Earth Day brings Investment Policy Linked to Sustainability and a ten-year 34% Cut in Carbon Emissions
Student engagement leads to consideration of Environmental, Social,
and Governance Principles in University Investments
Prioritizing environmental stewardship slashes
carbon emissions by more than a third over a ten-year period
ORONO, MAINE — Maine’s Public Universities are celebrating Earth Day 2017 with an announcement of a change in the investment policy for the University of Maine System’s Managed Investment Pool that will give consideration to Environmental, Social, and Governance principles in making investment and management decisions. The Universities also heralded the release of a report that details a 34% decline in total gross emissions across the seven campus system over the last decade.
Facts and Background on ESG Investment Principles
Environmental, Social, & Governance (ESG) principles will now be taken under consideration when completing asset allocation and investment manager reviews in the Managed Investment Pool (MIP). The MIP, which includes the System’s endowment funds as well as funds held for the UMFK Foundation, the University of Maine School of Law Foundation, the USM Foundation among other entities, had a market value of $287 million as of February 28, 2017.
ESG takes non-financial factors into account when evaluating an entity for inclusion in an investment portfolio. ESG investing models include such factors as environmental sustainability, effect on carbon footprint, the treatment of workers, and the transparency of their governing principles. Growing evidence shows that commitment to ESG policies has a real impact on the financial health and long-term performance of a company. Organizations with strong ESG practices may achieve reputational benefits and potential out-performance.
The University of Maine System will be considering managers that focus on ESG when reviewing new managers for the MIP. Currently there are three managers in the MIP that utilize ESG in their process.
ESG investment encompasses $22.9 trillion, just over a quarter of the world’s professionally managed assets according to the 2016 Global Sustainable Investment Review. A survey of 475 institutional investors conducted by State Street Global Advisors found that 84% of respondents are satisfied with the financial performance of their ESG strategy.
34% Reduction in Gross Emissions
Maine’s public universities have also achieved a ten-year, 34% reduction in carbon emissions through sustained, strategic investments in energy projects that achieve greater efficiency and reduce reliance on high intensity fossil fuels.
The universities have reduced consumption of high intensity fossil fuels by 557,000 MMBTUs since 2006, an 87 percent decrease as campuses have turned to renewable and lower intensity fossil fuels like natural gas and propane for their energy needs. High intensity fossil fuel energy sources like number 2 and 6 heating oil now represent just 11 percent of the university fossil fuel mix.
Maine’s universities also consume approximately 12% less energy per square foot compared to Northeast peer institutions according to data compiled by Sightlines, a leading education facility and a campus asset management company. In 2016 energy consumption for the University of Maine System was 113,000 BTU/GSF while the average for Northeast peer institutions was 128,000 BTU/GSF.
In 2010, the University of Maine System formed a collaborative, statewide Energy Management Committee to share information and expertise as well as identify and realize stewardship opportunities. Every campus has made progress toward improved efficiency and the transition away from high-intensity fossil fuels. Strategic investments in biomass energy systems using locally-sourced fuel at the University of Maine at Farmington and the University of Maine at Fort Kent have both reduced emissions and helped to support job growth in the state’s emerging biomass industry.
Student and Community Led Engagement on Investment Policy
The decision to implement an ESG policy resulted from three years of dialogue between the System’s Investment Committee and concerned members of the University of Maine community. Students, faculty, staff, and alumni have all come forward with pleas for full fossil fuel divestment, a worldwide movement in response to climate change meant to stigmatize the fossil fuel industry and initiate social change. Petitions, letters to the Board of Trustees, public comments at Trustee meetings, discussions with the Investment Committee, a Faculty Senate vote, and a Student Government vote have all called on the System to align its investments with its strong commitment to climate research, reduction of its carbon footprint, and renewable energy.
According to Trustee and Investment Committee chair Karl Turner, “ESG does not promise to completely eliminate the MIP’s fossil fuel holdings; it is a process that will screen for ‘best in class.’ While we credit Divest UMaine with being proactive in placing a spotlight on climate changes, we believe in allowing our investment managers to take the approach of positively screening companies based on ESG criteria rather than negatively screening out companies. The ESG investment process will weed out the worst offenders, while also exposing our portfolio to companies whose values align with the MIP’s long-term investment goal.”
The Divest UMaine initiative was spearheaded by members of the Maine Students for Climate Justice (MSCJ) who support the ESG approach to investing, which takes into account multiple important issues in the workplace. They are still, however, advocating for an end goal of full fossil fuel divestment. “We are proud of the System for taking this step,” says Cassandra Carroll (Class of 2019) “and we appreciate the administration’s engagement in dialogue with us over the past few years. At this moment we have agreed to disagree on the best way to bring financial investments in line with the System’s mission, but given the rising urgency of the climate crisis, we will continue to pressure the System to get out of the fossil fuel business entirely.”
Connor Scott (Class of 2017) and former University of Maine Student Representative to the Board of Trustees says there is one point all parties can agree on: “Climate change is an extreme threat. We must continue to engage in the kind of dialogue we’ve been having with the System to find as many ways as we can, as quickly as we can, to protect the students of the University of Maine, our state, and humanity as a whole.”