Columns, Opinions

Steinman ’19: What sustainable investing can do

By
Opinions Editor
Friday, April 21, 2017

It’s been three and a half years since the Corporation voted “no” on a divestment proposal submitted by the group then known as Brown Divest Coal in October 2013. When the class of 2017 leaves Brown in a few weeks, they will take with them the last institutional memory of the original manifestation of Brown’s divestment movement, a movement to rid the University’s endowment of all investments linked to coal. Brown Divest Coal restructured itself as Fossil Free Brown a year after the Oct. 2013 vote and extended their proposed negative screen to include oil and natural gas. It continues to exist nominally under the emPOWER umbrella, yet the energy behind the divestment movement is all but gone.

Despite this stagnation, divestment remains the focus of the conversation around the link between the Investment Office and environmental sustainability, particularly in the environmental activist community. Symbolically, divestment is a powerful move: It sends an institutional message that profiting off the continued use of fossil fuels is egregious and unethical. The further rationale behind divestment is that if it spreads widely enough, it can send shock waves through the fossil fuel economy, making hard-to-reach reserves — which tend to be the dirtiest to burn — suddenly unprofitable. Though I support divestment for its symbolism as a rallying point for environmentalists, there is more that can be done to demonstrate a positive commitment to a carbon-free future. In fact, some of these alternatives are arguably more powerful than divestment, whose effectiveness has been hotly debated.

This is where sustainable investing comes in. Generally defined as investing that takes into account both fiscal performance and environmental considerations — though the balance between the two can vary widely — sustainable investing is a way to make strides in the direction of a fossil-free future. It provides a positive incentive for businesses to prioritize the environment in their practices. From the investor standpoint, it is a way to profit from sustainability and potentially engage in shareholder advocacy, the practice of using one’s status as a shareholder to lobby for a corporation to become more sustainable.

Though the Investment Office is deservedly focused on the size of the endowment, there is no need for an absolute trade-off to exist between financial success and environmentalism; a belief in this trade-off ultimately harms both sides. There is a strong case to be made that corporations now aligning themselves with the goals of the environmental movement — efficiency, resource conservation, clean technology and avoidance of fossil fuels — are best positioned to outperform down the line, as resources become depleted and the shift toward renewable energy (whether driven by the market, activism or policy) gains traction.

In December, the Advisory Committee on Corporate Responsibility in Investment Policies, which makes recommendations to the University on “ethical and moral responsibility in investment policies,” released a proposal to President Christina Paxson P’19 suggesting two things: the establishment of a Climate Investment Task Force and the further promotion of the Brown University Sustainable Investment Fund. BUSIF in particular strikes me as an exceedingly underutilized resource; with no minimum giving requirement, a donation to BUSIF is invested in the Parnassus Endeavor Fund, a portfolio whose companies must “offer outstanding workplaces and must not be engaged in the extraction, exploration, production, manufacturing or refining of fossil fuels” — in other words, they are divested from fossil fuels, according to Parnassus’ website.

I know of recent alums who have decided not to donate money to the endowment until the University divests from fossil fuels, and I respect that commitment. But it’s a missed opportunity for both the sustainability-minded alums and for Brown. Making a donation to BUSIF sends a stronger message than withholding a donation to the endowment, and it actively increases the share of the endowment that has essentially been divested. While a primary reason given for the rejection of divestment in 2013 was the fact that Brown owns very few stocks directly and has most of its holdings in funds, we can be more selective about the funds we choose. And for what it’s worth, Parnassus Endeavor performed within the top percentile of funds in the large growth category over the past one, three, five and 10 years, according to Morningstar, Inc. BUSIF is not just a fund for idealists, it is a remarkably strong investment.

I’m not calling for environmentalists, whom I count myself among, to give up their work. But when domestic climate policy is at a standstill (if not in full-fledged retreat), innovative ways to drive change are more needed than ever. We need to look for ways to drive the private sector toward sustainability, especially when the public sector is actively ignoring it. Rather than viewing divestment as the only solution, we can broaden our understanding of the different ways to invest in environmental sustainability and bring closer the dream of a carbon-neutral economy.

Clare Steinman ’19 is a student in ENVS 1545: “The Theory and Practice of Sustainable Investing.” She can be reached at clare_steinman@brown.edu. Please send responses to this opinion to letters@browndailyherald.com and other op-eds to opinions@browndailyherald.com.