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In January 2022, a group of students affiliated with CEJS and Student Sustainable Action sat down with Wilson Garone, Vice President and Chief Financial Officer, and Bret Myers, Director of Treasury & Risk Management, to talk about SU's divestment journey and the future of sustainable reinvestment.
Before expanding, both Garone and Myers noted that they were not at SeattleU during divestment decision making. However, from their time here, they recognize that SU's strong connection with our Jesuit mission, which is inherently related to sustainability, is what sparked interest in divestment. Garone additionally noted that financial investments are just one part of the work, highlighting all the progress we have already made to incorporate sustainability in our academic curriculum, facilities, and more.
They note that the financial impacts vary based on what time period you focus on. Due to the pressure of COVID and stock market stalls, oil prices were heavily impacted for a period of time. Since SeattleU had already divested a large portion of oil-related investments, we did better financially than some of our non-divested peers. Garone sees more use of electric cars and alternative energy in the future, so our fossil fuel divesture could be beneficial in the long-term as well, but this is yet to be seen.
Additionally, SeattleU has modified how we measure our investment performance, by removing fossil fuels from our benchmark. The goal is to out perform this fossil fuel free benchmark with a fossil fuel free portfolio.
Garone expressed that he has seen a high resistance to divestment in higher education as it is a bold decision that can result in an impact on performance. Since most universities' endowments are solely focused on generating value, other parts of school need to speak up about sustainability to create this change.
However, CFOs of other universities seem interested in SeattleU's divestment. Garone notes that he has a significant amount of calls asking how we divested and how we manage an increasingly fossil fuel free portfolio. He hopes to see steps of progress within other institutions and takes every opportunity to spread the word about divestment.
Myers explained that our university does not hold individual stocks or bonds, but rather, we have a roster of investment managers who hold the individual stocks or bonds, and we have a portion of their portfolio.
Cambridge Associates articulates SU's investment standards to these investment managers, one standard being no investments in the fossil fuel industry. In order to track compliance, Cambridge Associates calculates the total percentage of the investment managers with fossil fuel holdings in our endowment.
While neither Garone or Myers were involved in the divestment decision, they remind us that SU was one of the first universities bold enough to make a commitment. This led to a lot of pressure and tension related to financial performance from committees, so 5 years seemed like a responsible time frame to be able to fully plan and execute a divestment strategy. This time frame also allows SU to sell off our fossil fuel investments at the right time in the stock market.
Despite the 5 year time frame, we are still far ahead of our divestment goals thus far. We have achieved half divesture (that is, divesting half of our fossil fuel investments) 9 months before our deadline. Garone believes we have everything we need to continue our divestment journey and that we on track to full divesture before the final deadline.
The retirement funds are not managed by the investment committee, Garone, or Myers, but instead are individually managed by the University employees. Our university partners with Fidelity to offer 20-25 different retirement funds, many of which include ESG-type investments, but the employees can choose which fund to participate in. If an employee does not choose a retirement fund, SU must assign them a default fund which has to meet certain requirements by the Department of Labor.
Retirement fund divesture is a more complicated issue since you don’t convince the University to divest; you have to convince each employee to divest their retirement. However, divesting the retirement funds is not completely off the table for SeattleU.
Myers explained that SRIs (socially responsible investments) are used when we want to make an investment in something that has a focus on the social impact it will generate from these investments. The social benefit may be related to the environment, human equity, or sustainability in general. On the other hand, ESG (environmental social governance) is more of a screening process. One would ask: What is this company's focus on the environment, social justice, and governance? How does it compare to other companies and their focuses? Where do I want to put my money?
Fossil fuel divesture was the first step, and the next case of work is putting our money into funds that align with our values and sustainability goals. While we will have to focus on financial return for the future of the University, we have just started making more of these kinds of decisions in publicly traded stocks and in private equity.
Myers noted that we can articulate our preference around sustainability and how we want to see things move, but the challenges are different depending on the size of the company. For large public companies, our investment percentages are very small, so it's difficult to have influence. But in private equity, our investment represents a significant portion of their company, it's possible to have more influence.
We can exhibit the most influence in conversation with other universities. If we can all agree on certain sustainability values, all of our collective voices can grow louder and create more change.