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Stanford Getting Rid of $18 Billion Endowment of Coal Stock
mdsolar sends this report from the NY Times:
"Stanford University announced Tuesday that it would divest its $18.7 billion endowment of stock in coal-mining companies, becoming the first major university to lend support to a nationwide campaign to purge endowments and pension funds of fossil fuel investments. The university said it acted in accordance with internal guidelines that allow its trustees to consider whether 'corporate policies or practices create substantial social injury' when choosing investments. Coal's status as a major source of carbon pollution linked to climate change persuaded the trustees to remove companies 'whose principal business is coal' from their investment portfolio, the university said."
They are not acting in the best interest of those the endowments are there to serve. They are using the financial clout of the endowments to make a political statement, often to the detriment of the endowment's beneficiaries.
Stupid.
In retrospect, everything that worked out looks pretty smart, doesn't it?
Everything that didn't work out? Nobody talks about it.
Wow, your time as a University trustee seems to have left you really bitter. Oh wait, you were *never* entrusted with maintaining a 120-year-old institution and its 11-figure endowment? Huh.
Stanford is a (very rich) non-profit educational institution, so while they have plenty of sharp investment managers it is not their sole obligation to maximize returns no matter what it takes. Their reputation is worth quite a bit to them. They bring in just about as much money in alumni donations as they do from the endowment.
Maybe with that money they will buy a natural gas electrical generator.
How much social injury does having no electricity cause?
Stanford University has an $18 billion endowment, but only a fraction of that is invested in coal mining companies. They're not just dumping $18 billion worth of stock.
that 30% of electricity that California imports, where does it come from?
45% of that produced inside the state is from natural gas, better than coal at least.
Not much electricity comes from burning coal out Stanford's way.
a,e,i,o,u and sometimes w and y (at be if of up cwm by)
Ok, ill bite;
Given that coal causes more harm to society than other forms of electricty generation (it causes more polution per kW), how is divesting coal investments hypecritical.
This is an amazingly stupid approach to look good and get into the good graces of green initiative supporters. But, I am sure, they are not going to stop producing coal from those mines. They are just going to sell it to another entity, which in turn will utilize "dirtier" methods to cultivate these mines and sell the same product to the public to cause the same amount of pollution. It is just plain dumb, but again this is a university suystem with roots in the most liberal of the places, San Francisco Bay Area. Good riddance to them.
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they are reducing the value of future offerings by becoming one less bidder for those shares.
Not by much, because the summary is WRONG. $18B is the value of their entire endowment. The fraction of that specifically invested in coal is a tiny fraction of that. If they are smart, they already divested, before making the announcement.
Stanford tuition, room, and board is actually free for students with families making less than $100k a year. http://paloalto.patch.com/grou...
Read.
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Endowments return significant operating funds in up years, and sales from the endowment assets smooth out what would otherwise be significant operating losses in the down years; they decouple university operating finances from the business cycle and local politics. They _stabilize_ finances. They can also used as collateral allow for much larger debt funded initiatives to be floated. I dearly wish my university employer had a large endowment....
Put another way: you don't eat your seed corn. The endowment is the seed corn. Selling off an endowment for short term, short sighted "it seems wrong to have so much money!" would be criminal
To the contrary, Stanford is simply astute enough to be the first to sell, while the price of companies involved in coal are still high. Its now just a trickle, but soon it will be a flood. The smart ones always get out first. The rest won't be able to afford not to and will begin to sell as their portfolios in these companies as they decrease in value. With new solar technologies capable of energy capture at up to 70% likely to start hitting the market within 5 years and wind energy becoming cheaper and cheaper and the electric car industry just around the corner, fossil fuel dinosaurs will be returning once again to the depths. Only those locked in will ride coal and ultimately fossil fuels all the way to the bottom.
The energy barons of the future will be those that invested in renewables first. Its inevitable and of course, the reason that China is now spending 3 times more on solar ($147 billion in 2011) than the US ($52 billion in 2011). No one can say the Chinese don't know how to grow their economy, which will be the world's largest this year, if it isn't already.
By selling Stanford will put downward pressure on the stock of coal companies, which means they have less capital against which to borrow and pay executives their stock options. It will take more and more stock options to keep the insiders happy, which will put further pressure on the stocks as other stockholders recognized they are soon to be the last guy out and the one holding the bag. If owned stock in a coal company, I would be selling as quickly as possible and moving into solar, wind and other renewables, since these will be the growth industries of the future, while fossil fuels will be creating more and more pollution and health problems for more and more people, leading to more litigation, more calls for regulation and less profits, especially as the world grows hotter and hotter and the 99% figure out they are being stuck with the tab. Its bad enough that oil companies have been raising prices recently to fund lobbying and campaigning for their favorite republican candidates. As fracking leads to more earthquakes and health and water issues, expect to see the profits in the fossil fuels sectors decline as those in the alternative energy industries rise as new technologies power increase efficiencies and growing public acceptance. It will only take one El Nino to drive this point home to all but those most deeply in denial.
Stanford is simply selling coal stocks while they are high and moving into alternative energies, which are on their way up. From an investment point of view this is a no brainer.
It has a lot to do with being founded by a railroad baron who didn't want to be the richest guy in the graveyard.
Slashdot still doesnâ(TM)t support Unicode after it was added to the HTML standard in 1997.
They live on the interest and capital gains. Think about it.
How can a university have so much money?
Wait... that's probably not even a significant portion of their money. It's just the portion they say is invested in coal. Responsible portfolio managers will typically not put more than 20% of their stocks in any one sector.
Does this mean Standford will divest itself from the use of electricity too? Or is this just a hypocritical publicity stunt?
Stanford receives electricity from two sources -- Cardinal Cogen, an onsite natural gas cogeneration unit, and PG&E. Neither of which use coal.
So by your logic : no one can use electricity and be non hypocrites if they are not coal supporters.
This means that you think all electricity does and must always come from coal burning.
In fact electricity also comes from generators not powered by coal now, and in the future, all electricity will come from generators not powered by coal.
No need to nationalize these industries. Alternative energy and natural gas are putting them out of business soon anyway. Stanford just doesn't want clunkers draining their portfolios going forward. Its not as if global warming isn't actually occurring.
Unless they want to turn off every light and computer on campus, they are still regularly using coal energy.
California has a pretty diverse power grid.
On another note, it's only early May and we are already having air quality problems here in Metro Atlanta.
We are all coal around here and big trucks.
And due to my health issues, I'm stuck indoors.
I just wish we could get away from this antiquated 19th century fuels and engine technology and move into the 21st century.
Harvard could pay for every incoming student, room board, classes materials for over 100 years based on what they have.
The Kruger Dunning explains most post on
First of all, Stanford does not own $18B in coal stocks. 18B is the ENTIRE endowment amount. Coal stocks are a small fraction of the total.
Now that that little correction is out of the way....
Stanford seems to me to be making an entirely political statement. Selling all of their coal stock is not going to change the supply of coal by even an ounce. Someone else will simply buy the shares.
I wonder how many of those coal plants are producing electricity that powers all those Teslas that I see on the roads here? The electricity has to come from somewhere and there are not enough Solar panels to meet the need. Other options? Nuclear? Not in California.
Almost any way you slice it, power generation is a dirty business.
Shouldn't the responsibility of the endowment trustees be strictly fiduciary? In other words, manage the money and leave the political grandstanding to someone else.
I hope they got a good price! Er no, wait, that would be ba--- does not compute!!!
Yeah, god put the coal there for us to use, right? Fuckwit. Let's see how your bible saves you next time severe weather hits.
Hah. And here I've been writing paragraphs on other sites trying to explain this to people. Well put.
turkeyfish, stock sales don't put downard pressure on the value of a company. The put a temporary downward pressure on the trade value available on an exchange. But all that effects is liquidity. As long as even two sufficiently-capitalized bidders understand the value of the underlying company, coal stocks would maintain their price with only those two bidders. Why would one of them turn down the stock at a bargain price?
The value of these companies, and thus the value of their stock, is driven by the value of coal. That value is realized on the energy market, not the stock market. The stock market is only where that value is *traded*. Theoretically, sure, massive investor actions could upset underlying dynamics. But it doesn't take a Stanford grad to know that coal energy will never be stopped, or even much affected, by voluntary divestment activity. There are simply too many remaining sources of capital, to the extent that these companies even need new capital at this point. And there will always be enough people happy to soak up the profits of the companies, as long as there are buyers of coal energy.
Far smarter for Stanfard to point this out, then dedicate all coal-energy profits to avoid purchasing the *energy* from coal, and also toward reducing the cost of alternatives, not just for Stanford, but for everyone. They actually chose PR *over* environmental responsibility, not to mention over simple economic intelligence.
Actually, no, they couldn't. Net student income (i.e. total tuition, housing payments, etc.) was about $800 million last year. The endowment was $32 billion, of which $1.5 billion was spent last year. All else being equal, if you cut tuition to zero, you'd burn through the endowment in 40 years. Given that the institution has been around for nearly 400 years at this point, that would be incredibly short-sighted.
That $18.7 billion is the entire endowment, not just the portion invested in coal.
So, just because they might have a billion in revenue, they can't exist for education purposes? If they split into two halves, with $500 million in revenue each, would each suddenly become a legitimate educational institution?
This is about the likely future value of such investments in face of regulatory hostility. If their fund managers thought the investments were long-term viable, they would keep them. They really should have quietly divested in early 2011, as did most hedge funds.
"Computers are useless. They can only give you answers."
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>"Stanford's coal stock is half of my country's annual state budget"
Big deal! My country has $18 billion more in debt since you posted that!
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Stanford's own Professor Mark Jacobson and twenty Stanford students demonstrated that California could be entirely fossil fuel free by 2050. Stanford should divest from all fossil fuel companies. http://www.stanford.edu/group/...
And, when Stanford divested from tobacco, it made it hard for tobacco companies to get Stanford Medical School grads to shill for them. Divestment has broad effects.
What do think helps pay to keep the university running. The tuition does not cover the full costs of an education there. If they didn't have the endowment tuition would about 20K higher then it is now. How do you think scholarships are paid for? endowments.
It's too much money for that. Coal is on the way out. Real "Clean" Coal is expensive as hell. Solar has gotten cheaper if you're not offsetting the costs by dumping pollution into the air and water and letting the gov't clean it up. I think they're just going to sell off what they've got while they stock price is still pretty high.
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It seems to have worked quite well in tandem with other measures such as punitive taxes and places like New York City outlawing smoking in any public areas, even parks. As a pipe and cigar smoker, I've witnessed firsthand the decline in smoking and the social acceptability of smoking.
They may just invest that money into something else that will give a better return. You'll have to wait some years before you can make such a statement in retrospect. If you can already predicting that they will fail to find a better investment, you should be working for an investment company and not posting here on SlashDot.
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oh fuck off, being an AC troll is a mental disorder, what mind numbing arrogant shits they are...
"The hands that help are better far than lips that pray." - Robert Ingersoll (1833-1899)
and it really worked cause no one smokes anymore.
You think you are being facetious, but in many areas it's the truth. In the most populous state in the US, these sorts of initiatives have been pretty fucking effective...
http://www.cdph.ca.gov/Pages/N...
Divest (and stop buying!) anything even partially owned by the fucking Koch brothers.
Perils of being a Stanford grad!
A charity trust is requre to spend 5% of its assets each year. With good investing and continuous donations, this should be perpetual. No one would "run out in 40 years" under these conditions
Chart here . 50% if you include other carbon.
You must keep lists in the same form!
Stanford receives electricity from two sources: Cardinal Cogen, an onsite natural gas cogeneration unit, and PG&E, a whatever the hell they are, neither of which uses coal.
The colon indicates the close relationship between the first sentence and the second. The comma was chosen for its stylistic consideration: a semicolon would represent stronger separation. "Either" and "neither" reference one subject, and must agree with a singular verb.
Source: "The Elements of Style" by William Strunk and E.B. White.
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1. Balance is $32B. Payout is about $1.5B (about 5%). If you eliminated all student payments, payout would rise to about $2.3B/year. So, after 40 years, your balance would be $32B lower than it would be with $1.5B in annual payouts. Actually, the lower balance would be even greater, since you'd lose the compounding effect of gains on the higher balance. For Harvard to eliminate tuition, it would have to raise the payout to over 7%.
2. This isn't a charity trust. There's no minimum payout rule for University endowments.
If I had modpoints, I'd mod you up.
so they sell shares of their evil coal stocks but dont cut the power lines coming into their campus. Yawn... more pr bullshit from academics....
While the decline is obvious, the claiming that the initiatives are the cause would require more than this. People choose to quit for a lot of reasons...these may or may not have played a role.
As a side note, I'd have to question the accuracy of the the data CA is claiming with a 4.4% decline in one year, followed by a 1.3% increase.
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So the headline was a lie then. They didn't divest $18 billion from coal. They divested coal which was a tiny fraction, perhaps less than 5% of their $18 billion portfolio.
Probably on the order of $10 to $20 million worth of stock they sold off.
They probably give coal more money than that powering their campus every 4 or 5 years worth.
Sure, obviously the cause can't be directly traced to those initiatives, but it can be *correlated* with the drop in smoking, which is enough to make the OP's sarcastic comment as to how it was ineffective invalid.
And, big deal that there is a couple percent change in the data you can't explain. All sampled surveys have a margin of error so that's fairly irrelevant to the 25 year trend. And if you look at the data since '96 the deviation is a low lower - likely because they have started taking larger samples. Again, makes no real different to the point.
For all the comments on this being a bad decision, an attempt to make a political statement, it can also be seen as forward thinking. The investors involved in nurturing the endowments probably see the writing on the wall. With clean energy coming into its own, coal will be increasingly seen as unneeded and detrimental to the environment and humanity in the longterm. Battery Technology is about to explode with the introduction of Tesla's battery factories and silicons replacement, carbon nanotube materials that conduct electricity so much better. From my observance of news and company postings home battery use will increase and solar and wind energy storage will be enough to offset the need for coal power plants to take up the slack when the sun is down or the wind is not blowing. Stanford is well placed to see this movement at least in California, where Californians have been burned by the last decades brownouts and greedy manipulative power industry fat cats.
Headline would have been better written as "Stanford Ridding $18 Billion Endowment of Coal Stock."