Wednesday, September 18, 2019
The Changing Climate
Jagdeep Singh Bachher and Richard Sherman, Sept. 17, 2019, LA Times
Our job is to make money for the University of California, and we’re betting we can do that without fossil fuels investments.
We are investors and fiduciaries for what is widely considered the best public research university in the world. That makes us fiscally conservative by nature and by policy — “Risk rules” is one of the 10 pillars of what we call the UC Investments Way. We want to ensure that the more than 320,000 people currently receiving a UC pension actually get paid, that we can continue to fund research and scholarships throughout the UC system, and that our campuses and medical centers earn the best possible return on their investments.
We believe hanging on to fossil fuel assets is a financial risk. That’s why we will have made our $13.4-billion endowment “fossil free” as of the end of this month, and why our $70-billion pension will soon be that way as well...
Full op ed at https://www.latimes.com/opinion/story/2019-09-16/divestment-fossil-fuel-university-of-california-climate-change
The University of California declares a climate emergency
Carolyn McMillan, UC Newsroom, Sept. 17, 2019,
The University of California has joined forces with more than 7,000 colleges and universities around the globe to declare a climate emergency and commit to urgent action to address the crisis.
UC President Janet Napolitano and all 10 UC chancellors have signed a climate emergency declaration letter that recognizes “the need for a drastic societal shift to combat the growing threat of climate change.”*
In signing the declaration, UC leaders agreed to a three-point plan that includes increasing action-oriented climate research; expanding education and outreach on environmental and sustainability issues; and achieving climate neutrality, a goal UC expects to achieve by 2025, five years ahead of the declaration’s pledge.
“We have a moral responsibility to take swift action on climate change,” said UC President Napolitano. “This declaration reaffirms UC’s commitment to addressing one of the greatest existential threats of our time..."
Full media release at https://www.universityofcalifornia.edu/news/university-california-declares-climate-emergency
*Letter at https://www.unenvironment.org/news-and-stories/press-release/higher-and-further-education-institutions-across-globe-declare
Note: The timing of the op ed and the media release coincides with the Regents meeting this week and follows a "fossil free" resolution by the Academic Senate. This timing coincides, but is unlikely to be a coincidence. Although yours truly doesn't want to rain on the parade, it seems unlikely that academic finance types would buy the rationale offered in the op ed above by UC's chief financial official and the chair of the Regents' Investments Committee, essentially that because fossil fuels are facing a declining market, they are risky and thus should not be included in a broad portfolio. All equities have a degree of risk. And financial markets are aware of the particular risks entailed in fossil fuel securities and presumably price related equities accordingly. In short, the divestment is a response to the changing university climate rather than a strictly financial decision. Whether over any given future period, the endowment and pension portfolios will gain or lose from the decision is unknown, but it is a deviation from the finance idea of having lots of different eggs in the portfolio basket.
PS: Fear not! Yours truly is downloading and archiving the audio of the sessions of the Regents occurring this week including the session of the Investments Committee. But, as usual, it takes time to go through the recordings.