Divesting for a sustainable future

Years ago, the movement to move away from fossil fuels was at the forefront of the public eye. Marchers organized and protests took headlines, screaming for change citizens demanded organizations eliminate their support for unsustainable energy practices.

In the spring of 2013, a group of Humboldt State students approached Craig Wruck, the Vice President of the HSU Advancement Foundation, to discuss eliminating the university’s investments within the fossil fuel industry and other concerning sectors.

“Four years ago, the students came to us, and it was during the whole run up to the fossil fuels divestment movement,” said Craig Wruck. “Humboldt State has been very good about socially responsible investing since the foundation was reconstituted, so we never had separate investments and we had never owned separate stocks. It would have been easy for us to say, ‘Good news, we’ve already divested, we don’t own any Texaco stock, because that was literally true.”

Yes, HSU was not directly invested in fossil fuels. However, indirect mutual funds held ties to the fossil fuel industry. This is what the students wanted to change.

“Our endowments as of the end of last year totaled about 30 to 31 million, and those are contributions over the last thirty years or so. They are then invested, and they are invested in what are called institutional funds, but are actually mutual funds. That’s not unusual for an endowment of our size. We just aren’t big enough to pick individual stocks, we get better diversification and lower costs if we invest in these institutional funds.”

Sorting through the details of the institutional funds was not an easy decision at first.

“It was a real risk for the foundation board, because they’re programed to get the best return they can,” said Wruck.

It took over a year to compromise and for the board to begin the process of divesting from the mutual fund investments that had ties to fossil fuels. The Advancement Foundation and the students worked to find the best compromise environmentally and financially.

“It’s an interesting argument. Whether the best way to force change in the corporate world, in terms of utilities and energy production, is to stop investing in it,” said HSU President Lisa Rossbacher.

Rossbacher was also a member of the Foundation board, and debated the next step in divesting from fossil fuels.

“Do we stay invested and use the fact that we are shareholders to argue from within, or do we make an even more dramatic statement and divest,” said Rossbacher. “We are in the process of divesting.

The board decided, at the encouragement of the students, to look into the indirect mutual funds and their ties to fossil fuels.

“We, [the Advancement Foundation] decided to take on the more complicated work of looking into the investments that the mutual funds own and trying to figure out how to green those up,” said Wruck. “Nobody had done that before.”

According to an article written by Annette J. Penny, a HSU grad and one of the students who originally approached the foundation about divesting, they were finally able to agree on the next steps towards divesting in late 2014:

1. “To create a new SEROP fund in which donors can rest assured knowing their donation is being invested only in portfolios that align with their own personal Environmental and Social Governance Criteria views.
2. To move 10% of the existing $26 million portfolio (so $2.6 million) within 12 months of SEROP fund implementation into funds guaranteed to not have holdings in any of our concerning sectors. (HSU’s definition of “concerning sectors” was expanded to include all energy and utility stocks rather than just fossil fuels in order to steer clear of any unintentional fossil fuel investments. Under this definition, 7.5% of HSU’s portfolio is invested in concerning sectors.)
3. To create a SEROP Investment Challenge which involved massive fundraising for increasing divestment capacity. For every $500,000 that is raised into the SEROP fund, another 10% will be moved. And once we’ve raised $5 million, HSU may be able to go completely Fossil Free!”

From there, things began to move faster and the Humboldt State Investment pledge was created. Below are the ten agreements stated in the pledge, provided by the 2014 press release on the HSU Investment pledge:

The Humboldt State University Advancement Foundation will:

1. Define Socially or Environmentally Concerning Sectors (“Concerning Sectors”) in a broad, bold way so as to include:

• Energy – extraction, distribution, refining and marketing (i.e. Oil, natural gas, coal and related/supporting industries);

• Utilities – electricity generation (i.e. Utilities utilizing carbon-based fuels);
• Aerospace/Defense, Alcohol, Tobacco, Gaming and Casino industries. Revisit definition and revise as appropriate over time.

2. Continue to abstain from any direct investment in Concerning Sectors.

3. Monitor and report on the value of indirect investments in Concerning Sectors.

4. Make reasonable attempts to reduce the size of indirect investments in Concerning Sectors, provided any divestments are consistent with the Foundation’s fiduciary requirements.

5. Define Socially or Environmentally Responsible (“SER”) organizations, projects or assets initially as ones which are environmentally friendly (i.e. reduce the levels of atmospheric C02) or improve the health and well-being of our community members. Revisit definition and revise as appropriate over time.

6. Actively seek offsetting investment opportunities in SER organizations, projects or assets.

7. Invest directly in SER organizations, projects or assets provided that:

• Investments meet the Foundation’s fiduciary requirements and policies.
• Investments support the stated HSU mission, vision and values.

8. Monitor and report on the value of direct investments in SER assets and active investments in SER organizations or projects.

9. Monitor and report on the value of obvious indirect investments in SER organizations, projects or assets.

10. Create a SEROP Fund (with appropriate policies) and actively seek donations of funds and assets that could be used to support Humboldt’s SEROP Pledge.

Since the Humboldt Investment pledge was created, HSU has taken actions to be more sustainable and environmentally responsible.

“The Humboldt Investment pledge does a couple things,” said Wruck. “We define socially concerning sectors much more broadly than anyone else. So we have always tried to minimize our investments in alcohol, tobacco, firearms, gaming, that sort of thing. We decided to add the entire energy sector and the entire utilities sector.”

Eliminating investments in both the energy and utility sectors was a huge step for the university.

“As we debated it we realized, ‘What’s the point of divesting in fossil fuels if you still own utility stocks that have power plants that burn coal,’” said Wruck. “So we decided to just eliminate both of those sectors. That has an impact on investment return, although we are three years in now and our investment return is as good as it’s ever been.

Deciding to divest from the energy and utilities sectors was not the easiest decision, but it was the next step in the university’s commitment to environmental accountability.

“A lot of schools have said, ‘Well you know, we’d love to step away from investing in petroleum and other fossil fuels, but we’re worried about what the impact of that would have on our endowment holdings,” said Rossbacher. “Our job is to increase those resources, that then can help the university. We divested and [still] have a really strong return on investment.”

The endowments the university receives funds numerous programs on campus, in addition to providing individual scholarship funds to students.

“Endowments are created by donors who give us money, and their direction to us is that we are to invest it and distribute the investment profits, but try to maintain it as a permanent fund,” said Craig Wruck. “So we try to maintain a little bit for inflation each year and then make distributions off of that.”

There was the possibility of having a much weaker investment return after divesting.

“They (financial advisors to the foundation) advised us that we would probably suffer about a 10th of a percent loss because we were going to pay attention to these sectors,” said Wruck. “It didn’t work that way, we have had our second best year ever as of June 30th.”

Since this process began in 2013, the foundation has made significant progress in divesting from concerning sectors.

“The portfolio itself is totally divested, the equity portfolio has totally divested about a fifth of it. It’s a balance, you don’t get as good investment return if you exclude utilities and energy, so we want to protect the investment return and continue to green up the portfolio.”

Another main focus for Wruck and the Advancement Foundation is to invest more in environmentally sustainable practices and programs.

“About a year ago the board members decided to raise money for what they called a ‘Go Green fund,’ to support students working on projects that contribute to a sustainable environment, and they just met their goals,” said Rossbacher.

During the first few weeks of the semester, the Go Green fund’s reached its goal, and the fund was considered successful enough to continue.

“We are just this year launching the Go Green interns,” said Wruck. “That’s money that the foundation raised, it’s a little over $100,000, and it’s being used to employ students to do sustainability work on campus.”

The Climate Action Plan was also fully completed last year, planning out the next steps to create a more sustainable campus. A group of students have been chosen to work on the project alongside the newly formed campus-wide Sustainability Committee.

“Working through the Office of Sustainability, [the students] are getting paid for their work and their job is to implement the campus’s sustainability plan, [also known as the Climate Action Plan,]” said Wruck.

Students took the initiative, first bringing the question of divesting to the foundation in 2013. Since then, numerous actions have been taken to carry out the ideas originally

“We wouldn’t have done this if the students hadn’t brought it to our attention. We were doing good, we were doing socially responsible investing the right way, but we wouldn’t have taken this extra step had the students not encouraged us to do that,” said Wruck.

Students are the ones who prompted this change, and they did so simply because they cared about the environment and the university. In the article Annette J. Penny released back in 2014, she explains why she needed to fight to divest.

“So why did I push so hard,” wrote Penny. “Because prioritizing the people and planet over profits is always the right thing to do. Because “Green Funds” are up and coming, allowing for quick growth in fund diversity. And because I can’t stand the thought of one day telling my daughter that I didn’t do everything I could to keep the planet healthy and alive for her to enjoy like we are lucky enough to do today.”

She was right to push. Since the issue was first discussed we have begun the process of divesting, the Climate Action Plan was created, the Sustainability Committee was formed, and the target for the Go Green Fund was met.

“We can do both, we can support the green efforts that are so aligned with the values of this institution and still increase the rate of return on our investments,” said Rossbacher.