Fossil fuel divestment crusader Bill McKibben praised the University of Maryland Thursday after the school announced its decision to divest from oil, despite the fact the school doesn’t actually have direct fossil fuel assets in any large oil companies.
The University of Maryland Foundation, which funds the school’s scholarships, decided Tuesday to sell off $70 million in direct fossil fuel assets from its massive $1 billion endowment. The number is paltry, especially when considering the school has no direct investments in coal, tar sands or any companies on the Carbon Underground 200 list, according to the university’s newspaper.
Still, the lack of oil has not dampened the spirit of McKibben, the co-founder of environmental group 350.org. “Go you Terps! Univ of Maryland divests from fossil fuel!!!” the anti-fracking activist tweeted Thursday after the school announced its decision.
Go you Terps! Univ of Maryland divests from fossil fuel!!! https://t.co/GtYjw2Rmft
— Bill McKibben (@billmckibben) June 30, 2016
Universities and other public institutions are making liberal use of the so-called Syracuse model, a term developed by an administrator at the University of Massachusetts, which focuses on divesting from stand alone fossil fuel assets, rather than assets sunk in co-mingled funds or mutual funds.
In short, the school is giving up essentially no direct fossil fuel holdings while, at the same time, maintaining more than $70 million of fossil fuel investments in co-mingled funds – funds not impacted by this divestment announcement. The divestment crowd recognized quickly that this was an empty gesture, even though the “Potemkin gesture” largely escaped McKibben. Campaign activists, in responses to the school’s move, called for more “focus on direct investments in clean energy companies and shift away from investments in indexes that may include fossil fuel stocks.”
Benjamin Franta, a researcher in Harvard University’s physics department, echoed many of the University of Maryland activist sentiments in an editorial on Wednesday.
“[D]oes Harvard actually want to fix climate change, or does it merely want to look like it wants to fix it?” wrote Franta, who spent the bulk of his editorial grousing about Harvard’s decision not to divest. “And perhaps more troublingly,” Franta added, “do we actually want to fix climate change, or are we just going through the motions to save face, to avoid admitting to ourselves that, deep down, we aren’t who we thought we were, that we actually don’t care that much what happens to our children—or what happens to the world?”
Any decision to remove these oil assets from co-mingled funds will be difficult.
“It might take some time to divest from all coal, oil and natural gas companies, because some investments come with a penalty for pulling out early,” Leonard Raley, president and CEO of the foundation, told the Baltimore Sun.
A new study conducted by Hendrik Bessembinder, a professor of finance at the Arizona State University’s Carey School of Business, shows that disentangling these mutual funds could potentially wallow out endowments, ultimately causing them to lose as much as 12 percent of their total value over a 20-year time frame.
Worse still, Bessembinder found that the costs associated with managing complex endowments could cost an endowment fund as much as $7.4 billion in value over a 20-year period, depending on the size of the endowment.
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