NYU Says Oil Asset Purges Are Pointless, Time To Look For Better Solutions

Chris White | Energy Reporter

New York University officials formally moved to reject fossil fuel divestment Thursday, writing that divestment does not change anything because “it simply transfers ownership of stock from one holder to another.”

“The Board carefully studied the arguments presented in favor of divestment. Notwithstanding this, and the concerns the Board shares about climate change, the Board does not believe divestment is the proper action to take,” the memorandum stated.

The university letter was quick to point out that it will continue to push forward on steps to “enhance sustainability and reduce its greenhouse gas emissions,” which, it noted, have already been reduced by 30 percent since 2007.

The move to reject the urge to purge comes after both anti-fossil fuel crusaders pushed the school to act against oil assets, and as studies consistently show fossil fuel divestment would have a negative impact on NYU’s $3.9 billion endowment.

Nearly 80 percent of the university’s faculty, staff, and student body voted in favor of divestment in April. The school is moving to make its massive campus greener by cutting 50 percent of its carbon emissions by 2025.

A report from Prof. Bradford Cornell of University of California, Los Angeles, specifically determined how much divestment would cost NYU and four other leading universities. According to this report, NYU’s endowment would lose $4.16 million every year if it divested from fossil fuels.

Another recent study conducted by Hendrik Bessembinder, a professor of finance at the Arizona State University’s Carey School of Business, indicates selling off massive troves of oil assets ultimately causes large college endowments like NYU to lose as much as 12 percent of their total value over a 20-year time frame.

The study notes that the frictional costs, or those associated with managing complex college endowments, could cost an endowment fund as much as $7.4 billion in value over a 20-year period.

The NYU letter largely agreed with Bessembinder’s findings, at least as it pertained to the frictional costs associated with divesting fossil fuel assets tied in with mutual funds private and equity funds.

In order “to accomplish the goals proposed in the Senate resolution,” the school wrote in the memorandum, the divestment policy “would require us to invest only with firms that have renounced fossil fuel related investments. This would significantly limit the choices we may make in investment managers, thereby limiting our ability to seek out the best long-term investment opportunities for the endowment.”

The NYU letter recognized the irony of deeming the fossil fuel industry a morally reprehensible plague on society, while, at the same time, using it for some of the school’s most important services.

“It seems disingenuous for NYU to, on the one hand, deem the fossil fuel industry morally reprehensible—the clear implication of a decision to divest—while on the other hand continue to regularly and willingly use their products to power and heat our campus and to transport our students and faculty (albeit in ways that are more efficient and less carbon intensive than in the past),” the memorandum stated.

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