At $1.5 billion, NC State has the second-largest endowment of all UNC System schools. This endowment is invested to help fund the university. NC State’s endowment is given to different management groups, the largest being UNC Management Company (UNCMC), which handles the investments for all UNC schools. Up to 7.2 percent of UNCMC’s assets are invested in “oil, natural gas, power, and other commodity-related investments.” Continued investment in fossil fuels such as these is environmentally irresponsible and poses a financial risk for our university.
From a long-term perspective, fossil fuels are a limited resource. Not only is there only a finite amount of fuel on the planet, but it is becoming more dangerous and expensive to extract, while technological advances make renewable energy more competitive. “Business as usual” behaviors are predicted to increase global average temperatures up to 4 degrees Celsius by 2100. This puts a hard and quickly-approaching limit on the profitability of fossil fuel companies, which continue to conduct exploratory missions for resources they cannot use without causing catastrophe. By investing in companies partaking in these practices, NC State and the other UNC schools are taking on financial risk.
Market indices can help quantify the economic damages that may arise from a lack of sustainable practices. Well-constructed indices, such as MSCI’s ACWI (i.e., Global) Sustainable Impact Metric, provide a way to compare the performance of sustainable businesses to other companies. This is done by filtering out companies that do not meet particular practice requirements, such as the implementation of alternative energy sources and energy efficiency strategies. While the Sustainable Impact Metric is relatively new, it has shown comparable growth to the overall global market.
The bottom line is that sustaining a company or organization for a long period of time requires sustainable investment choices. NC State should absolutely take this approach — and certainly claims to — in its Investment Policy Statement. In the statement, NC State establishes that “for the purpose of investment strategy, [the endowment] can be considered to be in ‘perpetuity.’” Continued investment into fossil fuel-related companies directly opposes this sort of long-term thinking. Instead, NC State and the rest of the UNC System need to start thinking in terms of sustainable investment strategies.
Considerable steps towards sustainable investing at NC State have already been made. In 2013, the Park Endowment was created with a gift of $50 million dollars and a commitment to investing in a “socially responsible fashion.” Since its creation, the Park endowment has had comparable return on investments to the NC State endowment. Endowment health is essential to the function of a successful university; therefore, we have an obligation to sustainably divest our entire endowment from fossil fuels. As a land-grant university, we also have a responsibility to North Carolina citizens to cease investment in fossil fuels.
The NC State Climate Reality Campus Corps is currently collaborating with other UNC System schools to promote sustainable investment practices. If successful, their efforts could prevent millions of dollars per year from reaching environmentally irresponsible companies and ensure a future healthy endowment for NC State and other UNC schools.
To ensure the financial health of our endowment, NC State must invest our entire endowment sustainably. To support Climate Reality Corps’ sustainable investment efforts, sign our petition here.
Nadia Sheppard is a second-year studying environmental engineering and a research executive in the Climate Reality Project at NC State.
Robert van der Drift is a second-year studying meteorology and applied mathematics and a research executive in the Climate Reality Project at NC State.
