The University of Sydney has revealed its plans to begin divesting from heavy-polluting and fossil fuel companies, in an effort to cut the carbon footprint of its investment portfolio by 20 per cent in three years.
The partial divestment plan, released by the University on Monday, brings it in line with a growing number of tertiary, religious and other organisations around the world that have divested over $50 billion in fossil fuel stocks for reasons both environmental and economic – that is, their business models are incompatible with the pledge by the world’s governments to tackle global warming.
Last May, America’s Stanford University said it would no longer directly invest in approximately 100 publicly traded companies for which coal extraction was the primary business, and would divest of any current direct holdings in such companies.
And in October, Glasgow University voted to begin divesting £18 million from the fossil fuel industry and freeze new investments across its entire endowment of £128 million, marking the first academic institution in Europe to respond to the student-led global divestment movement.
Australian universities, however, have been slow to join the movement, despite pressure mounting to follow the example of Australian National University, which last year dropped $16 million worth of shares in seven resources companies including Santos, Sandfire Resources and Oil Search.
The University of Sydney – which was itself the target of a sustained student-led divestment campaign, backed by Greenpeace – says it will take a “whole of portfolio approach” to address climate change, putting all companies it invests in “under the microscope”.
To hit its target, it will invest in a portfolio that, in three years, will have a carbon footprint 20 per cent lower than the average weighted footprint of each of the three markets it invests in: the top 300 Australian companies, international markets and emerging markets.
The university’s vice-principal (operations), Sara Watts, said the “sector-leading approach” took into account that some fossil fuel companies might be developing renewable energy technology, while other companies not involved in mining or oil and gas might be heavy carbon emitters.
Watts wouldn’t name which companies the university would divest, or which green companies it would invest in, to meet its ambitious target. The university’s total investment portfolio, which also includes property, is worth $1.4 billion and funds campus development and new teaching facilities.
The university had also signed up to the Portfolio Decarbonisation Coalition, a group of investors committed to decarbonising $A128 billion of their investment assets, and the Carbon Disclosure Project, which corporate transparency in reporting of carbon emissions.
Watts said on a rough estimate, the university’s Australian portfolio, which accounts for about $237 million of its fund, emitted slightly below the weighted average for the S&P/ASX300, despite that index of stocks having “relatively heavy carbon emitters”.
There was scope to increase the emission reduction target in future, she said, adding: “That’s partly because we would expect the benchmarks to change over time and we want to be decreasing faster than the benchmarks do.
“Interestingly, and very pleasingly,” she added, “we found that we believe we can meet the 20 per cent target and get either the same or slightly improved returns.”
Fossil Free USYD, who drove the campaign behind the University’s divestment shift, were encouraged by the move, but said the University should aim higher.
“It’s five minutes to midnight on climate change, and we live in a country that has no viable policies to address this issue, and no plans on how to create a just transition to a viable, renewable economy.” said spokesperson Clodagh Schofield.
“We, as a university community, must do more than simply begin to partially pull our own weight. Our role as a thought leader is to help Australia move first into the 21st century on climate change, and then into the future.
“Already more than twenty universities have completely divested from fossil fuels, yet Sydney University’s announcement will only see a handful of companies shed. We also don’t know how they plan to define and implement the target nor which companies will be divested.”
“Sydney University is in a unique position to call for a just transition to a renewable economy now, through divesting and joining the ranks of a rapidly growing list institutions worldwide, including the World Council of Churches, the Rockefeller Foundation, Glasgow University and the British Medical Association. We are committed to working with Sydney University to see them realize full leadership on climate by divesting from all fossil fuels.
“This can be a win-win for the University. Divestment is not only a moral imperative but it is good financial management. Financial experts everywhere point to the growing risks posed by fossil fuel investments.” said Schofield.
This last point – highlighting the financial prudence of divesting from fossil fuels – was neatly illustrated last week, when the world’s largest sovereign wealth fund, Norway’s Government Pension Fund Global (GPFG), removed 32 coal mining companies from its portfolio, citing the risk they faced from regulatory action on climate change.
The $US850 billion GPFG – which was founded on the nation’s oil and gas wealth – revealed a total of 114 companies had been dumped on environmental and climate grounds in its first report on responsible investing, released last Thursday.
“Our risk-based approach means that we exit sectors and areas where we see elevated levels of risk to our investments in the long term,” said Marthe Skaar, spokeswoman for GPFG, which has $40 billion invested in fossil fuel companies.
“Companies with particularly high greenhouse gas emissions may be exposed to risk from regulatory or other changes leading to a fall in demand.”
Skaar said GPFG had divested from 22 companies because of their high carbon emissions: 14 coal miners, five tar sand producers, two cement companies and one coal-based electricity generator. In addition, 16 coal miners linked to deforestation in Indonesia and India were dumped, as were two US coal companies involved in mountain-top removal.
“One of the largest global investment institutions is winding down its coal interests, as it is clear the business model for coal no longer works with western markets already in a death spiral, and signs of Chinese demand peaking,” said James Leaton, research director at the Carbon Tracker Initiative, which analyses the risk of fossil fuel assets being stranded.