By Don Jordan
The University of Michigan will immediately shift its natural resources investments to focus more on renewable energy, stop investing in funds primarily focused on certain fossil fuels and discontinue direct investments in publicly traded companies that are the largest contributors to greenhouse gases.
The new investment strategies are part of a commitment approved by the Board of Regents today to ensure the university’s investment portfolio reaches a “net-zero” carbon footprint by 2050, likely making it the first public university in the country to take this step to address climate change.
In conjunction with the announced shift in strategy, the Board of Regents also voted to approve a $140 million investment in three funds directed toward renewable energy development and sustainable infrastructure development.
“Endowments by their very nature are future-looking,” said U-M President Mark Schlissel. “Today we position our investment strategies to meet the challenges of the future.”
While a number of universities have focused on one tactic or another, U-M is the first American university to publicly commit to this combined set of strategies designed to mitigate the financial risks of global climate change.
“A net-zero endowment strategy considers the greenhouse gas emissions from all of the university’s investments,” Schlissel said. “Substantial greenhouse gas emissions occur outside of the energy sector, and net-zero applies broadly rather than targeting a single industry.”
The president and regents outlined the new approach during a Board of Regents meeting as a part of a supplemental action item to modify the university’s existing portfolio of natural resources investments and approve a new investment strategy designed to mitigate climate change-related financial risk.
“The University of Michigan chooses to lead with a comprehensive, concrete investment plan to address the climate change crisis,” said Regent Mark Bernstein. “We are making a clear commitment to reduce greenhouse gas emissions from our entire investment portfolio to net-zero. But that is simply not enough. We must do more, and we are. I’m proud that we are also the very first public university in the United States to publicly adopt this comprehensive combination of commitments, paving the way for others to follow.”
Regents unanimously approved the recommended action, which commits the university to doing the following:
- Transition its endowment—valued at $12.5 billion as of June 30—to net-zero greenhouse gas emissions by 2050 while maintaining its fiduciary duty to manage risks and maximize risk-adjusted returns.
- Shift its natural resource investment to renewable energy investments, including infrastructure and services that support energy efficiency and emerging technologies that support the transition to a carbon-neutral economy.
- Discontinue directly investing in companies that are the largest contributors to greenhouse cases, currently defined as the top 100 public coal companies and top 100 public oil and gas companies as compiled in the Carbon Underground 200 list. U-M does not currently hold any direct investments in these companies.
- Discontinue investing in funds whose primary focus is oil reserves, oil extraction or thermal coal extraction.
- Continue a strategy of not investing in companies that extract thermal coal or extract oil from tar sands. U-M has not invested in such companies for the past decade.
Achieving net-zero emissions for the university’s endowment means balancing greenhouse gas emissions linked to U-M assets with emissions reductions.
With the action Thursday, U-M joins a small group of universities—including Harvard University, Stanford University and the University of Oxford—that have pledged to transition their endowments to net-zero emissions by 2050, according to data compiled by the nonprofit Intentional Endowments Network.
The $140 million in new investments aligned with the transition to a more sustainable economy and approved by regents included:
- Up to $30 million to D. E. Shaw Renewable Investments, a solar and wind developer and operator that has built more than 40 utility-scale projects across the country, including in Michigan.
- Up to $50 million to Aplomado Partners, which partners with solar developers to put together the land rights necessary to develop utility-scale solar projects.
- Up to $60 million to Cresta Energy Sustainable Infrastructure, which invests in energy infrastructure across the United States and will focus on investments to reduce carbon emissions, sequester carbon dioxide and develop and support renewable power.
Announcement of the new investment strategy builds upon the university’s efforts to address sustainability through both academic research across disciplines and limiting its own carbon footprint.
Last week, the President’s Commission on Carbon Neutrality delivered its final report, including 50 recommendations to help the university achieve net-zero greenhouse gas emissions across the Flint, Dearborn and Ann Arbor campuses, including Michigan Medicine.
Recommendations pertain to direct U-M emissions, purchased electricity and indirect emissions sources, like commuting and food procurement. Proposed actions include converting heating and cooling infrastructure on all campuses to a more efficient system, transitioning university vehicles to a fully decarbonized fleet and incentivizing commuter electric vehicle use.
The commission designed recommendations to be scalable, transferable, financially responsible and environmentally just. Schlissel praised the PCCN report and said he will respond with initial action steps in the next month or so.
In addition, the university continues its progress toward meeting its 2025 sustainability goals, established in 2011. The Ann Arbor campus is expected to meet its goal of cutting greenhouse gas emissions by 25%, relative to a 2006 baseline, later this year on an annualized basis.
It is expected to fully meet its annual goal during the next fiscal year—three years ahead of schedule. This will mean a net reduction of nearly 200,000 metric tons of carbon dioxide per year—equivalent to removing 43,000 cars from the road each year.