Should university endowments be invested in fossil fuel companies? Or should they divest such holdings? Universities across the U.S. are considering these questions. In the latest development, Stanford University's Board of Trustees has released a statement on climate change, describing the university's initiatives to battle climate change, but declining to divest Stanford's roughly $22 billion endowment from the fossil fuel industry.
In the April 25 statement, the Board describes climate change as "among the most serious challenges of our time." The statement lists various elements of Stanford's strategic approach to combating climate change, including a $500 million transformative campus energy system, commitments to invest in solar, other renewable energy, wastewater recovery, green transportation, and energy efficiency in campus buildings. The statement also announces the creation of a new climate task force to be composed of undergraduates, graduate students, faculty and staff, to solicit ideas for further action.
Much of the statement is structured as a response to a proposal by student organization Fossil Free Stanford that the university divest its endowment from the fossil fuel industry. The trustees cite the university's Statement on Investment Responsibility as outlining a specific set of criteria by which the trustees may evaluate
whether a company is inflicting social injury in a manner that warrants
consideration of divestment. The statement notes the establishment of an Advisory Panel on Investment Responsibility and Licensing, which studied the issues and made a recommendation to the Board’s Special Committee on Investment Responsibility, which in turn made a recommendation to the trustees.
According to the statement, the advisory panel "recommended divestment of companies whose primary business is oil sands
extraction, a method that studies have found requires more water, and
releases more carbon into the atmosphere, than other forms of fossil
fuel extraction." It cites Stanford Management Company as saying that the Stanford endowment
has no direct exposure to companies whose primary business is oil sands extraction, so the trustees had no action to take on this point.
On the broader fossil fuel industry, the panel "concluded that it could not evaluate whether the social injury caused by
the fossil fuel industry outweighs the social benefit it provides, and
therefore did not recommend divestment." The trustees agreed that the criteria were not met, and declined to divest.
That said, the statement expressed the trustees' belief "that the global community must develop effective alternatives
to fossil fuels at sufficient scale, so that fossil fuels will not
continue to be extracted and used at the present rate... the long-term solution is for all of us to reduce our consumption of fossil fuel resources and develop effective alternatives."
But despite investment and progress in research, including by Stanford, the trustees note that "at the present moment oil and gas remain integral components of the
global economy, essential to the daily lives of billions of people in
both developed and emerging economies." The statement also notes the efforts of some oil and gas companies to explore alternatives. The statement notes that "the trustees do not believe that a credible case can be made for
divesting from the fossil fuel industry until there are competitive and
readily available alternatives."
The statement also notes that the university's investment program does take climate change into consideration when evaluating the economic attractiveness of various investments. In the trustees' words, "Prudent investors acknowledge that the world is beginning a transition
away from carbon-based energy sources and that pricing for fossil fuels
will reflect this transition." The statement also notes the efforts of the endowment managers to "identify and support industry best practices that, in addition to
positively impacting investment results, may pay significant
This is not the first time Stanford has considered divesting from fossil fuels. In 2014, after pressure from Fossil Free Stanford, the trustees announced a decision that Stanford would not make direct investments in coal mining companies, in recognition of "the availability of alternate energy sources with lower greenhouse gas emissions than coal."