The Regents of the University of California control a large amount of money. Along with this control comes the control of allocation of students’ tuition payments to endowments held by the Regents. These endowments are then invested in high grossing companies as an effort to yield the largest possible return on UC funds.
According to a statement made by the California Student Sustainability Coalition (CSSC) on April 4, the UC Regents released data showing investment holdings of $234 million in the 15 largest coal mining and burning corporations in the United States.
The CSSC is now calling for the Regents to reinvest funds directed towards coal corporations into renewable energy resources in addition to implementation of a more “democratic” process that would include student participation in deciding where the UC invests its money.
“It turns out that the UC’s investment in coal is sort of a complicated situation,” said Kitty Bolte, Outreach Coordinator for CSSC’s EndCoal Campaign. “The UC system controls a ton of money, and they’ve sourced the investment of that money out to third party investors. Those companies have, in turn, put the money into these things called indexes, which, for example, might invest the money in the top 3000 highest grossing companies in the U.S.”
The CSSC commissioned graduate student Sarah Siedschlag of the Bren School of Environmental Science and Management at UC Santa Barbara to write a report on the UC’s investments in the coal industry. According to the report, the UC invests heavily in the Russell 3000 index, which consists of a pooled fund that contains holdings in the top 3000 US companies by size. By investing in this index, the UC system owns shares in every major coal company in the US.
“Historically, endowments in the UC and elsewhere have had one mission: to create a consistently growing base of funds through which the school could then fulfill its mission of educating and providing services to the academic community,” said Andrew Chang, UC Santa Barbara alumnus and Campaign Director of CSSC’s EndCoal Campaign. “In more recent times, people have realized the impacts of their investments and have moved to include social responsibility to investment practices as well as financial responsibility.”
The CSSC is calling on all UC campuses to practice – not just educate students on a system-wide commitment towards environmental responsibility. By encouraging students to advocate for more disclosure of investment holdings and practices by the Regents, the CSSC is hoping to establish a student voice in investment practices. They hope to do this through forming investment committees and calling for socially responsible investment strategies that would serve as both policy and practice.
Marie Berggren, Chief Investment Officer and Acting Treasurer of the Regents, said that the Regents have no plans to divest from coal-related securities at this time.
“The Regents have a fiduciary responsibility to protect the security of the University’s pension and endowment fund and they have consistently maintained a position of primarily using economic factors in evaluating the University’s portfolio and its investments,” Berggren said. “Their primary investment goal is to maximize the risk-adjusted total investment returns on the portfolios to benefit the current and future constituencies of the retirement and endowment pools.”
Although Berggren and the Regents currently have no intentions of seeking an alternative to the UC’s coal investments, records show that the Regents have divested from other securities that carry political and ethical weight as a result of public pressure in the past.
“The UC has divested from tobacco and Sudan in recent years and students would like to see the UC divest from coal and proactively invest in renewable energy,” Chang said. “Socially responsible investment strategies, including divestment, are very powerful tools toward social change, with the ability to alter perception of and ultimately dismantle dangerous, corrupt institutions – including the coal industry.”
According to the World Coal Association, the United States is second to China in world production and consumption of coal. Additionally, Siedschlag’s report said that coal is used for roughly half of all electricity generated in the United States and accounts for 81 percent of the electricity sector’s carbon dioxide emissions.
Both Chang and the CSSC report said that the coal industry, aside from its environmental pitfalls, will fail to sustain itself as a long-term, profitable investment.
“Coal is a risky investment not only environmentally, but financially,” Chang said. “The EPA’s new pollution-cutting measures will create significant and unpredictable costs for coal-reliant industries. The cost of coal itself is volatile and on the whole rising, and increasing construction costs for power plants are driving the replacement of coal fired plants with alternative energy sources.”
Chang said that while he recognizes the fact that the UC has a responsibility towards maintaining its financial security for its employees, students and public education system as a whole, the UC also has an obligation to invest in a better future for its students.
“The UC needs to continue its leadership and invest in the clean, renewable energy our country needs,” Chang said. “The UC is investing in our generation by creating the leaders of tomorrow.”
