Last week, Technician broke the news that NC State’s endowment is $43 million deep in fossil fuel holdings. That means our university sponsors companies that actively promote dangerous levels of climate denial in our political leadership, emit the lion’s share of the world’s greenhouse gas emissions, and commit sickening environmental injustices that threaten our nation’s public health. And this is only one of many ghastly industries that our endowment may support — numbers on private prisons, weapons development and other socially destructive investments have yet to be released.
NC State has the power to move our endowment towards an environmentally and socially responsible framework that could avoid these investments; however, financial leaders at our university are held back by pervasive myths about responsible investing in general and fossil fuel divestment in particular. As a student who has been talking a lot about fossil fuel divestment this year, I would like to offer some basic facts to counter these falsehoods.
Whenever one brings attention to the darker side of the endowment, NC State’s financial leaders are quick to note the $50 million Park Scholarships fund, which is invested within a forward-thinking, socially responsible framework. We applaud the university on taking the first step towards ethical investment with the Park fund. But why limit this strategy to less than 5 percent of the entire endowment? It’s time to expand our university’s commitment to responsible investing.
According to Bloomberg, the sustainably invested Park fund consistently outperforms the traditional endowment. This is no fluke. Without screening for environmental and social risk factors when considering investments, the university’s endowment is blind to the risks that affect holdings in unsavory industries. Remember how Facebook’s stocks tanked after it was revealed that they handled personal data unethically? A responsible investment strategy precludes such losses by screening the questionable social practices of a company. This is why our responsible endowment is outperforming our main portfolio: it’s smarter.
Another popular refrain from NC State’s financial leadership is that we shouldn’t change our investment strategies for these funds, because many students depend on endowment money for access to higher education. However, feeding money into a volatile fund isn’t good for anyone. According to annual reports from the managers of our endowment, in 2016 the fund contracted by 2 percent, largely due to the contraction of 10 percent in the “Energy and Natural Resources” sector. Again, a socially responsible investment framework would have precluded this loss. Eliminating risky investments is a good way to get our portfolio to provide a stable source of revenue for students who depend on it.
Finally, our financial leadership delegates blame for unethical investments to the UNC Management Company, which, according to the Vice Chancellor for Finance, invests 87 percent of NC State’s endowment. However, there are two ways NC State can work within the existing framework to achieve an ethical, smarter endowment. First, they can use their influence with the UNC Management Company to push for that organization’s commitment to the UN’s Principles of Responsible Investing. This would be a huge step towards ethical investing and transparency across the entire 17-school UNC System.
Secondly, there is still endowment money that is under the control of the university. If 87 percent is managed by UNC Management Company and 5 percent belongs to the Park fund, that leaves another 8 percent of the endowment — around $100 million — within NC State’s control. Expanding our responsible investment strategies should start with this money.
In particular, we would love to see the financial leadership of this university commit to the following realistic steps:
1. Invest as much of the endowment as possible in the sustainable model exemplified by the Park endowment;
2. Push the UNC Management Company to sign on to the UN's Principles of Responsible Investment; and
3. Create an advisory board of faculty, staff, alumni and students to provide input on the environmental, social and governance framework for the university's sustainable investments.
Our top administrators have the opportunity to move our endowment in a smarter and less destructive direction. I look forward to the day when NC State’s financial leadership steps up to that challenge.
Meredith Bain is a fourth-year studying mathematics and the chapter chair of The Climate Reality Project at NC State