Virginia Tech is losing money because of its investments in fossil fuels. The university’s endowment is operated by the Virginia Tech Foundation (VTF) and holds $1.15 billion in assets as of last year. Approximately 10% of this amount is invested in fossil fuels, which includes the production and distribution of coal, oil and natural gas. While such an investment may have been secure and profitable in the past, that is no longer the case and universities, banks and economists have begun to take note. Virginia Tech has an opportunity to show leadership by divesting its portfolio from fossil fuels.
Universities are recognizing that fossil fuels are not the strong investment that they used to be.
A study commissioned by the University of Mary Washington found that divesting its portfolio from fossil fuels made “financial sense.” In May 2015, the University of Hawaii announced it would divest its holdings from fossil fuels. In April 2016, the University of Ottawa announced that it, too, would divest its holdings from fossil fuels in order to “prudently manage … risk, to stay abreast of emerging market dynamics, and to promote investment practices likely to meet fiduciary responsibilities to optimize investment returns.” Johns Hopkins divested its endowment in December 2017 from companies that generate more than 35% of their electricity from thermal coal, and still saw a 12.5% increase in its endowment from fiscal year 2017 to fiscal year 2018. The University of Edinburgh announced in February 2018 that it would divest its £1 billion endowment (~$1.29 billion) completely from fossil fuels.
Virginia Tech could be the first public R-1 university to acknowledge this financial trend by entirely divesting its holdings from fossil fuels.
Research firms and investment banks are also beginning to note the advantage in divesting from fossil fuels. In October 2018,the research firm Corporate Knights found that the New York State Common Retirement Fund (NYSCRF) “would be an estimated $22.2 billion richer had it decided to divest its fossil fuel stocks ten years ago.” The investment bank Morgan Stanley has developed a Climate Change and Fossil Fuel Aware Investing Framework to address the risks associated with fossil fuel investments. Indeed, in October 2018, they highlighted a report by the Institute for Sustainable Investing which noted that, “From 2004 to 2014, renewable energy investments increased from $45 billion to over $270 billion.” At the same time, “not addressing a portfolio’s exposure to fossil-fuel-related assets can also pose risks. The Institute’s brief notes that environmental risk factors could strand fossil-fuel assets in a range of sectors, leaving investors exposed to unanticipated write-downs, devaluations or conversion to liabilities.” Virginia Tech would be financially prudent to consider this advice.
When renowned economist Jeremy Rifkin spoke on Feb. 6 at the Moss Arts Center, he highlighted, “a land of free renewable energy,” as a necessary economic goal. Not just any group could carry out this mission, though.
“Virginia Tech is one of the great schools in this country,” Rifkin said. “You are a great land-grant university, but you’re also one of the great tech universities. Make it happen at Virginia Tech and make this a lighthouse for the rest of the United States of America.”
On March 21, the Graduate Student Assembly (GSA) concurred with these facts and voted in favor of a resolution calling on the university to divest from fossil fuels. On March 26, the Student General Assembly (SGA) approved the same resolution. This is a golden moment for the university. It is an opportunity for greater financial success. It is an opportunity to be that “lighthouse.” It is an opportunity to show that the university values the concerns of its student body. It is our earnest hope that this is an opportunity that Virginia Tech will take.