Almost $40 trillion divested from fossil fuels by 2021, with University of Toronto joining the long list of institutions in October

Time to coincide with COP26, Divest Invest 2021: A Decade of Progress towards a Just Climate Future was released by Stand.earth on October 26. It reports that “there are now 1,485 institutions publicly committed to at least some form of fossil fuel divestment, representing an enormous $39.2 trillion of assets under management.”  The report provides a timeline and summary of the major institutions which have divested, and includes brief case studies of South Africa and Harvard University.  It argues that divestment is more impactful than shareholder engagement, and summarizes the impact of the shift of capital on the fossil fuel industry. Finally, the report discusses how that capital can be directed to renewables and to Just Transition, highlighting the cases of the Navajo Power in the U.S. and Frontier Markets in India.   Accompanying the report is a database with much more information about individual institutions.     

The report states: “Major new divestment commitments from iconic institutions have arrived in a rush over just a few months in late 2021, including Harvard University, Dutch and Canadian pension fund giants PME and CDPQ, French public bank La Banque Postale, the U.S. city of Baltimore, and the Ford and MacArthur Foundations.”  Add to that list, Canada’s largest university, the University of Toronto, which  announced  on October 27  that the University of Toronto Asset Management Corporation (UTAM) – which manages $4.0-billion – “will divest from all direct investments in fossil fuel companies within the next 12 months, and divest from indirect investments, typically held through pooled and commingled investment vehicles, by no later than 2030, and sooner if possible. UTAM will also allocate 10 per cent of its endowment portfolio to sustainable and low-carbon investments by 2025, representing an initial commitment of $400 million, and is committing to achieve net zero carbon emissions associated with U of T’s endowment by no later than 2050.”  Many of the same details were provided in the U of T President’s Letter to “the University of Toronto Community”, here, which also describes the newly-announced goal of a “climate-positive” St. George campus by 2050 , and defends why it has taken the U of T so long to act after the 2015 report of the  President’s Advisory Committee on Divestment from Fossil Fuels  .     

Divestment decision at University of Toronto amid further financial warnings

At the end of March, the President of the University of Toronto issued an official response  to the Advisory Committee on Divestment from Fossil Fuels, which had reported in December 2015. The University rejected a blanket divestment strategy and opted to pursue a targeted approach which will incorporate environmental, social, and governance-based factors (ESG) in investment decisions. It states that the core mission of the university, research and teaching, will be used as its main contribution to the fight against climate change. The statement  is summarized in a  Globe and Mail article (March 30) .  On April 12, the New York Times reported  that Yale University had also found a compromise position regarding investment strategies for its endowment fund, rather  than outright divestment.  Arguing against such approaches: from researchers at the London School of Economics,  “Climate value at risk’ of global financial assets” in Nature Climate Change online (April 4)  which uses models to estimate the impact of twenty-first-century climate change on the present market value of global financial assets, and concludes that “losses could soar to $24tn, or 17% of the world’s assets, and wreck the global economy”.  An article in The Guardian   (April 4) summarizes this and other studies.  Even the Harvard Business Review (April 14)  is sounding the alarm, based on the latest research.   An article in Corporate Knights magazine, “Defending Divestment”   (April 6) considers the financial and moral arguments about divestment.

A New tool for Responsible Investing and Divesting in Canada

As it does every year to coincide with the World Economic Fund Meetings, Canadian magazine Corporate Knights released its rankings of the 100 Most Sustainable Corporations in the World in January 2016 . Perhaps surprisingly given the current VW emissions scandal, a German automaker, BMW, is ranked #1 in sustainability, based on its energy, waste and water reduction performance and for linking the salary of its senior executives to their sustainability performance. Corporate Knights also introduces its Eco Fund ratings , along with a discussion of responsible investing , “to make it easy for Canadian investors to see which funds provide the best combination of economic and environmental performance.” Canadian mutual funds are ranked, with calculations of their 3-year annualized returns, weighted carbon intensity, and exposure to green companies.  Such ranking may prove useful to the financial managers at the University of Toronto, who are currently considering the recommendations of a Presidential Advisory committee on divestment from fossil fuels . The committee has recommended that the university determine a method to evaluate whether a given fossil fuels company’s actions blatantly disregard the 1.5-degree threshold, and then proceed with “targeted and principled divestment from specific companies in the fossil fuels industry”.   Alternatives Journal puts this in context of the wider university divestment movement in “U of T could make Divestment History” (Dec. 2015)  . Disappointingly, the Globe and Mail reported on December 23 “Ontario Teachers, CPPIB opt to maintain fossil-fuel assets” . The Ontario Teachers’ Pension Plan and Canada Pension Plan Investment Board say they are committed to their roles as “engaged investors”, seeking transparency from companies regarding risk.     On January 1, 2016, Marc Lee summarized the issues in The Tyee and asked, “Is your Pension Fund in Climate Denial?