Canadian universities must dissociate themselves from polluting industries

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In a dramatic statement, Harvard University recently announced that it will cede all of its massive $ 42 billion (US) endowment to fossil fuels.

Divestment – the opposite of investing – is the act of selling, eliminating or closing all positions in stocks and bonds. In many cases, this is due to ethical or moral considerations.

There are two well-known examples of successful divestment campaigns in recent history that stand out. The first relates to companies that went into business in South Africa during the apartheid regime in the mid-1980s. The second relates to tobacco companies.

Divesting from fossil fuels is a relatively new trend, but with the urgency of the climate crisis, the practice is becoming more common among large institutional investors such as sovereign wealth management funds, pension funds and financial institutions. university foundations.

Harvard is not the first to divest itself and it is not the only one. According to a recent study, in December 2020, 190 higher education institutions in 13 countries had committed to divest (or partially divest) their endowments of fossil fuel stocks.

But among Canadian universities, only a few have made bold divestment commitments. Of the country’s 30 universities, two have announced partial divestitures and five full divestments, with the University of British Columbia being the largest.

Dror Etzion, associate professor of strategy at McGill University, whose research focuses on sustainable development, has been promoting the “Divest McGill” movement for years without much success.

“It is disappointing that with such strong support from students and faculty, and after the McGill Senate votes in favor of divestiture, the board of governors refuses to dissociate the university from these polluting industries,” he said. .

The power of divestment lies in its ability to stigmatize the oil and gas sector, says Etzion, by mobilizing the public, empowering social movements and increasing political pressure on governments to pass restrictive legislation.

Divesting oil and gas is of course only one approach to try to accelerate the transition to a low carbon economy. Shareholder activism, or “engagement,” is another strategy pursued by some large institutional investors, such as CalPERS and CalSTRS, based in California, two of the world’s largest pension funds that jointly manage around $ 800 billion in investment. ‘assets.

Both funds have deliberately decided to pressure companies to adopt sustainable standards and reduce their emissions through shareholder resolutions, board appointments, etc. Given their size, they have the right to vote.

“We strongly believe that engagement is the first call to action, and the results show that it is the most effective form of communicating concerns with the companies we own,” CalPERS writes on its website.

“Engagement and activism are not bad ideas,” Etzion adds. “But what is possible for CalPERS is not possible for McGill or any other Canadian university.

Indeed, Canadian universities manage their endowments by subcontracting to several asset managers, hedge funds, venture capital firms, etc. With endowments in the order of $ 1.8 billion (McGill) and $ 3.5 billion (University of Toronto), they simply do not have significant voting rights. power to impose change, leaving divestment as the only option.

It makes sense that these universities and others, which host science and scientists who are part of the United Nations Intergovernmental Panel on Climate Change (IPCC), should be the first to act on the recommendations of their own members.

But when I asked the University of Toronto and McGill University how they could justify their stakes in oil and gas companies, I did not receive a direct answer.

The McGill president’s office simply ignored me, and the university’s media relations department provided me with a link to a socially responsible investment report which says McGill commits to reducing carbon emissions from its portfolio holdings by 2025 using a complex metric.

The University of Toronto provided more details and, in an emailed statement, wrote: “(As of) June 30, 2021, oil and gas companies in corporate equity and bond portfolios accounted for approximately 2.4% of the total assets of each of the pension funds. and endowment portfolios.

But the U of T isn’t planning a full divestment anytime soon. On the contrary, he set a “target to reduce the 2017 carbon footprint by 40% by the end of 2030”.

Being the richest university in the world and perhaps the most prestigious, Harvard’s divestment decision is a game-changer.

Lawrence S. Bacow, its chairman, should be credited with the move, but it would not have been possible without the continued pressure from student groups, faculty and staff, NGOs and grassroots movements such as Divest Harvard, who has been fighting since 2012 for Harvard to act ethically in the face of the climate crisis.

Some 1,339 institutions that manage $ 14.7 trillion in assets are committed to divesting from oil and gas. These include universities, pension funds, religious organizations and NGOs. It is unacceptable that there are only a handful of Canadian universities on this list.

It’s time for our schools to respect science, follow Harvard’s lead, and lead the way for a cleaner future.

Amir Barnea is an associate professor of finance at HEC Montreal and a freelance columnist at Star. Follow him on Twitter: @ abarnea1



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