Why Divest?

Continued fossil fuel investment puts the well-being of the Vanderbilt community at risk:

1. Members of the Vanderbilt and broader Nashville community were threatened when Waverly, TN was hit with a flash flood that led to twenty two confirmed dead and several people trapped, including Vanderbilt Professor Samar Ali.
   
2. Floods of this magnitude, which are intensified by climate change, will only continue to threaten Tennesseans who make our community what it is.
   
3. Vanderbilt professor Dr. Janey Camp spoke on the relationship between the Waverly flood and climate change in a Washington Post article, where she discussed how the decisions of today will impact the Tennessee community in the future.
   
4. More than just floods, Dr. Carol Ziegler also recently presented on how climate change may cause a spike in deadly heat waves in Nashville specifically by 2050.
   
5. Climate change is also a justice issue. It is no secret that Black and Brown communities suffer disproportionately from the effects of climate change, and that not all communities suffer in the same way. In an online forum with Prof. Patrick Greiner, BIPOC students from various geographies spoke to how climate change is presently negatively impacting their families, especially in communities of color. From rising sea levels in Miami to loss of land in the Pacific Islands to changes to mass ecosystems that affect the functioning of Indigenous communities to increased susceptibility to COVID-19 resulting from pollution, students expressed how climate change injustice results in the erosion and loss of identity, functioning, and safety.
   
6. So what can we do to protect Vanderbilt families? International agencies agree that, in order to limit the worst consequences, we must stop the flow of capital to fossil fuel companies who continue to explore for new fossil fuels.
   
7. Despite this consensus, Vanderbilt continues to contribute its wealth to polluters who are directly causing adverse outcomes for millions, both abroad and at home. Climate change is just one aspect of what prevents Indigenous and marginalized communities from being empowered to exit difficult cycles such as poverty. Unless we stop investing in fossil fuels, we will not be able to stop the already occurring irreversible climate change harm to Vanderbilt community members.

Fidiciary Responsibility suggests divestment would be prudent for Vanderbilt:

1. The university endowment’s role is to provide a permanent, long-term source of capital to financially support all the amazing things the Vanderbilt community does.
   

2. Currently, Vanderbilt’s endowment sits at around $11 billion.
   

3. Around 4% of the endowment is currently invested in a category called “natural resources”, which includes oil & gas production assets.
   

4. Although only 4% of our portfolio, the natural resources category is still a staggering 500 million dollars. Because it represents primary investment, it’s this part of the endowment that we especially would love to see divested.
   

5. Now, some of you may have seen the large returns from this year and may be wondering “Why should we change anything?”. Let’s break it down.
   

6. It turns out that nearly all top universities, including divesting peer institutions, had extremely strong returns last year due to favorable market conditions.
   

7. In addition, this year’s returns may appear higher due to the disappointing losses from the year before. Nevertheless, of various asset classes in Vanderbilt’s endowment, how did the natural resources category perform?
   

8. It turns out- of the $4 billion in value added, only 4.9% of those gains came from the natural resource asset class. This clearly shows that Vanderbilt’s strong performance was not due to the natural resource category. So now that we discussed Vanderbilt’s endowment, let’s dive further into fossil fuels as an asset class.
   

9. Regardless of the reputational risks and the risks to our community, we point to the significant evidence that show that fossil fuels are objectively bad investments.
   

10. Starting with private equity, oil & gas funds have been among the lowest yielding asset classes in the past decade and have underperformed comparable buyout firms.
    

11. Similarly, on the public equity side, the S&P energy sector has been a drag on the broader market and is one of the only sectors to have negative annual returns in a historically amazing market. So what about portfolio diversification?
    

12. Multiple research studies have shown the divestment does not negatively impact a portfolio’s diversification or flexibility, and research from large asset managers like BlackRock have shown that divested funds performance either match or outperform non-divested funds.
    

13. Therefore, divestment does not violate fiduciary responsibility in any meaningful way nor suggest that our endowment would be conceding any aspect of investment performance that is mandated by the university.
    

14. We’re not going to claim we know how the future of fossil fuel investments will play out, but there are significant signs that suggest that it’s not looking good. First, countless institutions are divesting from fossil fuels and have already significantly reduced the amount of capital in the industry.
    

15. According to the Global Fossil Fuel Divestment Database, approximately $39.2 trillion in AUM have publicly committed to at least some form of divestment. Even if we estimate that 5% was previously invested in fossil fuels, the total amount of capital commitment to divesting is significant and a serious threat to the future of the industry.
    

16. In addition, both governments and large institutional asset managers are ramping up their policies to accelerate the energy transition and pathway towards net-zero, which will only continue to increase the pressure and risk for fossil fuel companies. Once again, we can ask the fundamental question of why we should stay in fossil fuels?