To realize our aspiration to create lasting remedies for climate change, the university must be a careful steward of its financial assets. Annual, budgeted spending from the endowment has been instrumental in supporting university operations, and more importantly, in propelling research and education.
In faithfully managing our financial resources, the university, through its Investments Office, encourages its external investment managers to consider the financial risks associated with climate change. In addition, the university has for decades followed a framework set forth in The Ethical Investor that, in rare cases, makes certain companies ineligible for investment by the endowment because they cause grave social injury. This has resulted in three divestment policies over Yale’s history related to companies complicit in South African apartheid, oil companies providing substantial assistance to the government of Sudan in light of the genocide in Darfur, and assault weapons retailers.
In April of this year, the university adopted a set of fossil fuel investment principles identifying specific behaviors that, if engaged in by a fossil fuel producer, would make it ineligible for investment by Yale’s endowment. Given the fact that Yale’s endowment is not heavily invested in fossil fuel companies, the principles were meant not simply for Yale’s purposes, but also to inform broader discussion regarding ethical investment related to fossil fuel production.
The principles were developed after considerable outreach and study by faculty and staff experts on the presidential Committee on Fossil Fuel Investment Principles. Their report explains in detail how they arrived at these principles and makes clear that the implementation of these principles is intended to be dynamic, taking into account technological innovation, business evolution, shifts in government policies, and other changes that are expected to occur as the world transitions to cleaner energy.
Upon the adoption of these principles, the Corporation Committee on Investor Responsibility tasked the Advisory Committee on Investor Responsibility (ACIR) with the work of identifying fossil fuel producers that would no longer be eligible for investment by the endowment. The ACIR has begun this work primarily by developing specific criteria to apply to fossil fuel producers. Already they received the CCIR’s approval for a recommendation that coal producers no longer be eligible for investment. In addition, oil and gas producers who fail to disclose their greenhouse gas emissions—or if they do disclose, have high carbon intensity in their production—will no longer be eligible. The ACIR is building out the list under these criteria and will continue its work of implementing the principles with the expected result that more names will be added. The list can be found on the ACIR’s website and is expected to be updated periodically.
Already, the world is witnessing a wave of announcements by fossil fuel companies about new goals to reduce their carbon footprint and carbon intensity of production, as well as plans to advance renewables and carbon capture. The ACIR will monitor companies’ progress under the various announced plans and stands ready to revisit a company’s status as appropriate.