2013-07-12 / Letters

Fiduciaries need to act—and act now—regarding fossil fuels

To the editor:

On Feb. 27 of this year I attended an investment committee meeting conducted by the board of trustees for the University of Maine System (UMS). I was there as a student representative from a group called Students for Environmental Awareness and Sustainability. In December we began a campaign to pressure the UMS Board of Trustees to divest its endowment of the 6.2 percent it currently has invested in fossil fuels.

With the general and financial future of our university in mind, Students for Environmental Awareness and Sustainability, along with a broad coalition of staff, faculty and alumni, joined up with 350.org to start a process that would realign the university’s moral rhetoric with its investment strategy.

After all, the UMS mission statement states, “Through integrated teaching, research, and outreach, the University of Maine improves the quality of life for people in Maine and around the world, and promotes responsible stewardship of human, natural, and financial resources.”

Although the investment committee is to be praised for taking up the issue,– the discussion did last for an hour – the results were disappointing. Basically, New England Pension Consultants, the UMS fund manager, warned against changing the strategy.

Consultant Kelley Reagan stated that although, “there are some investment funds out there today that are already limiting their exposure to fossil fuels ... the space is evolving and is not very researched at this time.

“Currently, there are no funds reviewed by NEPC that are approved.”

On June 24, the Washington Post reported an average drop of 8.9 percent in coal shares (and this was before President Obama’s recent climate change speech).

Therefore, New England Pension Consultants better stepup its research as one of its larger clients, i.e. the UMaine System, is invested in coal companies such as Peabody Energy, whose shares lost 7.2 percent. Obviously, it is high time for the UMS and other large Maine institutions to rethink their investment strategies.

As the federal government finally begins to implement long-awaited regulations on greenhouse gas emissions and the Chinese appetite for coal weakens, the value of coal stocks will decrease.

Though fossil fuels have been a reliable investment for the past century, they now run the risk of becoming “stranded assets,” inflating an imminent carbon bubble, which could sabotage the vital funds the UMS has wrapped up in these risky investments.

In the February meeting, Karl W. Turner, a trustee hailing from Cumberland, stated that, “We have an obligation from a fiduciary standpoint to maximize the returns on the monies that are under our purview.”

Jean Dan, a representative from the University of Maine School of Law Foundation said, “When you are a fiduciary, and this board is a fiduciary, you have to be like a parent and you have to examine every little aspect of what you are doing. Can we look at managers who don’t have fossil fuels? We don’t know if they’re going to be any good, they may not make the cut.” With these two conservative perspectives in mind, it can hardly be said that coal is a sound fiduciary investment – a 7.2 percent loss shouldn’t be expected to “make the cut.”

Finally, institutional investors like the UMS need to realize that fossil fuel investments are not a sustainably sound financial decision. Sure, coal may bounce back temporarily in the event of a natural gas explosion or another devastating oil rig spill, but in the near future these assets will eventually become useless.

This is not to mention the social and environmental implications that go along with a public university that claims to care about improving, “the quality of life for people in Maine and around the world.”

Regardless of one’s political or social opinions, it’s all too apparent that, from a fiduciary perspective, the UMS needs to divest the 6.2 percent of its endowment that is allocated to fossil fuels and reinvest those funds in something fiscally sound and environmentally sustainable.

Chriss Sutherland
South Portland

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