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Rice responds to national divestment trend

By Miles Kruppa     9/17/14 5:36pm

In an email sent to the Rice Environmental Club on Sept. 3, Club President Hutson Chilton said the club would, among other initiatives and if members were interested, enact a campaign to encourage the university to withdraw from, or divest of, fossil fuel investments, following a trend at other American private universities.

“We have just begun a campaign with three goals: to encourage Rice to divest from coal, make our investments more transparent and begin the conversation on campus about whether or not we have a responsibility as a non-profit university to invest sustainably,” Chilton, a McMurtry College senior, said in the email. “Coal is one of the most polluting fossil fuels as well as one of Rice’s smallest fossil fuel investments, so it is a good place to start. Right now, the project involves getting more information about Rice’s investment strategies as well as what divestment campaigns look like across the country. Eventually we hope to create some sort of rubric that is agreed upon by students, faculty and administration that would lead to future investment decisions being made more sustainable.”

At other American private universities, including Stanford, Harvard and Yale, referendums have been issued on divestment with 78 percent, 72 percent and 83 percent of the student body, respectively, voting for divestment. In May, Stanford announced it would divest its $18.7 billion endowment of coal, making it the university with the largest endowment to commit to at least partially divesting from fossil fuels.

According to the 2012 Rice Endowment Update, energy and natural resource investments comprise 7 percent of Rice’s endowment, which was valued at $4.84 billion as of June 30, 2013. The 2013 update specified that Real Assets, which includes real estate, natural resources, minerals and timber, comprise 22 percent of the endowment.

Chief Investment Officer and President of the Rice Management Company Allison Thacker (Baker ‘96) said Rice currently does not plan to divest from fossil fuels and any decision to divest would first have to be approved by the Board of Regents.

“We’ve had very successful, historical fossil fuel investments, [and] we’ve had some successful natural resources investments,” Thacker said. “I feel like Rice has a lot of ways in which we work collaboratively with the energy industry beyond investing, and I feel like we could do better on all of those fronts, but blanket divestment, to me, is certainly not the answer for moving the sustainability issue forward into the next hundred years.”

According to Thacker, Rice does not endorse or boycott products, including energy investments, though she said it is not a written policy.

“There are no specific regulations governing the types of investments that can or cannot be made, but as a general policy, Rice University does not endorse nor boycott products,” Thacker said. “This policy applies not only to decisions about the purchase of goods and services for use on campus, but also to decisions about investments that support the university's endowment and enable Rice to carry out its mission of education, research and public service.”

Thacker said the goal of the endowment is to provide a large base of working capital for the university; Rice currently funds about 40 percent of its operating budget using money from the endowment.

“The main thing I worry about is how can I invest the endowment in the best way possible to make sure that we can continue to support an affordable education at Rice for the most students possible and the best research and facilities for those students,” Thacker said. “That is my primary goal.”

Director of Rice’s Administrative Center for Sustainability and Energy Management Richard Johnson said the Rice Management Company’s investments, including those in 50,000 acres of timberland in Southwest Louisiana, help Rice be a more sustainable campus.

“The endowment features approximately $100 million in sustainability-oriented investments, including exemplary land management practices and habitat protection at the Rice Land Lumber Company (which is owned by the endowment),” Johnson said. “Through the Rice Management Company, the university has also enjoyed enthusiastic partnerships with faculty and student environmental research on endowment-owned lands and meaningful participation in Rice’s greenhouse-gas reduction efforts.”

The Stanford Campaign

Stanford University junior and Fossil Free Stanford campaigner Matt Simon said he sees divestment as an immediately attainable goal to combat climate change and promote environmentalism on college campuses.

“I think that, in terms of supporting environmental activism and trying to prevent climate change, it’s the new biggest thing, and considering how little time we have to affect change then we really don’t have any other options,” Simon said. “Divestment right now has gained so much momentum and so much power that we have to go with this one big movement.”

Fellow Stanford University junior and Fossil Free Stanford campaigner Shane S. Johnson said universities have a moral imperative to divest.

“I see divestment as a very important thing for universities to do because, whether they like it or not, they’re big economic players with a responsibility to the community, more so than a random person with just as much money as the endowment,” S. Johnson said.

S. Johnson and Simon said Fossil Free Stanford’s canvassing and outreach efforts culminated in a divestment week that preceded Stanford’s referendum on divestment. According to S. Johnson, outreach efforts to alumni, which resulted in local alumni groups discussing divestment, were particularly effective for persuading the administration.

“We had little mini Fossil Free Stanfords across the U.S.,” S. Johnson said. “The alumni network showed the university that [they also] want divestment; they have so much power, considering the university really takes seriously the opinions of the people that give them their money.”

Simon said, as the campaign progressed, student and administrative opinion gradually changed in favor of divestment.

“When we first proposed the idea, [Stanford] President [John] Hennessy was adamantly opposed to the movement, and now he supports coal divestment, and moving forward we’re hoping that can change even further,” Simon said. “The student body I think just has to be made aware. There are people that are opposed, but when you talk to them and reason they change their mind.”

Simon also said it is important for Fossil Free movements to encourage free dialogue surrounding the issue.

“Stanford has a lot of praise about letting our critics talk even if they are completely against us,” Simon said. “We just want all of the facts out there so that everyone can have as much information as possible and make the best decision.”

According to Simon, energy companies fund many of the initiatives on the Stanford campus, similar to how Shell funds the Center for Sustainability at Rice. Simon said it is important to push for energy companies to invest in more sustainable practices in addition to campaigning for divestment.

“That can be kind of a hypocrisy in that we’re trying to become so much more environmentally friendly, but we’re still getting so much funding from the fossil fuel industry,” Simon said. “One of our [requests] is that the fossil fuel industry become much more diverse and become a renewable energy industry instead of extracting fossil fuels and burning them.”

S. Johnson said most schools that have divested have not lost funding from energy companies.

“Schools that have divested have not lost any funding, whether or not it has come from fossil fuels,” S. Johnson said. “A lot of the schools have actually increased their funding, getting new donations from people who really like the idea of divestment.”

S. Johnson said convincing the Stanford administration of divesting from coal was easier because of coal’s lack of long-term viability.

“Coal is going to objectively be an awful investment in not that long, so it’s not going to be as profitable as it now, and getting out now is probably the right thing to do financially,” S. Johnson said. “The people who control the university’s money are pretty responsive to money.”

According to Simon, the overwhelming support from multiple groups — including students, faculty and alumni — is what ultimately forced the administration to divest.

“I’m not sure the university was really responding to the arguments as much as they were responding to support from all different directions,” Simon said. “And those different groups and different individuals are all persuaded by different arguments.”

Simon said the Fossil Free Stanford campaign is immediately translatable to other campuses, provided students devote enough time to it.

“I think if you did everything that we did and put in all the long hours outreaching to the entire campus and hundreds of faculty and starting an alumni campaign, [it would] go a long way in leading to success,” Simon said.

Rice Sentiment

In the March 13, 2009 edition of the Thresher, two students from the club Rice for Peace wrote an editorial demanding that the university establish an Advisory Committee for a Responsible Endowment to ensure that the Rice Management Company invest in ethical and sustainable companies.

“Rice for Peace is calling on Rice University to join a growing movement of schools committed to responsible endowment management,” the editorial states. “We have created a proposal asking Rice to establish an Advisory Committee for a Responsible Endowment so we can use the university's power as a shareholder to promote social and environmental responsibility. Investments in companies that guarantee ethical practices and contribute to community development will, in both the short- and long-run, be the most beneficial to growing Rice's endowment as well as its standing in the academic and international communities.”

According to Student Association President Ravi Sheth, a student advisory board to the endowment has existed in the past. However, Sheth said he has not heard of any student initiatives urging for divestment during his tenure.

“I can’t say that I’ve heard of any [interest in divesting] through any of our formal channels,” Sheth said. “That doesn’t mean it’s not happening because we haven’t asked students about it and looked for people that are interested in it, but from our perspective we haven’t really heard much about it.”

Sheth said the SA will investigate divestment if there exists a large enough student sentiment.

“If people are interested in it, we’re happy to look into it and happy to move forward with it,” Sheth said. “If it’s something that students don’t feel passionate about, something that only three people care about, there’s plenty of other issues on my radar that are much more important that have hundreds of students, thousands of students interested in them.”

Rice economics professor Peter Hartley has performed research on electricity, natural gas, oil, coal, nuclear and renewable energy. He said divestment is not an efficient way to advocate for reducing the environmental impact of fossil fuels.

“When it comes to fossil fuels in particular, once you’ve controlled for externalities, what’s the ethical position?” Hartley said. “What you want is efficient energy production, so you want an appropriate tradeoff between marginal costs and marginal benefits. Divestment seems like a really roundabout way to encourage the government to have policies that internalize externalities.”

Hanszen College sophomore Geneva Vest is both a member of the Rice Environmental Club and an ecology and evolutionary biology and policy studies major. She said certain aspects of Rice’s geography and student body make it less environmentally active.

“First off, we’re in Texas, which automatically makes [divestment] less of a concern, not because all of the students are from Texas, but because Rice is not in a state with firebrand environmentalists,” Vest said. “The other thing is we’re so busy we have other things to care about, and there’s no money in being sustainable, but there is in engineering.”

Moving Forward

Vest said she believes other sustainability initiatives should take precedent before a campaign for divestment.

“There are things that we have to do before [divestment],” Vest said. “There are a lot more tangible things that we have to do among the student body to get them to understand our impact on the environment before we can get into the economics of it and the politics of sustainability. I think [divestment is] a good thing, and if we could just get people to understand the concept of divestment, [that] would be an amazing thing, and then enacting it would be another level.”

Thacker said she also thinks other sustainability initiatives should be emphasized as opposed to divestment.

“The best solution is one where you can offer an environmentally superior outcome at the same cost as an inferior outcome, as opposed to doing something like boycott, which isn’t as long-term powerful as making somebody want to throw something in a recycling bin,” Thacker said.

In 2012, SA Environmental Committee Co-Chair Josh Rutenberg introduced a 100-Year Sustainability plan that directed the university to, among other requests, “be ethical and responsible in our endowment by making our investments transparent and transitioning into sustainable investments.” Current SA Environmental Committee Co-Chair Ryan Saathoff said the bill shows at least some support from the student body for re-examining the university’s investments in fossil fuels.

“I would like to think that Student Senate bills mean something,” Saathoff said. “But have we actually acted upon it yet? No, but it does show unanimous student support for transitioning into sustainable investments.”

According to Sheth, advocating and protesting for divestment would be ineffective, and students should begin conversations with the administration and Rice Management Company to assess whether Rice’s investments align with the student body’s ethics.

“Any attempt to say that Rice just shouldn’t invest in fossil fuels would be silly because I don’t think that’s a realistic end-goal,” Sheth said. “At a school that has an incredibly large endowment per student to say, ‘Oh, we’re going to make a fiscally bad decision that moves money away from our students, moves money away from our mission,’ that’s something in an efficiency-centered and administration-centered school that’s not going to happen.”

According to Chilton, the decision to divest has to be considered along with the role energy companies play on the Rice campus as well as Rice’s status as a non-profit institution.

"As for whether or not [divestment] is important at Rice, I think that’s something that has to be weighed carefully, given that fossil fuels have such negative social and environmental effects but also that fossil fuel companies provide a lot of wonderful opportunities for Rice students and faculty,” Chilton said. “I think it’s definitely important that students be allowed to participate in that discussion, however, which is not really something that happens too much now.”

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