Finance: USC’s divestment from fossil fuels provided for major updates


In its first update since announcing its fossil fuel divestment commitments two years ago, USC announced in June 2021 that it will withdraw $102 million from its $313 million worth of investments. announced that it has sold a third of its divestment portfolio.

The value of the remaining investments in the portfolio increased to $385 million.

The Bureau of Investment also provided an update on the timeline for a full exit from these investments. In an interview with daily trojan horseUSC Chief Investment Officer Amy Diamond said the university is looking to deliver on its commitment to the sale “in a prudent and financial manner.”

“While we are fully committed to liquidating this portfolio, a key aspect of it is that we have a responsibility to add value, so we do so by generating as much revenue as possible without hurting the fund. Donate,” Diamond said.

The existing call deal led to an additional $27 million investment in the original $313 million pot, after which most of the investment was withdrawn. Despite the withdrawal, USC’s fossil fuel reserves increased by about 23% as of his March 2023. Diamond said macroeconomic trends and higher prices related to the pandemic and Russia’s war in Ukraine were the reasons.

The university continues what it describes as a 10-year process of exiting partnerships and funds invested primarily in fossil fuels, including oil and gas. William Higby, a member of the Student Sustainability Committee, was one of several students who greatly admired the transparency when progress was discussed in meetings between SSC members and the investment office.

At the conference, the university committed to working with students to provide quarterly fact sheets on fossil fuel divestment. We also published an outline of our “Investment Stewardship Policy” by selecting ESG investment criteria for donations. Higbie, her junior in film and media studies, said the conference was a “very positive” sign.

“I walked in not knowing what was going to happen,” Hibby said. “Frankly, no one has really heard of a commitment to remove and relocate $277 million in fossil fuels. [investments, back in February 2021]”

USC’s commitment to divestment is part of a larger trend among higher education institutions across the country. More than 100 colleges across the country are working on similar strategies, including Columbia University and Dartmouth College.

However, not all financial institutions are selling at the same pace. The UC system fully sold all its fossil fuel holdings almost three years ago, following an initiative that began six years before USC. When asked why USC decided on his 10-year timeline, Diamond said it could be because of the different private and public nature of college investments.

“One issue would be how much they hold on the open market, which is obviously much easier to sell,” Diamond said. “We have very limited exposure to oil and gas companies in the public market.”

SSC member Jules Flores said exiting fossil fuels is a natural financial process.

“We have seen that investing in fossil fuels is not a smart investment choice,” said Flores, a sophomore majoring in international relations. “The value will continue to fall as other new technologies emerge.”

The university continues what it describes as a 10-year process of exiting partnerships and funds invested primarily in fossil fuels, including oil and gas. (Chris Louboutillier | Unsplash)

Critics of divestment as a sustainability strategy have labeled it ineffective, pointing out that in order for an institution to sell its fossil fuel investments, another party must buy them. increase. Nonetheless, Flores described the solution as “the best we have,” and Higbie said USC’s efforts would not be wasted as part of a larger sale drive. said.

“USC is not selling alone,” Higbie said. “When institutions like Harvard, the Los Angeles Pension Fund, and countless other large institutions take money out of dirty energy, it will have a very big impact, lowering the value of stocks and creating dissatisfaction with companies. It creates certainty.”

The likelihood of a successful divestment “is the bigger question of whether institutional investors as a whole can change the way the world gets energy,” said Diamond, noting that many of his USC peers , added that it is also working on universities like Harvard. Divestment — There is no longer interest in investing in fossil fuels, demand has fallen, and discounts on these products have occurred.

“This is direct evidence that the efforts of groups like the USC student group that have actually pushed the sale of fossil fuels can change the world,” said Diamond.

According to Flores, the ethical arguments for divestment are too strong to ignore.

“If we continue to do that and continue to fund things that actively destroy our planet, it’s not just a fiduciary duty, it’s an ethical, moral one,” Flores said. .

Higby said the line of argument was “good news,” but the mass adoption of sustainable alternatives to fossil fuels can only be successful if those options are economically viable. said.

“People are motivated by what is more economically viable,” he said. “People won’t buy electric cars if gas cars are cheaper.”

According to Diamond, the university has invested more than $230 million in new and additional green opportunities during this time, including projects related to carbon capture and solar technology.

“We are ahead of the pace compared to the distribution we received from that portfolio,” said Diamond. “We are finding more attractive opportunities in areas such as carbon capture and solar and other infrastructure and investments that have helped us move away from fossil fuels.”

Looking ahead, Diamond said he expects the majority of the university’s portfolio in fossil fuels to be sold in a much shorter period of time than the 10-year target set by the investment firm.

“[Around] Half of the portfolio comes from two portfolio companies, so when they liquidate, we expect the portfolio to be worth significantly less than it is today,” said Diamond. “They will be liquidated within three years and we expect them to be liquidated within five years, so it will be a portfolio with tail exposure that will last for quite some time.”

Higbie said the goals the investment office must achieve are not just related to portfolio numbers.

“We are looking for accountability and transparency along with urgency,” said Higbie.

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