June 25, 2015
After more than a year studying industry standards, and the fossil fuel stock divestment positions of universities and companies around the world, board members of the Ball State University Foundation support pursuing an alternative investment portfolio that adopts environmental, social and governance (ESG) strategies.
The decision comes 15 months after board members and foundation staff began reviewing options, citing a need to balance prudent fund management with pragmatic sustainability efforts. Of particular concern was the board’s desire to adopt a reasoned response, since an analysis of the foundation’s funds found that less than 1 percent of the holdings involve any of the Carbon Underground 200 companies that have the highest exposure to fossil fuel production.
“We are grateful to the board and staff members who reviewed the various responses of peer institutions, attended various conferences where this was a topic of discussion and returned with solid data to help inform our action plan,” said Cherí O’Neill, foundation president and CEO.
In addition to creating an alternative investment portfolio pilot program, the foundation is encouraging its fund advisors and managers to incorporate ESG strategies. Further, foundation employees are developing opportunities for donors who wish to have gifts managed via more specific, restrictive criteria.
The history of ESG investing
University endowments in the U.S., on the whole, have less than 3 percent of their assets committed to investable fossil fuel public equities, according to a fall 2013 study by researchers at Oxford University. That same report noted that the primary driver behind divestment campaigns is the desire for measurable change.
The ESG principles were first identified and encouraged in the late 1970s to help end apartheid in South Africa. The idea of socially responsive investing gained further footing in some corners after the 1989 Exxon Valdez accident that spilled 10.8 million gallons of crude oil into Prince William Sound, off the southern coast of Alaska.
The interest in ESG strategies among university and college investors took hold after the 2012 decision by Maine’s Unity College to divest all fossil fuel holdings. Today, divestment strategies are in place at an estimated 27 U.S. colleges and universities, according to Fossil Free, a project of 350.org, a global environmental activist group started in 2008 by author and environmentalist Bill McKibben.
Striking a sensible balance between social and fiscal responsibility is a challenge university leaders across the country are facing. In a 2013 letter to her campus community, Harvard University President Drew Faust expressed the desire to act responsibly on the matter of climate change while being mindful that an attempt to leverage a university’s endowment to command social or political change can undermine the very pursuits scholars hold dear.
“Significantly constraining investment options risks significantly constraining investment returns,” Faust warned, potentially curtailing the number and type of resources available for students and faculty. The Harvard University endowment’s strength and growth, she said, “are crucial to our institutional ambitions — to the support we can offer students and faculty, to the intellectual opportunities we can provide, to the research we can advance.”
In other words, divestment strategies are most worthy of consideration and review. But an aggressive, immediate disposal of all fossil-fuel related funds, some experts say, does little to effect measureable change.
In an interview with The New York Times, Frank Wolak, director of the Program on Energy and Sustainable Development at Stanford said, “Divestment comes at the expense of meaningful action. It will do nothing to reduce global greenhouse emissions.”
Ahead of the curve
Even before the foundation board took up the discussion of divestment and what it could mean for the future of university investments, Ball State leaders had committed to innovative, measurable, meaningful sustainability.
In spring 2012, the university launched its geothermal district heating and cooling system — the nation’s largest ground-source, closed-loop district geothermal energy system, benefiting the economy and the environment. Now, nearly fully operational, the system will cut the university’s carbon footprint in half and result in an annual savings of $2 million, said Jim Lowe, director of engineering, construction and operations at Ball State.
“When we shut down the coal-fired burners in March 2014, we not only reduced our dependence on fossil fuels, we also reduced carbon dioxide emissions and sulfur matter produced by burning coal,” Lowe said.
And late last year, Kinghorn Hall became the university’s seventh building to become Leadership in Energy and Environmental Design certified, through the U.S. Green Building Council. On average, LEED-certified buildings use an estimated 32 percent less electricity and save some 350 metric tons of carbon dioxide emissions annually.
Other sustainability strategies employed by the university include a recycling program that diverts an estimated 20 percent of waste from landfills, in addition to the managed recycling of such items as computers, carpeting and drywall.
And the university continues its longstanding tradition of student-centered course work focused on making changes in the community. Recent projects with a direct environmental impact include an effort by 14 students to study logjams on the Mississinewa River. Left unchecked, logjams can create areas of stagnant, polluted water hazardous to not only the environment but to people living near a blocked waterway.
The students’ work resulted in the group receiving an estimated $100,000 in grants to clear three of the most troublesome areas of the river. And having hands-on access to study — and, in the case of the logjams, correct — environmental problems inspires the next generation.
That type of learning can occur only in a setting that is appropriately, as well as responsibly, funded, said Ball State President Paul W. Ferguson.
“The Ball State University Foundation has demonstrated significant commitment to understanding, and responding to, the challenges and rewards of leading in accord with principles of sustainability,” Ferguson said. “This current focus effectively balances the foundation’s fiduciary responsibility with a commitment to environmental, social and governance guidelines — a balance that will continue to provide new opportunities for our faculty, staff and students.