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Stanford Getting Rid of $18 Billion Endowment of Coal Stock

Posted by Soulskill on from the unconflicting-itself-of-interests dept.

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."

11 of 208 comments (clear)

  1. Activist investors by EmagGeek · · Score: 5, Insightful

    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.

    1. Re:Activist investors by Travis+Mansbridge · · Score: 4, Insightful

      It would seem they simply consider the environmental detriment more significant than the economic detriment.

    2. Re:Activist investors by CRCulver · · Score: 4, Informative

      Harvard divested from tobacco investments over two decades ago and, in retrospect, pretty much everyone agrees it was a good thing. In any event, activists can only push universities to consider their investments. If the university is sitting on a massive endowment and it can easily weather the divestment, then the activists will have their way, but if it were to pose a serious threat to the university, then I think such calls would face great resistance.

    3. Re:Activist investors by afidel · · Score: 4, Informative

      Companies only get money from stock when they offer new shares (or sell those already in company reserves), by refusing to buy shares in these types of companies they are reducing the value of future offerings by becoming one less bidder for those shares.

      --
      There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
    4. Re:Activist investors by ShanghaiBill · · Score: 4, Insightful

      so what's to stop some activist group form using this as a precedent?

      The fact that the endowment managers can pick and choose which activists they pay attention to. They didn't divest from coal because of a few whining activists. They divested because of broad support among students and faculty for the divestiture. It is also likely that they looked at coal mining companies, and decided that they weren't a very good investment in the first place. Coal mining may not be a good long term growth industry.

    5. Re:Activist investors by Anonymous Coward · · Score: 4, Insightful

      No, they aren't. If you auction off a commodity, I don't lower the sale value by not bidding. The sale value will be whatever the economic usefulness of the item dictates, so long as there are enough willing buyers to soak up the entire supply. To put it another way: the value of coal stock is a feature of the value of coal. Complete divestiture by everyone on the planet wouldn't even kill those companies - in fact they'd be able to buy all their own stock back for a pittance! The only thing that will kill the companies is refusing to buy their *product*. Stanford should rather have calculated their profits from these investments and used that money to divest themselves of their use of coal.

    6. Re:Activist investors by guises · · Score: 5, Insightful

      Divestment as a prod for inducing responsible behavior is famous mainly for it's role in ending apartheid, and university endowments were a big part of what made it work. In fact, Standford was one of the first universities to do apartheid divestment.

      People have called into question just how much of the effectiveness of that campaign came from the financial impact and how much came from the increased publicity, but I think its pretty widely considered to have played a non-trivial role in ending apartheid.

      So yes, it is certainly possible that this campaign will prevent some environmental damage. Additionally, let me point out that Standford is not impoverishing themselves here. Money currently invested in coal can be invested in other things, with minimal opportunity loss - coal stocks aren't exactly skyrocketing right now. So the idea that the environmental gains could out way the financial losses is completely plausible.

  2. Misleading headline by Daffy+Duck · · Score: 5, Informative

    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.

  3. Summary is WRONG by ShanghaiBill · · Score: 5, Informative

    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.

  4. Re:$18.7 billion?! by krlynch · · Score: 4, Insightful

    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

  5. To the Contrary. The last ones out get burned. by turkeyfish · · Score: 5, Insightful

    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.