Correction appended.
The University has fully divested all of its public fossil fuel investments from the endowment, AU will announce in a press release Wednesday morning.
The University has had no direct investments in these stocks for several years, the press release stated, but over the last few months the Board of Trustees has sold off the final $12.9 million of fossil fuel exposure within the University’s public endowment portfolio. This was done by selling $350 million in commingled and index funds, where the indirect investments were located, and using the proceeds to invest in non-fossil fuel holdings.
The news comes seven years after the student body passed a referendum in favor of divesting the University’s fossil fuel investments, with a similar vote last week. The Board of Trustees decided against following the initial recommendation in November 2014, citing D.C. law, a potential loss in returns and significant management fees.
The announcement makes AU one of few U.S. universities to fully divest both direct and indirect fossil fuel holdings over the past decade.
“For more than a decade, AU has been on a campus-wide sustainability journey — something that’s not just part of our mission, but our DNA as changemakers,” President Sylvia Burwell said in the press release. “Our actions, from reaching carbon neutrality to the Board’s commitment to evolving our investments, will continue to serve as a model for sustainability, further demonstrating our leadership on the issue and how our community can make an impact in the global fight against climate change.”
Fossil Free AU, a campus group formed in 2012 to urge fossil fuel divestment, met with Burwell in January 2018 and protested outside of a Board of Trustees meeting that November, in addition to the group’s efforts to increase their visibility on campus.
“While Fossil Free American University applauds the University's decision to divest their endowment from the destructive fossil fuel industry, this is only one step towards a just university. We hope that AU will continue this act by talking with students about reinvestment so we can all play a role in a just and equitable transition," said Marley Wiest, a spokesperson from Fossil Free AU.
In 2013, students voted on a referendum to support divestment, before divestment last came up for a vote by the Board of Trustees.
The press release commended student activism, especially in light of last week’s referendum vote.
“Student action now and in 2013 was a major factor,” Student Government Comptroller Bobby Zitzmann said. “Student Government worked with student groups like Fossil Free AU to put together their thoughts, get a response from the Board of Trustees and force them to take a position.”
The divestment required the University to find new investment opportunities with the same performance and similar or lower fees to fossil fuel investments.
Index and commingled funds, like ones reflecting the lucrative S&P 500, contain a large variety of individual stocks, spreading risk and profit across the market. These often include fossil fuel stocks, which the University removed from its public portfolio.
“We have always made public that we had no direct investments in fossil fuel companies,” said Doug Kudravetz, AU’s chief financial officer, in an email to the Eagle. “It was only recently that we were able to eliminate the exposure in our commingled funds and index funds.”
The press release stated that AU does not have any top coal and oil companies known as the Carbon Underground 200 in its separate, private investment portfolio, but "may at some point have small and short-lived positions."
“Those investments are longer-term in nature and can be ‘locked-up’ for more than five years, allowing the managers to take ownership positions in certain companies,” Kudravetz said.
According to a February report from the Student Government Financial Research Office, the Board conducted a partial divestment of its fossil fuel investments in November 2019, reducing their exposure to 0.6 percent, or $4.5 million, of AU’s $750 million endowment. AU’s overall fossil fuel exposure has declined 85 percent since 2014.
In its February meeting, the Board voted in favor of divestment and made a conscious decision to buy fossil-free stocks instead, said Zitzmann, an author of the report. The moral and environmental aspects of divestment motivated the Board’s decision, he said, while the legal and financial situation finally evolved enough to allow it to happen.
It’s important that this decision is not simply about economic pressure, but that there’s much more behind it, said Paul Wapner, a professor of global environmental politics in the School of International Service. He added that we shouldn’t expect Exxon, for example, to go under as a result of this kind of divestment, but instead recognize the message it sends.
Georgetown University announced their commitment to five-to-ten year divestment in February, and peer institutions of AU, including Brandeis University and Syracuse University, have all publicly claimed to be at least partially divested from the fossil fuel industry.
Wapner said that smaller colleges have appeared to divest more readily, as their smaller endowments mean that management costs aren’t as high. He hopes that AU’s size and national profile boost both the divestment campaign and the greater climate campaign.
Beyond this step, Wapner, who chaired a committee created in the aftermath of the 2013 referendum, said that he hopes AU continues on this path, becoming a leader in climate science and progress.
He said that this change couldn’t have come without massive, sustained student outcry from organizations like Fossil Free AU.
Despite the Board of Trustees voting on this in February, it wasn’t made public until now, and was also left out of the summary of the Board’s meeting.
“The Board wanted to share this news earlier, but the University and everyone else was beginning to adjust to the changing reality around COVID-19,” said University spokesperson Lisa Stark in an email to The Eagle. “We decided to hold the announcement and release it in conjunction with the 50th anniversary of Earth Day. This also allows us to mark and celebrate the long and ongoing journey of sustainability at American University.”
The announcement comes two years after AU’s carbon neutrality declaration.
On Monday, the price of oil dropped below zero, and, while coincidental, the momentous collapse is just the most recent and extreme example of the decreasing returns from the fossil fuel industry highlighted in the SG report.
“This is symbolic, but not in a superficial way,” Wapner said. “It’s a political act that’s trying to shift the balance of legitimacy of how we see fossil fuels and the recognition that you can’t keep planning on educating students if the world they’re going to be living in is fundamentally compromised by climate change. We’re saying, as an institution, that we want to do the right thing.”
This is a developing story and will be updated with more information as it becomes available.
Correction: The original version of this article stated that AU was unaware of any Carbon Underground 200 companies in its separate, private investment portfolio. An updated press release sent to The Eagle before publication states that AU does not currently have Carbon Underground 200 companies in its separate, private investment portfolio.
