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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.
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.
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.
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.
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.
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.