Climate Change News: University Of California Divests Entirely From Fossil Fuel Assets

The University of California, or UC, has divested the last of its $1 billion of fossil fuel assets, thereby becoming the largest U.S. educational institution to do so.

“As long-term investors, we believe the university and its stakeholders are much better served by investing in promising opportunities in the alternative energy field rather than gambling on oil and gas,” said Richard Sherman, chair of the UC Board of Regents’ investments committee.

UC will now tailor its $126-billion portfolio into more environmentally sustainable energy investments, including wind and solar energy.

"Today, we remain convinced that continuing to invest in fossil fuels poses an unacceptable financial risk to UC's portfolios and therefore to the students, faculty, staff and retirees of the University of California," said Chief Investment Officer and Vice President Of Investments Jagdeep Singh Bachher. "While we certainly could not have predicted the speed nor depth of the recent downturn in the traditional energy sector, signs point to a structural shift -- not merely another cycle of boom or bust. Given geopolitical tensions and likely a bumpy and slow global financial recovery in a post-pandemic world, lowered demand and oversupply could portend an even longer price drought in oil and gas."

“The endowment, the pension [fund] and all of our working capital pools are fossil-free at the University of California,” Bachher added.

In March 2018 Bachher said that pulling out of fossil-fuel investments was the long-term goal for both the pension fund and the endowment.

In a Los Angeles Times op-ed, Baccher and Sherman wrote: “Our job is to make money for the University of California, and we’re betting we can do that without fossil fuels investment.”

The decision to divest was first floated by UC at least five years ago.

“While no one can know for certain how financial markets will perform, by examining the data and gauging potential risk, we have charted a long-term, sustainable course,” Board Chair John A. Pérez said in a statement.

UC’s decision is significant, said activists, due to its prominence and sheer size. The 10-campus system boasts some 285,000 students in enrollment.

“It’s the largest and one of the most recognizable universities in the nation” said Richard Brooks, a senior strategist with 350.org, an international environmental organization, “If they can do it, any other university can do it.”

But Naomi Goldenson, a stakeholder science lead at the Center for Climate Science at UCLA, was puzzled by how the UC Regents cited reasons other than climate activism for its divestment.

“This insistence that they’re only divesting from fossil fuels because it makes financial sense is a product of the same sort of reasoning that is giving us pay freezes for non-union employees: the bottom line comes before watching out for the common good,” Goldenson said.

Edward Parson, a professor of environmental law at the UCLA School of Law, said the divestment was only symbolic.

“Flows of capital around business are so enormous that no single actor, even one as big as the UC system, makes a big difference,” said Parson.

Parson thinks the most effective way to reduce the climate impact of fossil fuels would be through government regulations. The UC system, however, has an obligation to faculty and students.

“Returns from endowment are one of the sources of income that universities use to finance their opportunities,” Parson said.

Deepak Rajagopal, an associate professor with the Institute of the Environment and Sustainability and Department of Urban Planning at UCLA, said UC’s divestment may lead other universities and large institutions to similarly divest from fossil fuels.

Shawn Fujioka, a third-year environmental science student at UCLA, said she supports the divestment.

“Any push away from fossil fuels is good [since the UC system is] one of the biggest college systems,” she said.

The Los Angeles Times reported that more than 50 universities have pledged to full or partial divestment from fossil fuels.

In 2011, Hampshire College in Amherst, Mass. was the first university to unload its investment portfolio of fossil fuels. Harvard University faculty voted this year to support a similar disinvestment, while Georgetown University plans to completely divest by 2030.