by Dan Apfel, Executive Director, Responsible Endowments Coalition on twitter: @danapfel
You might believe that because colleges are 501(c)3 public-benefit institutions that they would clearly strive to invest their money in ways that match their values: with sustainability, justice and the future in mind. Unfortunately, that is not the way most investors, or most colleges look at things.
But, collectively colleges and universities have a minimum of $12 billion worth of stock in fossil fuel companies that extract and mine fossil fuels and another $5+ billion in other related companies: those that burn, help extract, and transport them.
So yes, unless they’ve specifically stated otherwise, your college does own stock in coal, oil, and gas companies, ranging from ExxonMobil to Peabody Energy and everything in between.
So How Much Do They Own? First, it’s important to understand what different investments universities make.
University Investment Portfolio Averages
|US Stocks||International Stocks||Fixed Income (Bonds)||Alternatives||Cash/ Short-term|
|Average School – Equal Weighted Average||31%||19%||19%||27%||6%|
Source: 2011 NACUBO-Commonfund Study of Endowments
So colleges have about 50% of their portfolio in stocks across all universities and sizes. Note that the bigger the endowment, schools will typically have less stocks and bonds and more ‘alternatives’ or hedge funds, private equity, commodities, etc. This area could have fossil fuels or renewables, but for the purposes of this article we will deal with public equity, also known as stocks.
In terms of stocks, fossil fuel related companies, including mining, oil services, and utilities that burn fossil fuels–the energy and utilities sector, minus utilities that focus just on water (but not trains that transport fossil fuels) make up 13% of the stock market in the US (of the Russell 3000) by market capitalization, the value of the companies.
Russell 3000 Index by Sectors (as of January 29, 2013)
|Total FF Energy Stocks and Utilities||Total Oil, Gas, Coal Exploration & Mining (subsector of total)||Russell 3000 Total|
|Amount||$2.333 Trillion||$1.231 Trillion||$17.868 Trillion|
US stocks make up about 31% of a university portfolio, or 27% of a typical $100-500 million portfolio. In this case, we will look at a example $100 million and those numbers for ease here. For a $100 million portfolio, if they held the total U.S. stock market as 27% of their endowment, knowing some hold more and some less, would hold approximately (.13053*27 million) in total energy and utilities companies or $3.52 million, including $1.86 million (.06891*27 million) in direct extraction related industries.
Applying the same method to international equities, you get a similar picture. We will do it a little differently since the international market is a bit different and utilities tend to have more renewables & nuclear in their portfolio (remember–this justs just looking at fossil fuels for now):
MSCI All World ex- USA All Cap Index (December 31, 2012)
|Total Energy (FF)||Total Oil, Gas, Coal Exploration & Mining||MSCI All World ex-USA|
|$ Amount||$1.312 Trillion||$1.159 Trillion||$14.065 Trillion|
International stocks make up about 19% of a university portfolio, or 18% of a $100-500 million portfolio. Using our $100 million example university, if they held the total U.S. stock market as 18% of their endowment, knowing some hold more and some less, they would hold approximately (.0933*18 million) in total energy and utilities companies or $1.79 million, including $1.48 million (.0824*18 million) in direct extraction related industries.
It is not possible to know if these numbers are exact since most colleges or universities do not disclose a substantially larger breakdown than the approximate sectors listed earlier. That said, even with a relative variation of 2-3%, we know that it is highly likely that all colleges that have not stated otherwise do own stock in fossil fuel companies, either directly or through pooled funds like mutual funds–and that a $100 million endowment is likely to own in the range of $3.5-5.5 million worth, depending how you count and if they are on the high or low side of that number.
Instead of spending money on energy efficiency on campus, and avoiding it in their endowments, it is time for those colleges and universities to join Unity College, Hampshire College and Sterling College in divesting from fossil fuels and reinvest for a sustainable future.
Notes and References
Russell 3000 Index Data: http://www.russell.com/indexes/data/fact_sheets/us/russell_3000_index.asp
MSCI All Cap Index Data: http://www.msci.com/resources/factsheets/index_fact_sheet/msci-world-ex-usa-all-cap.pdf
The total dollar amount of investments in fossil fuels was calculated using the ‘dollar-weighted average’ from the NACUBO public tables. This analysis does not include investments in bonds of fossil fuel companies. These investments most likely represent a somewhat smaller percentage of the fixed-income portfolio.
Thank you to Aperio Group for providing company level index breakdowns.