UC Systemwide Memorial Vote on Fossil Fuel Divestment

Explanation of the Provisions of the Memorial to the Regents

The Memorial states: “The U.C. Academic Senate petitions the Regents to divest the University’s endowment portfolio of all investments in the 200 publicly traded fossil fuel companies with the largest carbon reserves.”

For purposes of this Memorial, “the University’s endowment portfolio” refers only to funds managed by the Office of the Chief Investment Officer of the University of California.

The Carbon Underground 200 list identifies the largest owners of carbon reserves.
Fossil Free Indexes identifies the top 100 coal and the top 100 oil and gas publicly-traded reserve holders worldwide.

The Memorial petitions the Regents to divest UC’s endowment portfolio of all investments in companies on the Carbon Underground 200 list.
UC currently owns shares in companies on the Carbon Underground 200 list. UC’s holdings of securities in oil and gas drilling and refining firms is approximately three percent of UC’s public equity holdings. In contrast, oil and gas drilling and refining firms represent six to seven percent of the global economy. The Memorial would have the Regents divest entirely from all companies currently on that list.

History of the Memorial

On January 17, 2019 the UCSF Academic Senate Ad-hoc Committee on Sustainability held a vote to approve the Memorial to the Regents. The Memorial was approved.

On January 24, 2019 the UCSF Academic Senate Executive Council held a vote to approve the Memorial. The vote passed.

Between February 7-15, 2019, the UCSF Academic Senate Faculty At Large held a vote to approve the Memorial. The vote passed.

Between March 21 - May 21, 2019, the following UC Divisions voted* to approve the proposed Memorial:

  • UC Santa Barbara (March 21, 2019)
  • UC Berkeley (April 1, 2019)
  • UC Los Angeles (April 4, 2019)
  • UC Santa Cruz (April 8, 2019)
  • UC San Diego (April 16, 2019)
  • UC Davis (April 18, 2019)
  • UC Merced (May 1, 2019)
  • UC Riverside (May 21, 2019)

The vote meets the threshold set in Senate Bylaw 90, which requires approval by at least three divisions representing thirty-five percent of total Senate members in order to move the Memorial to a systemwide ballot of all voting members of the Academic Senate.

*Detailed voting breakdowns including approve/disapprove/abstentions per UC Division are available upon request.

Ensuring that our planet does not undergo catastrophic climate change requires that fossil fuels be phased out in the near future. Thus, being co-owners of corporations devoted to producing fossil fuels is both morally fraught and financially imprudent.

Global warming will have catastrophic consequences.
In the Paris Agreement,1 197 countries committed to taking the action necessary to limit global temperature rise this century to <2⁰C, and aim for a rise of <1.5⁰C. This requires that less than 20% of existing fossil fuel reserves can be burned, perhaps much less; reserves that must not be extracted if the Paris limits are to be met. In October 2018 the UN Intergovernmental Panel on Climate Change (IPCC) reported that urgent and unprecedented systemic changes are needed to reach the target, which they say is affordable and feasible.2

As global temperature has already risen by ~1⁰C, and atmospheric carbon dioxide already emitted will continue to contribute to warming for centuries to millennia, we may have already reached the limit for how much carbon can be burned to remain below a rise of 1.5˚C.

If current trends continue, multiple syntheses3 of the best climate science tell us unequivocally that major cities will be destroyed, biodiversity will continue to diminish precipitously, and trillions of dollars in assets will be lost due to sea level rise and extreme weather events. The impact on humans will be monumental and unprecedented. Droughts, floods and climate changes will cause crops to fail, opening the possibility for widespread starvation. Ecosystems will be devastated, which combined with other anthropogenic disruptions, will drive millions of species extinct.4 California will not be immune from these impacts.5

There is thus an irrefutable scientific rationale for supporting this memorial.

The greatest impact of climate change will be on those least responsible for it, and with the least power to affect it.3
The effects of climate change will be greatest on youth and future generations for hundreds of years,6 as well as on poorer countries, and communities of color and the poor in the United States, who contributed the least atmospheric pollution.7 We who have benefited most from the last 300 years of cheap energy, and who control the most resources, must act – for them as well as ourselves. In particular, we should support our students, who began the divestment movement at UC, and whose representative bodies all have passed resolutions urging this action. This is a matter of simple fairness, equity, and justice.
Fossil fuel companies are a primary cause for insufficient action countering global warming.

The business model of the fossil fuel companies calls for continued high fossil fuel use for decades to come.8 Despite the imperative, documented above, that they leave most of their existing reserves in the ground, they continue to invest huge sums in exploring for the dirtiest and least efficient remaining deposits and building the infrastructure to enable this.

Perhaps worse, they have willfully delayed an effective global response to the climate crisis for decades by hiding their own research which predicted global warming due to atmospheric carbon dioxide. They are heavily subsidized by governments, and their products are sold for a fraction of their true cost because their pollution goes untaxed, allowing them to accumulate enormous wealth and power. They have donated millions of dollars to think tanks that spread misinformation to distort media accounts, fatefully delaying a national conversation that could have started years ago. Their direct and indirect support has helped elect climate-denying senators, representatives, governors and presidents.9 By holding their stock we are complicit with their immoral corporate activities.

In addition to these moral and justice-based arguments for supporting fossil fuel divestment, there are sound practical and economic arguments:

Fossil fuel stocks are already a bad investment.
Fossil fuel-free stock portfolios already perform a bit better than fossil fuel-stock containing portfolios, and this difference is likely to grow in the future as the world energy economy shifts to renewable sources.10 UC’s portfolio is not available publicly, but the pension funds for other California educators (CalPERS and CalSTRS) lost $840 million in coal stocks in fiscal year 2014/5, and a total of $5.1 billion in oil, gas and coal companies.11 It is possible that UC lost comparable sums since Spring 2014 when the Regents rejected the UC students’ request to divest from fossil fuel stocks. In any case, fossil-fuel stocks account for only about only three percent of the endowment portfolio, so they can hardly be considered indispensable to its stability.

Sustainable energy is economically and technically viable
A rapid evolution to a largely carbon-free energy system is essential within the next 15 to 30 years. This is technically possible and increasingly affordable.12 Divestment is consistent with UC’s leadership in climate science and with its Carbon Neutrality Initiative. Divestment by the UC, perhaps the world’s most prestigious public university, will have a positive impact on the growing global divestment movement, and thereby hasten the transition to renewable energy.

Thus, divestment is the right thing to do both for the planet and for the University’s finances.

In Conclusion
A thousand years from now, our generation will be remembered only for what it did, or did not do, to address the climate crisis. An effective response will require, more than anything, a shared political will. You have been presented with this ballot because Academic Senate bodies on nine of our campuses voted, often unanimously, to support it. We invite you to join us, and urge the Regents to publicly affirm that most fossil fuels must stay in the ground by refusing to maintain ownership in the companies that are removing them.


1 http://unfccc.int/paris_agreement/items/9485.php
2 https://www.ipcc.ch/site/assets/uploads/sites/2/2018/07/SR15_SPM_version

3 https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_summary-for-policymakers.pdf
4 https://advances.sciencemag.org/content/1/5/e1400253.full
5 http://www.climateassessment.ca.gov http://newsroom.ucla.edu/releases/california-extreme-climate-future-ucla-study
6 http://www.columbia.edu/~jeh1/mailings/2018/20181206_Nutshell.pdf
7 http://www.naacp.org/issues/environmental-justice/; http://www.mrfcj.org/
8 https://www.chathamhouse.org/sites/files/chathamhouse/publications/research

9 https://link.springer.com/article/10.1007%2Fs10584-018-2241-z; https://www.nature.com/articles/nclimate2875
10 https://www.sicm.com/docs/FFFI-Booklet.pdf; https://www.msci.com/documents/10199/cd04f54f-603c-43ef-8f13-20f24919761b
11 http://senate.ucsd.edu/media/206129/trillium_asset_management_analysis.pdf
12 https://link.springer.com/chapter/10.1007/978-3-319-38919-6_12; https://link.springer.com/chapter/10.1007/978-3-319-38919-6_11; https://openknowledge.worldbank.org/handle/10986/24451; http://www.qibebt.cas.cn/xwzx/kydt/201612/P020161221360484614090.pdf

Although countering the effects of climate change is an important and laudable goal, the proposed divestment is an ineffective and probably expensive strategy to achieve this goal. Constraining portfolio holdings risks reduced returns and increased volatility. The proposers of these divestments seem aware that losses are possible since they did not include the UC pension funds (which are subject to fiduciary responsibility requirements). If the proposed divestment leads to lower endowment returns, this will reduce funding for many activities that are important for fulfilling UC’s mission - like the Presidential Postdoctoral Fellowship program.

Below are additional reasons to vote against the proposed memorial.

  1. The amount of the proposed divestment is so small that it is unlikely to change the stock price of the divested companies. The public equity portion of the UC endowment is worth about $5.1 billion, but only 3.1% of this is invested in stocks listed in the Carbon Underground list. A 2018 study concluded that divestment had been ineffective at changing fossil fuel company activities13. It is much more effective to engage rather than divest. The UC Investment Office has a full-time employee dedicated to monitoring firms’ actions related to environmental, social, and governance issues such as climate change and sustainability policy. UC uses these holdings across the pension fund ($68 billion), the endowment, and other fund sources to work with other investors to pressure firms to improve their performance.
  2. The UC Investment Office already recognizes the importance of climate change. They have selectively divested from companies specializing in tar sands and coal since these are most damaging to the environment (and therefore likely to have poor long run investment returns). Over 6% of the endowment portfolio is invested in companies pursuing new clean energy solutions14. The UC investment office has been recognized as among the 25 top large fund managers for their investment practices supporting environmental, social, and governance goals15. We believe that the UC investment managers know what there are doing and should not be micromanaged by the faculty.
  3. All fossil fuels are not alike, and a complete divestment ‘throws out the baby with the bathwater’. There is simply no way for at least the next 10 years that many areas of the country can exclusively use intermittent solar or wind power without baseload electricity generation capacity that comes in part from natural gas. Without natural gas, large areas of the country would be powerless and have no heat for parts of the year. Moreover, air transportation, steel manufacturing, and plastics all require fossil fuels. If divestment were successful in reducing supply and increasing costs, large areas of the economy would be negatively impacted.
  4. Reducing CO2 emissions has been distorted by many to be equivalent to eliminating fossil fuel use, but this is not true. Carbon Capture and Sequestration (CCS) is anticipated by most studies to be a critical component in achieving emissions goals. CCS takes CO2 from the atmosphere (or smokestacks) and sequesters it deep underground with fossil fuel technology. This technology can completely eliminate CO2 emissions or even clean existing CO2 from the air while still using fossil fuels. In many areas of the country this approach is more cost effective than a purely renewable solution. Many climatologists believe that eliminating future emissions cannot be done in time to substantially arrest global warming, and that CCS of existing atmospheric carbon is the best near term solution. In the unlikely event that the proposed divestment is successful, it could slow the development and implementation of CCS by existing fossil fuel companies.
  5. Many other large university endowments (e.g. Stanford, Harvard, and Yale) have considered divestment and have determined that it is counterproductive for achieving greenhouse gas emissions reductions and improving the environment.
  6. We recognize that the main objective of the proposed divestment is symbolic in nature - it is intended to show that UC faculty care deeply about confronting climate change. However there are many other actions that have the same symbolic value while actually reducing CO2 emissions. For example, UC faculty could vote to substantially increase the fees for campus parking permits and use the funds to subsidize students, staff, and faculty to use transit or bicycling to get to campus. UC faculty could also vote to ask the UC Travel Office to negotiate with airlines to purchase verified carbon offsets for our travel in lieu of receiving frequent flyer miles. These sorts of actions would show that the faculty is willing to sacrifice to help reduce carbon emissions, and will set examples that other firms could follow. In addition, these sorts of actions will likely generate more positive press coverage than the divestment memorial.

Actions to quickly reduce carbon emissions need to be implemented at the campus level, so UC faculty who are concerned about this issue should aim their lobbying efforts at their local campuses. Some campuses have already been recognized for their efforts - UC Irvine was named the top “coolest school” in the country by the Sierra Club in 201816. UCOP can help campuses by identifying best practices, but this effort does not need a memorial to the Regents.

The proposed divestment from the UC General Endowment of the Carbon Underground 200 companies is unlikely to have any impact on reducing CO2 emissions and is likely to reduce investment returns from the endowment. Many experts have concluded that CCS (implemented by existing fossil fuel companies) will be an essential component of any CO2 emissions reduction plan and may be the only solution for removing existing CO2 from the atmosphere. The proposed divestment could, in fact, hurt progress in CCS and consequently hurt efforts to confront global warming. To paraphrase Tolstoy, “The perfect is often the enemy of the good”.

Effective action to reduce CO2 emissions requires reducing demand and investing in new technologies. The proposed divestment does nothing to reduce demand and may reduce investment in promising technologies. We therefore urge a no vote on the proposed memorial.


13See https://www.peri.umass.edu/economists/robert-pollin/item/download/776_1ae306cb99a0ace3d577fe91ef68b0ab

14 Personal communication from UC Investment Office’s Director of ESG Integration on April 26, 2019.

15 See https://www.newamerica.org/responsible-asset-allocator-initiative/press-releases/raai-releases-2019-ranking-25-most-responsible-asset-allocators/, https://www.ucop.edu/investment-office/sustainable-investment/index.html, and https://www.ucop.edu/investment-office/_files/sustainable-investment-framework.pdf for more information

16 See https://www.sierraclub.org/sierra/cool-schools-2018/top-20-coolest-schools-2018