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UC Regents Investments Committee announces full divestment from fossil fuels

UC Board of Regents Investments Committee announced Tuesday it’s endowment, pension and working capital pools have completely divested from fossil fuels. This decision took financial and environmental concerns into consideration. (Daily Bruin file photo)

By Celia Janes

May 25, 2020 6:16 p.m.

The University of California Board of Regents Investments Committee announced Tuesday it has completely divested from fossil fuels.

This divestment affects approximately $125 billion worth of assets, said Jagdeep Bachher, chief investment officer and vice president of investments, during the UC Investments Committee meeting. The decision took environmental impacts and financial responsibilities into account, Bachher said.

“The endowment, the pension and all of our working capital pools are fossil-free at the University of California,” Bachher said.

The endowment consists of investment portfolios for the University of California campus Foundations and the Regents’ General Endowment Pool. The pension funds help pay workers after retirement, and the working capital pools help the universities pay for various operational costs.

The UC Regents first made the decision to divest from fossil fuels about five or six years ago, Bachher said. Since then, the regents have made steady progress toward complete divestment. In September, the Investments Committee announced the UC’s $13.4 billion endowment had completely divested from all fossil fuels.

UC students began the process of advocating for divestment with protests years ago, and faculty soon joined the cause, said Naomi Goldenson, a stakeholder science lead at the Center for Climate Science at UCLA. The efforts of the Fossil-Free UC campaign, including research, petitions, committees and meetings helped push the UC Regents to fully divest. Goldenson said it is baffling the regents are hesitant to take credit for their climate leadership.

“This insistence that they’re only divesting from fossil fuels because it makes financial sense is a product of the same sort of reasoning that is giving us pay freezes for non-union employees: the bottom line comes before watching out for the common good,” Goldenson said in an email statement.

The decision to divest has a symbolic meaning, and its impacts on the environment will be indirect, said Edward Parson, a Dan and Rae Emmett professor of environmental law at the UCLA School of Law.

“Flows of capital around business are so enormous that no single actor, even one as big as the UC system, makes a big difference,” said Parson, who is also a faculty co-director of the Emmett Institute on Climate Change and the Environment.

The divestment may cut off capital from firms that process fossil fuels, which will have some benefits, but the most effective way to reduce the impact of fossil fuels will be through government regulations, he said.

The UC system has had to balance its goal to divest from fossil fuels with its responsibilities to students and faculty, Parson added.

“Returns from endowment are one of the sources of income that universities use to finance their opportunities,” Parson said.

The massive decline in cost of renewable energy from solar, wind and falling price of storage battery technologies means demand for fossil fuels will steadily decrease, said Deepak Rajagopal, an associate professor with the Institute of the Environment and Sustainability and Department of Urban Planning.

The UC’s decision to divest may have a spillover effect, Rajagopal added. The UC’s decision to divest might encourage other universities and large institutions to divest from fossil fuels, not only because it is a moral choice, but also because it will be a financially sound choice leading them to divest, he said.

It is beneficial for the UC system to set a positive example for other institutions, even if their reasoning was based primarily on financial concerns, Goldenson added.

Since the number of funds available to the UC system before the divestment was so large, it is likely green technology and sustainable industries were already represented in their portfolio, Parson said. Investment in sustainable industries increases the amount of capital available to green technology.

Shawn Fujioka, a third-year environmental science student, said she supports the decision to divest, especially because the UC is one of the largest college systems in the United States.

“Any push away from fossil fuels is good (because the UC system is) one of the biggest college systems,” she said.

Conor McCaulley, a third-year individual field of concentration student who focuses on green technology management, said he applauds the UC Regents for taking this crucial first step. He said it is also important for the UC to reinvest the money in green technology to further demonstrate its support for environmental concerns.

“Although divestment decreases the ability of fossil fuel companies to raise money, it doesn’t decrease the demand for fossil fuels,” he said.

Rajagopal said he believes this is the right time for the UC system to make this decision because it is financially and environmentally prudent. Several analysts, including even a few oil companies themselves, believe oil demand will peak in the decade or so and then begin a slow but steady decline.

“It’s not a question of if, but when,” he said.

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Celia Janes
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