Sustainable Investment Framework Reveals Fossil Fuel Divestment Not on University Agenda5 April 2018
The University of Melbourne released its Sustainable Investment Framework (SIF) on 28 March, outlining the University’s approach to sustainability in its investment portfolios and processes. The SIF established that the University will not be be adopting a ‘strict exclusion approach’ from investing in the fossil fuel industry, citing concerns around ‘financial strength’.
According to the SIF, “the University does not believe that a strict exclusion (or divestment) approach is the most effective way for it to meet its fiduciary duty in regard to climate change.”
Fossil Free Melbourne University (FFMU), a campaign that has pioneered for full divestment from the fossil free industry by the University over the last four years, dubbed the SIF ‘vague’. One statement in the SIF is clear enough however:
‘A strict exclusion approach might compromise the University’s financial strength by narrowing the universe of possible investments, and such an approach would lead the University to forgo its ability to engage with or influence investee companies (via its fund and portfolio managers) in discussions around climate change risk management and disclosure.’
The SIF comes months after its approval by University Council in December 2017, a decision that was made without student consultation and kept hidden from student stakeholders. This contradicts statements within the Sustainability Plan (2017-2020) and the Sustainability Charter that “the University will involve the university community in decision-making and ensure transparent reporting on progress towards delivering these commitments”.
FFMU stated “that the lack of consultation and commitment to future divestment is a betrayal of trust with the staff, students, and members of the community”’.
“Unfortunately, the actions of the University continue to demonstrate that they are focused on appearing consultative … this is a symptom of the University’s administration’s focus on reputation and financial acquisitiveness, as well as the global trend towards the corporatisation of universities.”
FFMU is holding a meeting on 9 April to unpack the SIF and decide what their response to the University will be.
The implementation of the SIF supposedly contributes towards the numerous goals and grand statements announced by the University in both its Sustainability Plan and Charter. These documents, in addition to the UN’s ‘University commitment to the Sustainable Development Goals’ that the University signed in September 2016, make up the backbone of the sustainability agenda and goals of the University, and form the basis for the SIF.
Some of the goals mentioned in the Sustainability Plan include, but are not limited to, achieving carbon neutrality by 2030, develop industry partnerships that emphasise the University’s resource for sustainable research and to demonstrate leadership globally, nationally and locally in relation to sustainability.
According to the SIF, as of 30 June 2017 the University holds an investment portfolio valued at $2 billion. This portfolio is managed by third party fund managers, and as such the University claims it holds no power in decision-making over individual company holdings.
Primarily, the SIF will enable the University to assess whether its fund managers, including portfolio managers, are making informed decisions based upon integrated climate change risk assessments.
Should the University feel that its fund managers have not adequately considered these risks, or are investing in companies that fail to meet the climate change risk assessment indicators set out in the SIF, it may engage with the managers to request re-evaluation.
The University plans to work with its fund managers to implement the SIF gradually. As such, the University hopes that its implementation will contribute to better risk-adjusted returns in its portfolio in partnership with better climate change discussion and understanding.