By Hanna Merzbach
On Feb. 9, the Lewis & Clark Board of Trustees unanimously voted in favor of divesting from all endowment holdings in fossil fuels over the next five years, approving policy recommendations made by a subcommittee in May 2017. Currently, about six percent of LC’s endowment has fossil fuel exposure and nine percent of LC’s annual operating costs are funded by endowment revenue.
The subcommittee was formed in response to a divestment petition, spearheaded by Students Engaged in Eco-Defense (SEED). It was brought to the Board’s attention by Vice President, Secretary and General Counsel David Ellis, who was Interim President at the time.
“(The SEED leaders) made a compelling argument and I told them that I would both make sure that they could present their position to the Investment Committee of the board, and that I would support divestiture,” Ellis said over email. “They gave a very good presentation to the committee in May, and I told the committee that as Interim President I supported the petition.”
In addition to creating the committee composed of staff, faculty, trustees and a student representative, the Board agreed to halt all new investments in fossil fuels while the study was underway.
After months of research, the subcommittee proposed the divestment recommendations at the most recent Board meeting. The resolution has five major components. The first commits LC to divesting from any companies in the fossil fuel industry, defined specifically as “the largest owners of coal, oil, and natural gas reserves.” The second point halts any future investments in this industry starting the date passed.
“The Board and especially the investment committee felt that there was an economic argument, a fiduciary argument, as to why we should not be investing in fossil fuels,” Chief Investment Officer Carl Vance said.
Evelyn Hunsberger ’19, co-leader of SEED, placed large focus on the economic incentives to divest, along with the environment incentives, when presenting to the Board.
“One of the good economic reasons to divest is the fossil fuel companies are just severely overvaluing their stocks because they are valuing everything that they own,” Hunsberger said. “But actually 60 percent to 80 percent of all the fossil fuels in the world should not be burnt if we want to keep global warming to less than two degrees Celsius.”
Vance echoed this statement.
“The problem is that if we ever tried to burn all of those assets, we’d blow through the Paris Climate limitations and would have disastrous consequences for the world,” Vance said. “There’s a hundred trillion dollar carbon bubble and, at some point, that’s going to get popped and those valuations are going to collapse and economic impacts could be worse than the 2007 sub-prime mortgage recession.”
Director of Sustainability and Communications Amy Dvorak provided technical advice to the divestment subcommittee. She said that today’s market is well-suited for divestment.
“If we had tried to do this five years ago, it would have been much more difficult,” Dvorak said. “There were just not as many options that don’t have fossil fuels in them. Today, it is a totally different ballgame and, five years from now, it will be totally different.”
The third component of the resolution states, “Over the next five years (before Dec. 31, 2022) Lewis & Clark will eliminate exposure to fossil fuel companies held indirectly through public commingled strategies. In addition, the college will exit all private limited partnership investments holding fossil fuel companies as they mature, which will take more than five years.”
Vance said this recommendation for a five year plan was critical in the Board’s decision.
“I think if you said ‘We have to sell everything today,’ it could be quite problematic, but if you have a gradual, thoughtful process, we think we can do this and get an equal or better return,” Vance said.
The petition recognized the need for a transition period.
“I think that the student petition was very important,” Vance said. “I thought they crafted it in a very thoughtful way, so it wasn’t as confrontational as some of the other things that social activists want to do which is ‘divest now’ or ‘sell everything now,’ which I knew the investment committee wouldn’t be able to do.”
The fourth point in the adopted policy requires LC to remain consistent with the college’s Environment, Social and Government (ESG) policy. In May 2014, LC’s investment policy was amended to include these factors and further amended in May 2017, when an enhanced ESG policy was approved.
Additionally, this point encourages LC to “actively engage with existing investment managers to encourage them to adopt fossil fuel free investment options.” The policy does not include recommendations for future investments taking the place of investments in fossil fuels. The petition also refrained from making these suggestions.
“In our fight, we tried not to create demands in what to invest in because we didn’t want to deter (the Board) and because we don’t have experience,” Hunsberger said.
However, the students running the petition did request greater transparency throughout the divestment/investment process.
“One of the other things we stressed at the meeting with the Board of Trustees and in our petition was that we wanted transparency and we wanted them to share at least annually with the rest of the student body what they’ve done to work towards divestment and what their investments are,” Hunsberger said.
This request was reflected in the policy’s fifth and final component: “Lewis & Clark will provide an annual update to the broader campus community on holdings of fossil fuel securities in the endowment portfolio.”
Dvorak reiterated the significance of the policy prioritizing the student’s requests.
“At the end of the day, what made a difference in this … was that the baseline for doing the work and forming the policy was meeting the student requests,” Dvorak said.
Hunsberger emphasized that, although LC has decided to divest, the fight to divest from fossil fuels is not over.
“One of the things I think that is the most important about divestment is the moments like this, spreading the word,” Hunsberger said.
“(Fossil fuel investments only account for) six percent of the total endowment which, in the grand scheme of fossil fuel companies, is not that much money, but the actual stigma we create when we are spreading the news sends a lot of messages … LC’s endowment is so small, so I’m hoping other colleges will see that LC can do it with this size endowment and hopefully they will follow suit.”