A group of Penn students has begun calling on the University to divest its financial holdings in fossil fuel companies, joining a national movement that has picked up steam over the past several months.
As of press time, about 60 individuals — some of whom are part of a new student group called “Divestment at Penn” — have signed a petition calling for divestment.
Hosted on global climate change website 350.org, the petition asks Penn to “immediately freeze any new investment in fossil fuel companies, and to divest within five years from direct ownership and from any commingled funds including fossil fuel public equities and corporate bonds.”
Created in early November by School of Social Policy & Practice first-year student Brendan Sculley, the petition also claims that divestment would go a long way in creating a sustainable future for the environment.
“It’s really about starting to make some noise on college campuses, starting to let these fossil fuel companies know that what they’re doing is just unacceptable,” Sculley said. “We want people to know what’s going on.”
Although DAP just held its first meeting last week, the group is hopeful that Penn may eventually join the ranks of smaller New England institutions like Hampshire and Unity colleges — both of which recently agreed to rid their endowment portfolios of fossil fuels.
“If Penn were the first Ivy to divest, it would create a domino effect and prompt other schools to follow suit,” College sophomore and DAP member Sara Allan said. “I think divestment is a huge issue and it has the potential to make one of the most significant impacts of anything we do at Penn.”
An uphill battle
Despite students’ claims about the benefits of divestment, it seems unlikely that the University would move to sell off its holdings in fossil fuel companies — at least in the near future.
Although Penn does not publicize the specifics of its portfolio, approximately 3.6 percent of the Associated Investments Fund — which comprises the vast majority of the endowment — was invested in natural resources at the close of fiscal year 2012, according to the University’s most recent financial report.
FY 2012 ended on June 30, 2012. Penn’s endowment was valued at $6.8 billion at the time.
In addition to a number of fossil fuel holdings in Penn’s natural resource investments, Executive Vice President Craig Carnaroli acknowledged that the University has “modest exposure” to fossil fuels in other asset classes.
Although Carnaroli believes that a conversation about fossil fuels is worthwhile to have, he remains wary over whether divestment would be the ultimate outcome of that debate.
“The standards that we have for divestment are pretty high — there has to be broad consensus in the community and some substantiation of a moral evil,” he said. “I think this is an important issue, but I’m not sure myself whether it’s going to meet the standards for divestment, and I’m not sure that jumping to divestment as the solution is where we should land.”
Since FY 2008, the University has increased its holdings in natural resources nearly threefold. Penn invested $247 million in natural resources in FY 2012, compared to $92 million in FY 2008.
Natural resources also made up just 1.6 percent of the AIF in FY 2008.
Carnaroli said Penn has made a “conscious decision” to grow this asset class, given the relative performance and opportunity within natural resources over the past several years.
The University is not unique in this regard.
According to an annual study of endowments released last week by the National Association of College and University Business Officers and the Commonfund Institute, institutions with endowments of $1 billion or larger allocated an average of 9 percent of their portfolios toward investments in natural resources and energy last fiscal year. This marks an increase from previous years’ levels.
“Divesting that much of your holdings is difficult, and if you wanted to do it today, a lot of those energy holdings are in long-term investments, so divesting from them would essentially mean breaking a contract,” NACUBO Director of Research and Policy Analysis Ken Redd said. “Both sides of this issue have legitimate concerns, and hopefully they’ll sit down and see where the other is coming from.”
Carnaroli added that some of the University’s fossil fuel holdings are either in illiquid assets — which describe investments that are not easily converted into cash — or in larger funds controlled by independent managers. As a result, he said, it would be extremely difficult to sell off all of Penn’s fossil fuel holdings.
“One of the misperceptions in this space is that people think we have a room full of traders sitting around and deciding to buy 100 shares of Exxon,” Carnaroli said. “That’s really not the case.”
The ‘right thing’ to do?
The issue of divestment largely boils down to a debate over how — if at all — the endowment should be used as a vehicle for Penn to express views on social issues.
Members of DAP said that, while Penn has undeniably been a leader with its sustainability efforts, a move to divest would be the only way for the University to solidify its commitment to the environment.
“They really need to show that they’re committed to being as sustainable as they say they are,” College sophomore and DAP member Dani Castillo said. “They’ve done a lot of good things toward sustainability, but this is one huge way that they could put themselves out there as a leader. It’s the right thing to do.”
For his part, Carnaroli said he views revving up on-campus sustainability efforts as a better way to support the alternative energy industry, as opposed to taking a “punitive” approach against fossil fuel companies.
Students and activists, though, emphasized that divestment would primarily serve to send a symbolic statement to these companies.
“By divesting, institutions are sending a political message that they no longer want to invest in an industry that’s morally corrupt,” said Katie McChesney, who has worked with DAP as 350.org’s mid-Atlantic fossil organizer. “It’s true that divestment won’t end or cripple their business model, but it would create a strong political voice.”
If divestment were to take place at Penn, the conversation would need to start in front of University Council — a representative forum for the Penn community that contains students, staff, faculty and administrators. Any divestment proposal would need the ultimate approval of the Board of Trustees.
Divestment then and now
Divestment was last a major issue at Penn in 2006, when the University chose to prohibit future holdings in seven oil companies that operated in Sudan. The decision was a direct response to the genocide in Darfur.
“Divestment is an extreme measure that should be made rarely and carefully and only under the most unusual circumstances,” President Amy Gutmann said at the time. “In this case, the genocide occurring in Darfur with the support of the Sudanese government represents a moral evil that we cannot ignore.”
Now, DAP will be trying to persuade the administration that a similar “moral evil” exists with fossil fuels.
While DAP is still in the early planning stages of its efforts, Sculley said that the group hopes to spend the next month conducting research on the University’s investment practices and building support across campus.
DAP, which has about 15 members so far, has not yet reached out to the administration, Sculley added.
As it evolves, the student organization will likely be looking to similar, more established divestment groups at peer institutions. In particular, Swarthmore Mountain Justice, a divestment group at Swarthmore College, has made recent headway in getting its foot in the door with administrators.
Since the group was featured prominently in a recent New York Times article, Swarthmore senior Dinah DeWald said things have been progressing “faster than I think any of us could have expected.”
Though Swarthmore has remained unwilling to divest from fossil fuels, DeWald said there have been clear signs of movement recently.
Similar pushes for fossil fuel divestment have also made news at Ivy peers like Harvard and Yale universities. Although Harvard’s administration made clear in a statement that the school does not support the measure, a recent survey showed that 72 percent of Harvard undergraduates support divestment.
Nationwide, nearly 300 campuses currently have fossil fuel divestment petitions on 350.org — an increase from roughly 20 petitions six months ago.
“It’s been insane,” 350.org founder Bill McKibben said of the growth. “It’s so remarkable to see that the front line of the climate fight has, all of a sudden, become the college campus.”
College junior Penny Jennewein, another member of DAP, agreed.
“I feel very endangered by the threat of climate change, and feel that my future and future generations of my family are seriously threatened by what might happen,” she said. “Universities have a lot of power, and if a major university like Penn were to divest, I think it’d have a very significant impact. It would be huge.”
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