Prepared by Swarthmore Mountain Justice, in consultation with the Swarthmore College Investments and Finance Office, to be presented to five members of the Board of Managers at February 2nd negotiation. Find citations here.
Last fall, the UN Intergovernmental Panel on Climate Change released its starkest report yet, warning of ‘serious, pervasive, and irreversible’ climate change if worldwide emissions do not peak by 2020 and if we emit more than 470 gigatons of CO2. The fossil fuel industry plans to burn five to six times that amount of carbon and continues to spend billions every year searching for more. This business plan would put the world on track for six degrees Celsius of warming and is simply incompatible with a just and stable future on this planet. In order to keep warming below the internationally-agreed upon level of two degrees Celsius, over 80% of proven fossil fuel reserves must remain in the ground.
Unburnable carbon poses a clear financial risk to our endowment. Over the past 10 years, the fossil fuel industry has underperformed the market average, according to analysis by Standard and Poors and McGraw Hill Financial. If the world takes the necessary steps to avoid a 2 degrees Celsius rise in global temperatures, an estimated $20 trillion in fossil fuel assets will be rendered worthless, leading to a devaluation of the fossil fuel industry by up to 60%. U.K. Energy Secretary Ed Davey has warned that fossil fuel stocks could be the “sub-prime assets of the future,” and United Nations Climate Chief Christiana Figueres ‘79 has noted that either “we will move to a low-carbon world because nature will force us, or because policy will guide us,” stating that continued investment in fossil fuels despite this threat constitutes a “blatant breach of fiduciary duty.”
More than any campaign before it, fossil fuel divestment has strengthened the climate movement and has begun to turn the tide against the fossil fuel industry. Since Swarthmore Mountain Justice first called for fossil fuel divestment less than 4 years ago, the movement has grown to include over 500 campaigns around the world. Hundreds of institutions and world leaders, ranging from anti-apartheid champion Desmond Tutu to the UN Secretary General Ban Ki-moon, have formed an unprecedented coalition, collectively declaring that continued investments in fossil fuels are antithetical to a just and sustainable future. Funds totalling over $100 billion have divested, including Sweden’s $37 AP2 pension fund and the Rockefeller Brothers Fund, built off of oil wealth.
As of 2013, Swarthmore’s endowment was valued at approximately $1.6 billion. The Finance and Investments Office, working with the assistance of consultants, invests the endowment through 70 fund managers. These managers operate both commingled and separately-managed accounts. Separately-managed accounts are tailored specifically for Swarthmore College and we can immediately ask these managers to exclude certain stocks. Commingled accounts pool the funds of multiple investors and some of these managers already offer fossil fuel free investment strategies, which the College can request.
Last fall, our largest investment consultant, Cambridge Associates announced that it is willing to assist Swarthmore in identifying managers who offer fossil fuel free investment opportunities. This offer provides us with a historic opportunity to align our investments with our values.
We call on the Swarthmore Board of Managers to immediately begin a process that will achieve a fossil fuel free endowment by 2020, the same year that global carbon emissions must peak if the world is to avoid catastrophic climate change. As the world moves toward a more sustainable future, it is unconscionable for Swarthmore to remain invested in fossil fuels. We propose a time-based process of slowly but deliberately transitioning each of the 70 accounts to fossil fuel free investment strategies. We understand that all these accounts cannot be transitioned overnight, therefore we propose the following timeline to identify fossil free investment opportunities within our existing endowment structure and to select, when necessary, new fossil fuel free fund managers.
- By Dec 31st, 2015: Identify fossil fuel free investment strategies with our existing managers.
- Work with Cambridge Associates and existing fund managers to identify opportunities to exclude companies listed in the Carbon Underground 200, a list of the 200 fossil fuel companies with the most carbon reserves. The Carbon Underground is the industry standard for fossil fuel free investment, and using this list will maximize investment options. Some of our largest fund managers, such as Wellington Capital, already offer funds that exclude fossil fuels.
- Request that existing separately-managed accounts exclude the Carbon Underground 200.
- By Dec 31st, 2016: Transition first set of accounts to fossil free investment strategies.
- Divest 14 funds from the Carbon Underground 200.
- Identify any fund managers unwilling to accommodate divestment, and, with the assistance of Cambridge Associates or other consultants, begin to identify new fund managers that offer fossil fuel free investment opportunities.
- Every year thereafter, divest 14 additional funds from the Carbon Underground 200, ensuring that our College moves both purposefully and thoughtfully to a fossil fuel free endowment by 2020.
- By Dec 31st, 2020: Full fossil fuel divestment from the Carbon Underground 200, in adherence with the scientific mandate to peak global emissions by this year.
Now more than ever, fossil fuel investments are in the public eye, and there is no neutral choice here. If we, Swarthmore, continue to invest in fossil fuels, then we implicitly deny climate science and signal to the world that fossil fuels are an acceptable investment, compatible with our values of justice and sustainability. This is the wrong message being sent at the worst time. As the college where the movement began, the world is watching us. The next five years are pivotal ones for ensuring the survival of our generation; the window for action is closing rapidly.
The Swarthmore community recognizes this historic opportunity, as well as our responsibility to show international leadership on climate. 500 alumni, 63 faculty, and nearly 1000 students have signed a petition calling on the Board to divest our endowment from fossil fuels. As an institution that values civic responsibility, we need to ask ourselves how we can maximally leverage our material resources and our prestigious social standing to promote action to best ensure a stable future. Divestment is one of our most powerful tools toward that end. Together, let us seize this moment to stand on the right side of history, and in support of a more just, sustainable world for ourselves and for future generations.