UMass Foundation agrees to divest from coal companies

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STATE HOUSE — The University of Massachusetts Foundation will divest its $770 million endowment from investments in coal companies, marking a victory for climate change activists looking to bring financial pressures to bear on carbon emitters.

The UMass Foundation Board, which manages the five-campus system’s charitable contributions and endowment, also announced Thursday that it will continue to look for ways to manage endowment funds in a way that promotes “environmental sustainability and socially responsible investing.”

“We believe this action sends an important message about the urgency of climate change and the University community’s commitment to addressing it,” Charles Pagnam, executive vice president of the UMass Foundation, said in a statement.  “At the same time, our policy protects the Foundation’s primary mission of maximizing the investment returns on funds donated for research, academic programs, financial aid and other purposes.”

The decision to divest from coal companies came after a year-long process that started with the creation of the Socially Responsible Investing Advisory Committee in November 2014. The committee, which includes faculty, administrators, alumni and students, recommended divestment after researching the issue and meeting with the UMass Fossil Fuel Divestment Campaign, which formally petitioned the foundation in March to divest from coal investments.

A UMass Foundation spokeswoman could not immediately provide the News Service with figures on how much of the schools’ endowment is currently invested in coal company stocks.

While the UMass Foundation determined that divesting from coal investments was the best way for the fund to promote environmental conservation, other schools have come to different conclusions.

The Massachusetts Institute of Technology announced earlier this fall that it would not divest from fossil fuels despite similar overtures made by students and faculty on that campus, deciding that maintaining a relationship with oil, coal and other energy companies would be a preferable strategy to enact change.

Some lawmakers have also called for the state to divest its pension fund of investments in fossil fuel companies.

Sen. Benjamin Downing and Rep. Marjorie Decker have filed legislation that would require public pension revenues from fossil fuels to be trimmed by 20 percent over five years, including provisions to halt divestment if the transactions start to negatively affect pension fund returns.

“If we are serious about our climate goals, we cannot just be serious about one side of the ledger,” Downing told a legislative committee earlier this year.

A group of unions representing public employees, including the Massachusetts Nurses Associations, SEUI Local 509 and a caucus within the Massachusetts Teachers Association, wrote an open letter to the Pension Reserves Investment Management Board in July asking  state pension fund managers to “incorporate climate change concerns” into its investment strategy and consider a gradual divestment from fossil fuels.

Since then, Trillium Asset Management reported that the state pension fund lost $521 million in fiscal 2015 on its combined fossil fuel industry investments, a 28 percent decline on its $1.9 billion in starting investments for the year. The fund has realized a modest 1 percent return on its fossil fuel investments over the past three year, the group found.

PRIM Executive Director Michael Trotsky responded to the unions’ letter on Nov. 24, explaining that absent legislative direction it would be “illogical” and a “very poor approach to investment management” to instruct some of the world’s highest performing fund managers where they could or could not invest pension funds.

The Legislature in recent years has taken steps to divest public pension funds from some types of stocks and assets, including those tied to tobacco, the Sudan and Iran.

“Absent such a directive from the legislature, however, PRIM simply does not impose limitations on the ability of its managers to utilize their proven experience and expertise to provide PRIM — and its several hundred thousand pension beneficiaries — with the highest possible risk-adjusted investment return on the assets of the PRIT fund,” Trotsky wrote to Darcy Dumont, from Educators for a Democratic Union and Divest Our Pensions Now.

Downing and Decker’s bills (S 1350/H 2269) are still pending before the Joint Committee on Public Service.

— Written by Matt Murphy

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