investing.

Sanzillo said that while the oil crisis created by Russia’s invasion of Ukraine has temporarily boosted profitability in the fossil fuel sector, the trend for more than a decade has been downward – and it will only fall more precipitously as resources like coal become scarcer and alternative energy sources more in demand.

“The fossil fuel industry is under competitive pressure in nearly every major area in which it operates, which puts pressure on the stock’s long-term outlook,” Sanzillo said. “So from a financial proposal, it’s pretty clear that fossil fuels are not the place to be.”

The TIAA spokesman said if the fund were to sell any of its fossil fuel holdings, it would be done in a “systematic” way that “adheres to our primary obligation to deliver attractive, time-adjusted returns.” risk “.

“Large-scale divestments by simply selling fossil fuel-generating investments to other companies will not reduce carbon output. We want to work towards global solutions,” they wrote. “We also engage directly with the management of portfolio companies to drive positive change in their environmental policies – again, action we cannot take unless we are invested.”

But Sanzillo said the fund failed to do its due diligence when it came to evaluating its investments in the energy sector. By refusing to seriously investigate the impact of divestment on their portfolios, fund managers are neglecting their fiduciary duty, getting bogged down in the past and potentially hurting their funds’ potential earnings for their investors, Sanzillo said.

“I take a slightly different perspective from the advocates who say TIAA should just divest. And I would probably come to the same conclusion. But as a fiduciary, I think they need to take a really big step, which is to do an exercise and fully consider whether they could achieve their goals without fossil fuels in their portfolio,” he said. “I don’t see them taking those steps. responsible fund advisor.

While the economic case for divestment may be more compelling to financial consultants and fund managers, activists like McKibben and Levine don’t want that argument to overshadow what they see as the urgent moral imperative to reverse. the climate crisis.

“If we continue to do what the fossil fuel industry wants, climate damage will continue to increase not linearly, but exponentially,” McKibben said. “Theoretically, what we do in universities prepares students for the world they will inherit. So there is something deeply ironic about investing our pensions in such a way as to guarantee that there will be no world they can inherit.

“We have to keep pushing” TIAA, Levine said. “We’re not going to stop until we win.”

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