SRI Panel Discusses Fossil Fuels

On Monday, April 7, the College hosted its third panel on the subject of Socially Responsible Investing and the College’s endowment in the past 15 months.

Six investment experts were invited to speak on how fossil fuel investments are evaluated and how institutions such as the College can best incorporate Environmental-Social-Governance (ESG) consciousness into their investment process.

Vice President of Advisor Markets at Pax World Tom Gainey, Managing Director and Director of ESG Research and Shareholder Engagement at Boston Common Asset Management Steven Heim, Real Assets Director at Investure Jon Hill, Partner and Portfolio Manager at Trillium Asset Management Stephanie Leighton, Senior Vice President of Essex Investment Management William Page and Proprietary Trading and Risk Management Team member at Mariner Investment Group Akila Prabhakar served on the panel. The panelists hail from different genres of work, ranging from advising to investing at both large and small firms or hedge funds.

The panel came on the heels of the College’s announcement that, as of February 28, a $25 million portion of the endowment will go toward investments that generate social, environmental and economic value and are in keeping with good ESG practices. The $25 million represents approximately three percent of the College’s total endowment.

Additionally, the College has placed $150,000 of its endowment under the management of the Research and Investment and Social Equity (RISE) group, a division of the Socially Responsible Investment Club (SRI). RISE will be using the funds to invest in companies that meet particular ESG standards. The group will present a report on the status of the fund to the Investment Committee of the Board of Trustees each year. On April 7, RISE announced its first trades using the endowment funds.

The panelists began by introducing themselves and explaining their work in socially responsible investing, and transitioned into a discussion amongst themselves about working directly with companies to improve ESG-related practices and about the complexity of clean energy investments.

The panelists agreed that, particularly as climate change has moved to the forefront of political dialogue in recent years, companies have become more eager to address workplace sustainability practices and engagement between investors and companies has become much easier.

Heim noted that sustainability reports have proven to be advantageous not only with regard to the relationship between companies and managers or investors, but also between companies and employees, for employees are often more willing to work for a company that promotes transparency and boasts strong ESG practices.

The panelists noted that even clean energy investments, however, are not perfect. The mining of rare earth minerals, which are found in many phone and computer batteries, as well as solar panels and wind turbines, is an expensive and environmentally invasive process.

Throughout the evening, Hill emphasized Investure’s long-term outlook on investments. He argued that many of the company’s clients have been around for centuries and will be around for centuries more, and so slower, steadier and more promising investments are what they look for.

Adrian Leong ’16 found Investure’s stance to be problematic, however.

“It was surprising for me to hear … that they [Investure] think they’re currently investing with a view of the long term,” Leong wrote in an email. “As long as they are investing in the fossil fuel industry, they are not doing that.”

He alluded to United Nations Rapporteur Olivier De Schutter’s warning of a broken food system, prolonged poverty and increased risk of violent conflicts if current emission trends continue.

“Maybe we are still making money now, but sooner than we think, the consequences of our short-sighted vision and reluctance to lead will imperil the fundamental conditions that make life in a organized society possible,” he said.

The panelists emphasized that there is no right way to go about divesting, or any right alternative to fossil fuel investments. Leighton suggested that those involved in the divestment movement at the College speak to students at other colleges—particularly those that are managed by Investure—to find allies and press money managers to make changes.

“I was pleased that all of the panelists addressed fossil fuel divestment,” Greta Neubauer ’14.5 wrote in an email. “The panelists made clear [during the panel and in conversations afterward] that Middlebury could divest if the College considered it to be a priority,” noting that she felt a “sense of inevitability” rooted in the increasing number of socially responsible options for investment due to the worsening climate crisis.

Jeannie Bartlett ’15, too, remains optimistic about the feasibility of divestment in the College’s future.

“In talking with a couple of the panelists afterward, they said they think Investure could create a separately managed fund that was fossil fuel free but otherwise diversified,” Bartlett wrote in an email. “We would just have to ask them for it, which so far Patrick Norton and the trustees have been unwilling to do.” She added that in giving a portion of the endowment to RISE, “we have already seen that they can create a separate fund.”