Portland State will spend the summer grappling with the moral implications of fossil fuel investments that benefit the university’s endowment fund.
Student groups such as Divest PSU have pressured the administration and the nonprofit PSU Foundation to take investment funds entirely out of fossil fuel companies.
The PSU Foundation, which handles and invests donor gifts for university scholarships, currently estimates the endowment’s investment in fossil fuel producers is 1.5 percent of its total investment portfolio.
Recent Vanguard coverage reported on Divest PSU’s unsuccessful attempts to communicate with representatives from the Foundation. In early June, Divest members said they had not yet been able to connect with their designated point of contact at the Foundation, Chief Financial Officer and Associate Vice President of Development, Paul Carey.
PSU President Wim Wiewel has since arranged a July 24 meeting between Foundation committee members and Divest students. Carey said he will also attend the meeting.
With students rallying against the investments, and Wiewel requesting some sort of action, the Foundation now must consider the implications of fully divesting from oil, gas and coal.
According to Carey, choosing to take steps toward divestment would be complicated.
“[The 1.5 percent] is not a completely distinct energy investment,” he said. “It’s a mutual fund that’s in a variety of things, like Macy’s, Nordstrom, Nike and all that. In order to get rid of that investment, you have to get rid of all the other parts of it, which are not in question right now.”
Carey said JPMorgan Chase currently manages the investment portfolio, not the Foundation investment committee. The committee instead lays out and reviews the overall strategy, known as an Investment Policy Statement, which JPMorgan then employs as a guideline to manage the portfolio.
According to Carey, bringing the endowment to zero percent for fossil fuel-related companies would result in the unloading and reinvestment of roughly 75 percent of the Foundation’s current investment vehicles.
He also said that JPMorgan suggested the Foundation could decrease investment to under 1 percent through the employment of an Environmental, Social and Governance protocol, or ESG.
ESGs are a sort of investment filter, to which investment managers can refer for guidance on the types of companies an investor like the Foundation would like to avoid.
Carey noted that an ESG would enable the Foundation to avoid investing in companies deemed irresponsible in terms of environmental, social and governance parameters, without a complete exit from entire industries, such as energy or retail.
“This filter statement allows us to apply a recognition that we want to be conscious of these things happening in the world,” he said. “It doesn’t say ‘don’t do anything’ or ‘do something.’ It just allows you to have a mindset toward looking at that.”
“[JPMorgan] can do that relatively quickly, and the impact on [the endowment’s] projected returns will be minimal,” Carey said.
“It will certainly be on the downside,” he added, noting that fossil fuel companies are generally strong performers in the marketplace. “It’s not like taking it out you’re going to make more money, but you’ll probably have very little impact.”
Divest PSU, which continues to advocate for total divestment from fossil fuels, already knew about the Foundation’s preference for ESGs over other options, all of which were presented in a January 2015 report by the Foundation.
Divest PSU organizer Alfredo Gonzalez expressed misgivings about ESGs during a meeting at the end of spring term.
“They always seem to be leaning toward ESGs, which is always a red flag to me,” Gonzalez said. “Why are they leaning toward that versus [Socially Responsible Investments]?”
SRIs are generally regarded as more restrictive because they cut out entire industries in which SRI participants invest, where ESGs are more flexible in terms of where and in which industries they might invest.
Gonzalez criticized the Foundation for other decisions made throughout the divestment investigation, such as its choice to bring on Northwest Natural Gas Company’s Executive Vice President and Chief Operating Officer David Anderson as part of the committee looking into divestment. Gonzalez also criticized the foundation’s reliance on JPMorgan to provide divestment options, rather than seeking a third party.
“You cannot be asking your own banker about information that they don’t want to show you,” Gonzalez said. “If you want to buy Nike shoes, are you going to go to the Adidas store and ask the Adidas employee how good the Nike shoes are? It doesn’t make any sense.”
Despite the conversation around ESGs, Carey said the Foundation hasn’t moved toward a decision, and there is currently no deadline set for a final determination. He pointed to other potential alternatives, such as what he referred to as a proactive rather than reactive approach.
“What about taking a proactive stance?” Carey said. “Saying we want to create an investment vehicle that invests in local businesses. Invest in Portland, invest in Oregon. Invest in alternative energy.”
Though the Foundation has not decided on any particular course of action, Carey noted that the Board of Trustees could decide as early as the next scheduled meeting in September. Carey expects the committee to, at the very least, present an update on the alternative strategies to approaching fossil fuel investments.
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