Energy

Anti-Oil Crusaders Want University To Dump Entire Endowment Over Fossil Fuels

(REUTERS/Mal Langsdon)

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Chris White Tech Reporter
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Student activists believe the University of Maryland should divest all of its fossil fuel holdings, not just direct holdings, which would essentially scrap a large portion of the school’s $1 billion endowment.

The University of Maryland Foundation, which funds scholarships, decided Tuesday to jettison $70 million in direct fossil fuel assets from its massive endowment. The decision has angered campus greens. They claim the school should divest all oil assets, even those tied to mutual funds.

Maya Spaur, a member of the Student Government Association on campus, told reporters that while students are pleased with the announcement, they ultimately want to see the foundation focus on direct investments in clean energy companies and nix investments in indexes that may include fossil fuel stocks.

“I thought it was definitely progress,” Spaur said. “We need to keep pushing further if we really want to be a green model for the nation.”

The foundation, for its part, acknowledged that activist students were the driving force behind the decision.

“It’s because of the students and the positions they took that caused us to focus on it this year,” Leonard Raley, president and CEO of the foundation, told reporters Tuesday. “But the world is changing and we’re paying attention to it. We’re concerned about climate change and I think the actions that our foundation took reflect that.”

The complexity of these indexed funds seriously complicate the divestment campaign’s goals.

“Divesting from fossil fuels is an incredibly complicated undertaking,” Todd Kendall, an economist with economic consulting company Compass Lexecon, told a panel of energy analysts in early June. “What makes it so complicated,” he added, “is that oil assets are literally tied to every sector of the economy, not to mention every asset of a university’s endowment.”

Many of the assets these schools hold are from financial institutes that give loans to oil companies, while still others are in technology firms that, among other things, develop tools that help distribute oil from one place to another, Kendall told the panelists.

Endowments also use private equity funds and mutual funds to manage their assets, which hold stock in both green energy firms and fossil fuel companies, neither of which are easily disentangled.

Because there is no way for a mutual fund to weed out specific assets, Kendall added, “You’ll have to sell off 100 percent of the funds” — some of which would be in green energy investments.

Kendall, who co-researched a study in May explaining the “hidden costs” of divestment, told The Daily Caller News Foundation in early June environmentalists have dramatically downplayed the costs of fossil fuel divestment.

His research showed, among other things, that the frictional costs associated with divesting complex endowments could cost an endowment fund as much as $7.4 billion in value over a 20-year period. It’s one thing to make a promise to divest, it’s quite another to carry out a divestment proposal.

Meanwhile, the coal and fossil fuel industry are deriding the decision. The switch is a “shortsighted strategy” that will reduce returns on investment, said Betsy Monseu, the CEO of the American Coal Council.

“Coal demand continues to increase globally, and coal will continue to be used throughout the world and the United States,” Monseu said. “So how to address this from a practical standpoint, that would be a more productive approach.”

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