Cambridge University to Divest From Fossil Fuels

“We’ll be judged on our results,” says chief investment officer Tilly Franklin.

(Chris Ratcliffe/Bloomberg)

(Chris Ratcliffe/Bloomberg)

Cambridge University plans to rid its endowment of all direct and indirect fossil fuel investments by 2030, the school announced Wednesday.

The U.K. school has one of the largest endowments in Europe at £3.5 billion ($4.45 billion), and arguably becomes the most prominent university to aim for divestment.

“This is huge,” said one prominent real assets allocator when told of the move. Other post-secondary institutions that have announced divestment include George Washington University in Washington, D.C., and the University of California system.

But American counterparts to Cambridge — the vaunted Ivy League — have not divested in the face of strong pressure from students and other stakeholders.

“The university is responding comprehensively to a pressing environmental and moral need for action with an historic announcement that demonstrates our determination to seek solutions to the climate crisis,” said vice-chancellor Stephen Toope, the former president of the University of British Columbia.

[II Deep Dive: The Cost of Divestment for Endowments]

Cambridge has given itself nine years to accomplish its full goal, while also laying out specific and intermediate-term steps along the way, including to:

  • “Withdraw investments with conventional energy-focused public equity managers by December 2020
  • “Build up significant investments in renewable energy by 2025”
  • “Divest from all meaningful exposure in fossil fuels by 2030”
  • “Aim to achieve net zero greenhouse gas emissions across its entire investment portfolio by 2038, in line with the broader targets of the university.”

Students and staff have waged a sustained pressure campaign against fossil fuel investments, and contributed to the university’s decision to drop them, the announcement said. Within the institution, a report had noted “broad agreement” on the urgent need to reduce carbon emissions.
Chief investment officer Tilly Franklin walked into that environment when she joined Cambridge in January, and set about rebuilding the investment team.

“It was very much on my mind, and an explicit part of the interview process: How can we have the most impact on climate change?” she told Institutional Investor Thursday morning. “The vast majority of emissions actually come about from the combustion of fossil fuels, not the extraction.” This distinction is often overlooked, particularly in American drives for divestment.

“Earlier this week, we previewed these plans with our investment managers, and I got this overwhelming and positive email response,” she went on. “The message was, ‘We want to benefit from the resources of Cambridge.’ It was great, because one other possible outcome was a lot of resistance. Giving runway means that we can accomplish this in partnership instead of in conflict.”

Oil prices have been low for years, and fossil fuel companies some of the worst performers in an otherwise vigorous stock market, bringing the sting out of divestment for those that already took the step. “A friend said to me, ‘Don’t you wish you’d decided this years ago?’ But I wasn’t in this role then,” Franklin said. “We’ll be judged on our results.”