Just over a week ago, The Australian National University decided to sell shares worth approximately $16 million in seven companies, representing just one per cent of our investment portfolio, and a fraction of the market worth of the companies involved, which has sparked an extraordinary reaction.
From one side it has been attacked by elements of industry, media and some political figures as reckless, cowardly, superficial, anti-business, poorly conceived and as destroying jobs.
On the other side, my email account has melted down with emails of support, congratulating the University on its action, and the University’s Facebook page is awash with positive comments.
The reason for this extraordinary response is because the ANU decision is seen as another domino in the divestment-movement effect, involving individuals and institutions deciding to sell their holdings in fossil fuel-producing companies.
Thirteen US universities have now divested, and a number of cities, districts and foundations (including one linked to the Rockefeller family) in both the US and UK have followed suit. The same trend is also developing in Australia.
The University’s position on socially responsible investment is considerably more nuanced than has so far been recognised.
We invest for the betterment of its community – students, staff and researchers. The returns on these investments fund scholarships, staff salaries, research projects and new infrastructure.
In many cases the funds are donated to the University for these purposes. The University has a responsibility to invest wisely but also in a manner consistent with the desires of our stakeholder students, alumni and staff.
There has been growing sentiment from our community to not just get a good financial return from our investments but also to invest in companies which would have activities consistent with the goals of the University, and do not manifestly cause social harm. For instance, the University for many years has not, and would not now, invest in tobacco
The initial calls were to divest from all fossil fuels. This is difficult in Australia, as many of our companies are diversified. They may produce coal, oil or gas but they also do many other things. And given the world’s necessary dependence on such fuels for a long time to come, the ethical issues involved are complex. To address these issues ANU established a socially responsible investment policy.
In developing this we searched the world for best practice, and ultimately we modelled this policy largely on Stanford University’s, one of the world’s great universities and an institution that invests an endowment of $US19 billion.
Once developed, the challenge was to operationalise the policy. We undertook due diligence and engaged an independent environmental, social and corporate governance consultant to review our investment portfolio. Our chosen consultant is internationally accredited and has extensive experience.
Using an internationally recognised methodology, our investments were assessed against environmental, social and governance criteria. Our consultants stand by their assessments, which we have found persuasive, but should new information come to hand, or flaws become evident in the methodology involved, we would naturally reconsider the assessments.
The process assigns a score between 1 and 5 to each investment. The University decided that, pending a further review of our investment procedures, which are likely to involve the future outsourcing of our equities selection, we would sell those investments which fell into the lowest category. The University will certainly still retain many large resources-company stocks. The approach we have adopted is considered, measured, analytical and appropriately balances the desires of our community and the requirement to achieve an appropriate financial return.
Although the ANU has been attacked for its decision, we are simply part of a much bigger debate about carbon and carbon pricing.
My own views are that the world must eventually move away from the use of fossil fuels. This, however, will take decades. In the meantime we will require such fuels.
Far from destroying jobs, as our action has been described, I hope it goes some small way to do the opposite.
The real debate for Australia should be about jobs in a carbon-constrained world. What will our industries be in 20 or 30 years’ time? I am confident they will not be in producing fossil fuels. Australia should not be an adopter of alternative energy, we should be a producer.
The real debate in climate should be about producing cost-effective alternative energy. Sticking our collective heads in the sand and ignoring a changing world will ensure we do destroy jobs. Universities like the ANU should be the powerhouses to produce the new technologies for such a world.
The key here is for the various parties not to go to their collective corners and throw stones, but rather for us to work together and use the window of transition to ensure Australia is a technological leader in the post-carbon world.
If ANU has pushed this debate a small way in this direction we will have acted exactly as a leading Australian, and world, university should.
This op-ed was originally published in The Sydney Morning Herald and The Canberra Times on 13 October 2014.