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Unity College Reports No Loss from Fossil Fuel Divestment

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There are two key facts that have emerged from Unity College becoming the first institution of higher learning to divest from investments in fossil fuels.  The first is that Unity’s portfolio has not suffered as a result of divesting.  Quite the opposite is true.

Second, divesting should not affect an institution’s ability to provide competitive salaries and strong financial aid.

Divestment did not happen overnight.  In early 2008 the Investment Committee of the Board of Trustees asked Spinnaker Trust of Portland, Maine, Unity’s endowment manager, to decrease exposure to large energy companies and to move toward clean energy.

When it announced that it was divesting in November 2012, Unity was at 3 percent exposure.  The timeline allowed Unity’s investment manager to prudently shift investments, including fixed income bonds, over a five-year horizon.

Back when Unity began the process in 2008 its exposure to big energy was at approximately 10 percent of total endowment, says Deborah Cronin, Vice President of Finance & Administration.

“The strategy has been to shift investments in developed international countries to non-energy sectors,” Cronin explained.  “Investments in emerging international countries cannot be moved specifically out of fossil fuels, as there are no sector specific Exchange Traded Funds at this time.  Thus, the endowment target is less than 1 percent in, not zero, as the emerging international sector needs some fossil fuel tolerance.”

Unity’s endowment is diversified both by asset class (equities, bonds, and cash equivalents) and within asset class (within equities by economic sectors, industry, and size).  The portfolio is invested in US Equities (37 percent), International Equities (20 percent), Fixed Income (35 percent), Other (3 percent), and Cash Equivalents (5 percent). Exchange Traded Funds are the investment vehicle most commonly used.

Will this move reduce Unity’s investment earnings?

“It is possible that in any given year the answer may be ‘yes,’ but over time investment performance should not be negatively impacted by this strategy,” said Cronin.  “In fact, over the past five years the portfolio has met or exceeded market benchmarks despite the shift away from fossil fuel holdings.  The College’s endowment is managed for the long-term benefit of the College, and it is anticipated that investment earnings will meet long-term market performance benchmarks.”

Unity College is a private college in rural Maine that provides dedicated, engaged students with a liberal arts education that emphasizes the environment and natural resources. Unity College graduates are prepared to be environmental stewards, effective leaders, and responsible citizens through active learning experiences within a supportive community.

Wednesday, May 01, 2013