From: Harvard Faculty <firstname.lastname@example.org>
Date: 9 September 2014 12:59
Subject: Harvard Faculty for Divestment Reply to Letter of July 10, 2014
Cc: “Faust, Drew Gilpin” <email@example.com>, firstname.lastname@example.org
Dear Mr. Lee:
We thank the Corporation and you, on having assumed the role of Senior Fellow, for your letter of July 10, 2014. With regard to avoiding the worst consequences of our actions, the difference between us is not about ends but means.
Your letter suggests that the University “can monitor the fuel-producing companies in which we invest to determine if they are embarked on a sustainable course.” But just this July, a Principles for Responsible Investment (PRI) report highlighted an empirical study revealing that “pressure from equity investors . . . does not” influence the decision of corporations “to report GHG [greenhouse gas] emissions data,” and that “stakeholder pressure does not influence the extent of the reporting.”*
We also dispute the contention that the University’s holdings in fossil fuel companies encourage or facilitate responsible corporate behavior. Harvard in 2012-13 voted against a proposal that would have compelled Chevron to report on climate change and against another that required Chevron to include an environmental expert on its Board; Harvard abstained on a vote to compel Chevron to report on oil well risks; and it voted against requiring Chevron and ExxonMobil to end their political spending, including spending aimed at voters in political elections.
You write that “[u]nless we are prepared to change our life styles profoundly—in how we live, work, travel, grow our food, conduct our research and in many other ways—it [is] problematic to signal that the companies that provide these essential goods and services are beyond the pale.” We reject the implication that such change is not possible. Indeed, we, and the many students whose advocacy of divestment we support, desire serious reconsideration of the ways in which we work and live, reconsideration and action that take into account the social, public health, and environmental costs of our energy sources.
We conclude from the overwhelming evidence now available that we must embrace such change, in part by weaning ourselves off fossil fuels as quickly as possible. The alternative is a future of potentially catastrophic change that will most emphatically not be of our choosing. In the face of this scientific and ethical clarity, the fossil fuel industry pollutes our politics and media with pseudo-scientific disputation and continues to promote business as usual. We ask a simple question: which of these corporations plans to cut production of fossil fuels? The answer seems obvious.
Yet, this industry continues to enjoy a privileged position in the energy marketplace through subsidies and pervasive lobbying. Consumers alone cannot turn this tide, especially when they are forced to pay a premium for alternative energy, or where meaningful alternatives do not exist. This is precisely where the divestment strategy aims to make a difference—by stigmatizing the industry, highlighting artificial disparities in the marketplace, and opening up political space in which real alternatives can flourish.
It is important, therefore, to respond to your comments about Harvard’s capacity to “partner” with corporations. We know that Harvard receives funding from fossil fuel corporations. It is not our intention here to examine potential conflicts of interest that such funding, whether it goes to the University or to individual researchers, might entail. But we find the apparent logic of your argument—that divestment would somehow jeopardize such funding—highly disturbing. It is inconceivable that Harvard would accept such funding if it were contingent on the university maintaining a financial stake in this industry. Regarding the issue of industry funding, it seems that members of the Harvard community, when speaking or offering counsel on divestment or climate-related policies, have a responsibility to disclose any relevant financial ties, just as they do in situations involving biomedical and public health research. Harvard Faculty for Divestment has none to disclose.
Leadership is not only about doing something the right way; that is simply conventional good management. Leadership is, ultimately, about doing the right thing. Our current policy seeks “robust investment returns” and minimizes certain financial risks, but it does not minimize planetary risk. With a growing number of investment professionals, we are convinced that robust returns are obtainable without investing in fossil fuels. The gain in moral leadership from contributing to a sustainable future for the planet would dwarf any putative financial gain.
We as faculty wish to participate in good governance, in open dialogue in which the University as an academic community explores this issue and exchanges views broadly and vigorously. We wish to engage in an educational as well as a corporate and fiduciary process. In the spirit of this institution that we all cherish, these cannot be separate.
We think of our students and of generations to come. It requires imagination to see what kind of world they might inherit. As Theodore Hesburgh, former president of Notre Dame stated, “We cannot urge students to have the courage to speak out unless we are willing to do so ourselves.” We recall the convocation and honorary degree ceremony for Nelson Mandela. When he spoke, he gently but firmly chided Harvard for its reluctance to divest for so many years.
In sum, we recognize that our current situation is, in the words of Derek Bok, one of those “rare occasions when the very nature of a company’s business makes it inappropriate for a university to invest in the enterprise.”†
We ask for dialogue and exchange on this issue in individual conversations. We repeat our request for an open and public forum, one attended by members of the Corporation, HMC, the Corporation Committee on Shareholder Responsibility, and the Advisory Committee on Shareholder Responsibility.
Harvard Faculty for Divestment
*PRI Academic Network RI Quarterly vol. 4 (July 2014), “Corporate Disclosure of Greenhouse Gas Emissions,” p. 4. See Liesen, Andrea and Hoepner, Andreas G. F. and Patten, Dennis M. and Figge, Frank, “Corporate Disclosure of Greenhouse Gas Emissions in the Context of Stakeholder Pressures: An Empirical Analysis of Reporting Activity and Completeness” (August 9, 2013), at http://dx.doi.org/10.2139/ssrn.2307876.
† Quoted in the Annual Report of the Harvard University Corporation Committee on Shareholder Responsibility, 2012-2013, p. 36.
From: Lee, William <William.Lee@wilmerhale.com>
Date: 10 July 2014 15:00
Subject: Reply to messages on investment practices
To: “email@example.com” <firstname.lastname@example.org>
We write in response to your recent messages about Harvard’s investment practices. We fully support President Faust’s conclusion in her letters of October 2013 and April 2014 that the most responsible, effective, and institutionally appropriate way for Harvard to confront the challenge of climate change is to intensify our academic efforts in this important domain through both research and education, to continue Harvard’s aggressive efforts to reduce the University’s own carbon footprint, and to otherwise promote sustainability in the day-to-day activities of our community. Like President Faust, we do not support divestment, believing that engagement is preferable to withdrawal.
While we will not restate the details of President Faust’s letters, we can provide some amplification and respond to your request for more information on Harvard’s efforts to ensure it is a responsible investor. None of us doubts the reality or the seriousness of the dangers posed by climate change. Thoughtful people, however, hold divergent views about the right way for an institution like ours to confront climate change. While we may differ on the means, we do not differ on the importance of the challenge or the need to address it. It must be and is a university priority.
All of us believe that Harvard — and the world — must make accelerated progress toward ending reliance on fossil fuels. In our judgment, engagement with energy-producing companies in shared research and development on both the improved efficiency of energy use and development of renewable sources of energy is more likely to achieve this aim than divesting ourselves of investments in fossil fuels and distancing us from the companies that produce them.
Whatever the size of our holdings in any particular company, the fact that we are shareholders or investors gives us standing to express our concern about risks of environmental or other societal harm. Harvard, as a shareholder or investor, can insist more credibly on being heard than an institution that does not hold shares, however prestigious the institution may be.
By choosing not to distance ourselves through the blunt instrument of divestment, we are also in a better position to partner with those companies that are exploring alternatives to fossil fuels and those that are working to develop more effective ways to mitigate the environmental impact of burning hydrocarbons. We can collaborate with them on research and work with them to discover better ways to meet the world’s energy needs. We are hopeful that in the years ahead, there will be more such companies, and that the scholarship of our faculty will make a difference in these efforts. This sector is rapidly evolving, and we should not assume that the current landscape of energy producers will be the one we will be dealing with in the years ahead.
We also believe that this path is preferable to divestment because it is intellectually consistent with our continuing reliance on fossil fuels. Unless we are prepared to change our life styles profoundly — in how we live, work, travel, grow our food, conduct our research and in many other ways — it appears to us problematic to signal that the companies that provide these essential goods and services are beyond the pale. In this way, fossil fuels are clearly distinguishable from tobacco, which is not an essential good. In the case of tobacco stocks, we not only divested, but also no longer sell tobacco products on our campuses. Nor do we allow people to smoke in our buildings.
We can monitor the fuel-producing companies in which we invest to determine whether they are embarked on a sustainable course, in terms of both their long-term development strategies and their sensitivity to the environmental, social, and governance issues that are of serious concern to us. But the world cannot now, without dramatic changes in the lives and aspirations of billions of people, do without such fuels altogether. We will need to continue to use fossil fuels but in the most responsible way we can.
Your letter requests that we share more information about how Harvard is approaching our work as a responsible investor. As you know, Harvard Management Company has appointed a vice president for sustainable investing, a newly created position that is unusual within the world of university endowments. This spring Harvard became a signatory of the United Nations-supported Principles for Responsible Investment, the first U.S. university to do so. PRI is regarded by many institutions and individuals around the world as setting important standards for contemporary practices by institutional investors. PRI now has more than 1200 signatories worldwide, representing more than $34 trillion under management. Having become a PRI signatory in April, Harvard will work to implement our commitment to the principles — including the third principle, which commits signatories to seek appropriate disclosure on environmental, social, and governance issues by the entities in which they invest.
The path of engagement requires that we take our responsibilities seriously, not only in proxy voting but also in communicating our broader concerns to companies in which we hold stock or other investments. With this in mind, Harvard has also recently subscribed to the climate change program of the Carbon Disclosure Project. The explicit mission of this Project is to press companies “to disclose their impacts on the environment and natural resources and take action to reduce them.” We will engage with companies held in Harvard’s own portfolio to encourage the disclosure of greenhouse gas emissions, energy use, and climate risks and opportunities, consistent with the CDP’s annual disclosure request.
Jameela Pedicini, HMC’s new vice president for sustainable investing, has been and will remain a member of the Standards Council of the Sustainability Accounting Standards Board to help develop industry-specific guidelines to enhance sustainability-related disclosures by a wide array of companies. As noted in a recent op-ed by SASB’s chair and vice chair, Michael Bloomberg and Mary Schapiro, this initiative aims to create greater transparency and consistency in companies’ public reporting of significant environmental and other risks. Meanwhile, as Harvard pursues such efforts, we will continue our careful consideration of how to vote Harvard’s proxies on shareholder resolutions in order to encourage responsible conduct by portfolio companies, and we will follow up by corresponding with such companies in particular cases. As you will see when we provide our annual report on votes on our proxies in the season just concluded, we take this responsibility seriously, relying on the good counsel and close collaboration of the faculty-led Advisory Committee on Shareholder Responsibility.
These are among the steps the University is taking as part of an unfolding effort to incorporate environmental, social, and governance factors more fully into Harvard’s investment practices — and to encourage companies to measure and disclose the impacts of their activities on the environment, as well as other environmental considerations that may affect the future value of their assets. We appreciate and respect your candidly expressed views, and we trust you appreciate that there are others who share your concerns about climate change but nevertheless differ on the best means for effecting change. We will continue to weigh your views along with those of others as we deal with these concerns. We will do so with a deep appreciation of the very real risks posed by climate change, as well as a firm commitment to supporting and advancing the essential academic pursuits that represent Harvard’s distinctive contributions to society.
William F. Lee, Senior Fellow on behalf of the Fellows of Harvard College
Faculty of Harvard University to the President and Corporation of Harvard
May 5, 2014
On May 1, the arrest of a Harvard student at Massachusetts Hall engaged in an act of civil disobedience echoed the arrest of students protesting civil rights violations in the 1960s, of Henry David Thoreau protesting the Mexican War and slavery, and of Bill McKibben protesting a possible Keystone XL pipeline. A number of students on May 1 demonstrated to call attention to a request that the University hold an open forum to discuss University investments in fossil fuels, an issue that for two years has engaged thousands of students and hundreds of faculty members in all Schools of the University, as well as members of the Governing Boards and numerous alumni.
The Harvard Corporation has to date stood behind closed doors and issued statements, often in a dismissive tone. In response to a faculty Open Letter urging divestment as soon as possible — signed now by about 120 faculty members — President Faust responded by stating that Harvard has recently joined Principles for Responsible Investment (PRI). But on April 30, when asked by the University Gazette if PRI and fossil fuel investments were “in some way related?” Jameela Pedicini, University vice president for sustainable investing, flatly stated, “No, they’re not”.
It is time for the Corporation to stop issuing apparently contradictory statements and, as we have previously requested, to answer questions posed in earlier communications and to face this issue fully. An open forum in which members of the Corporation, students, faculty, and alumni speak is needed. An open forum is what the students have been seeking. They believe, rightly, that such dialogue is what a true University permits and encourages. An open forum should be held, not because students demand it at a demonstration—that’s no reason in and of itself—but because an open forum should have been held long prior to any demonstration. Such a forum would foster further dialogue and conversation.
Faculty of Harvard University to the President and Corporation of Harvard
April 28, 2014
Thank you for the reply sent a few hours after receiving our Open Letter of April 10. We continue to trust that, together with the Corporation and its relevant committees, you will answer the specific questions posed in our Open Letter and further hope that you will engage and respond to the substantive issues raised in that Letter and in this response to your reply.
We agree about ends though not specific means. Although a small step in the right direction, participation in Principles for Responsible Investment (PRI) and the Carbon Disclosure Project (CDP) is insufficient. There is no evidence from either organization, both operating on a voluntary basis, that their activities have significantly reduced greenhouse gas emissions or, more importantly, altered the business plans or practices of fossil fuel companies to locate, extract, sell, and burn carbon. Involvement of fossil fuel corporations in PRI and CDP is voluntary. Laudable as their goals are, PRI and CDP do not create sufficient pressure or publicity to alter the massive, ongoing practices of fossil fuel corporations. PRI and CDP have exerted no discernible effect on government regulations or statutes. The public is generally unaware of their activities. Harvard is the only university or college to sign on to PRI, while a growing number of colleges, universities, municipalities, and pension funds, in the United States and abroad, have divested, in one form or other, their holdings in fossil fuel companies. Several Harvard faculty members who possess extensive business experience and policy expertise in the energy sector regard the PRI and CDP as utterly ineffective.
Despite being scientifically conservative and constrained from making policy recommendations, the fifth round of IPCC reports points to the necessity of swift action to prevent climate alteration that will accelerate major deleterious effects and impose a possibly irreversible climate regime, the costs of which would be incalculable. In What We Know: The Reality, Risks, and Response to Climate Change, the American Association for the Advancement of Science, recently co-led by a prominent Harvard scientist, this year concluded that there is a “real chance of abrupt, unpredictable and potentially irreversible changes with highly damaging impacts on people around the globe.” All agree that unless substantial mitigation efforts are initiated soon, the poor and vulnerable will bear the greatest burden of our inaction.
We agree that leadership requires continued research on climate change as well as lowered institutional carbon footprints. We support Harvard’s research mission and its attempts to improve campus-wide energy efficiency—while calling attention to the fact that these measures by themselves are inadequate. Leadership also embraces fiduciary practices and intergenerational responsibilities, including responsibilities to current and future students. Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), warned that “Institutional investors” would be “blatantly in breach of their fiduciary duty” if they failed to accelerate the greening of their portfolios. She said, “Investment decisions need to reflect the clear scientific evidence, and fiduciary responsibility needs to grasp the intergenerational reality . . . unchecked climate change has the potential to impact and eventually devastate the lives, livelihoods and savings of many, now and well into the future.” Though speaking for the UN, she did not cite the PRI as sufficiently effective. The current issue of the British Medical Journal (26 March 2014) states the case directly: “This is an emergency. Immediate and transformative action is needed at every level: individual, local, and national; personal, political, and financial.”
We look forward to a communication from the Corporation as a whole. In our Open Letter and in this response to your reply, we have provided detailed statements, quotations, and references from the scientific, business, medical, and global policy communities—including the IPCC, AAAS, UN, and World Bank—regarding divestment in fossil fuel corporations. We hope that deliberations in the Corporation will be guided by these views, and that the Corporation will not be unduly influenced by those who may not accept the soundness of climate science, or who are simply unwilling to reconsider decisions already announced.
Thank you for your “open letter” of April 10. There is a range of perspectives in our community on how Harvard can respond most effectively to the serious dangers posed by climate change. As you know, I have written at length on this issue as recently as this past Monday, and more fully on the particular question of divestment last October. How our university can most constructively confront the environmental challenges we face is a question on which thoughtful people hold a variety of differing views. I appreciate having the benefit of yours. Meanwhile, my focus will remain on how our programs of research and education can best contribute to accelerating the transition to renewable sources of energy, how our institutional practices can best model a commitment to sustainability, and how our investments can take appropriate account of environmental, social, and governance factors in ways that advance the endowment’s paramount aim of supporting Harvard’s academic mission. On the last of these points, please note that Harvard has now become the first U.S. university to subscribe to the United Nations-supported Principles for Responsible Investment and has, in addition, become a signatory to the Carbon Disclosure Project.
Thank you again for writing.