Unity College Reports No Loss from Fossil Fuel Divestment
Two key myths 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 suffered. The second is that divesting would affect our institution’s ability to provide competitive salaries and strong financial aid.
On both counts, quite the opposite is true. First, some background.
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.
Back in 2008, when Unity began the process, its exposure to Big Energy was approximately 10 percent of total endowment, says Deborah Cronin, Vice President of Finance & Administration.
When the college announced it was divesting in November 2012, Unity was at 3 percent exposure. The timeline moving forward allowed Unity’s investment manager to prudently shift investments, including fixed income bonds, over a five-year horizon.
While these investments continue to unwind, we have not achieved full, actual divestment. Yet the performance on the overall portfolio has largely tracked the big market gains of the past three years. In other words, Cronin said, Unity’s portfolio is doing just fine without investing in the world’s Top 200 fossil fuel companies as it continues to shed them.
In fact, Cronin said, it takes no more effort to manage a portfolio for minimum exposure to fossil fuels than it does to manage for maximum market return.
“The two goals can coexist,” college President Dr. Stephen Mulkey said. “Divestment, in and of itself, is agnostic when it comes to returns.”
Admittedly, markets are more complex today than in the time of divestment from companies associated with apartheid, Mulkey said. “But we believe that under current market conditions, our overall portfolio will generally not perform more poorly than the market average,” he said, “while holding true to our promise to divest.”
All board members are acutely aware of their fiduciary responsibilities to the institution, Mulkey said, and they wanted assurances that investment practices bring an appropriate return – divestment or not.
The move has not reduced Unity’s investment earnings. But will it in the future?
“Over the past five years, the portfolio has met or exceeded market benchmarks despite the shift away from fossil fuel holdings,” Cronin said. “Our investment performance was in no way negatively impacted by this strategy.”
As for financial aid and salaries, Unity continues to supply some form of aid to more than 90 percent of its student applicants, and continues to hire new positions to meet its unique mission amid increasing enrollment in Unity’s high-demand programs that prepare students for a 21st-century economy.
Meanwhile, Mulkey says dollars and cents are only part of the picture.
“We must demand the highest ethical standards from our universities and colleges,” Mulkey said. “It is ethically indefensible that an institution dedicated to the proposition of the renewal of civilization would simultaneously invest in its destruction. In this respect, divestment is not optional.”
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.