Canadian Universities Refuse to Divest From Tar Sands

As major Canadian universities continue to invest in sustainable techonologies such as green buildings and renewable energy research, there's another kind of investment most are keeping quiet on: oil and gas companies. Universities across the country are entrusting millions of dollars of their endowments to the fossil fuel industry.

Last month the University of British Columbia announced it was adopting a responsible investment strategy using a relatively new system called environmental, social and governance investing. ESG approaches social responsibility by taking into account the environmental, social and governance principles of various companies across sectors, rather than excluding certain industries.

Despite the move forward, the university—and every other endowed university in Canada—is still refusing to withdraw money from companies involved in the oil and gas industry. Luckily the voices of those demanding greater change are growing louder.

Gordon Katic, a founding member of environmental justice group UBCC350, is disappointed by the university’s outright refusal to divest from oil and gas companies.

UBCC350 has requested an immediate halt to investment in the oil and gas industry, and full divestment in five years. Katic said the group recognizes that the process requires time, but he also sees this as an opportunity to break new ground.

“A part of this movement is really about pushing for that kind of financial innovation.”

When UBCC350 met with the office of the vice-president of finance, resources and operations, the group was told the university can be more effective if it leverages its power as a large investor to push companies to shift their policies, but when asked whether UBC has written to any companies in particular to demand change, they said no.

The office’s website states that the university doesn’t invest directly in specific companies, instead investing in pooled funds managed by external managers.

“At various times, the funds in which UBC’s Endowment is invested include a number of companies in the oil and gas sector,” the announcement reads.

Jai Parihar, president of the UBC Investment Management Trust (IMANT), wouldn’t elaborate further on what goes into developing the university’s investing strategy, including whether student concerns are taken into account.

“UBC wants to be a responsible investor. That's why they put out the policy. If there’s any further development, we’ll put that on our website.”

Katic said he doesn’t understand why a university otherwise so concerned with environmental sustainability—UBC is home to some of the greenest infrastructure in Canada as well as some of the most comprehensive academic programs, including more than 400 course offerings that pertain to environmental issues—is willing to support tar sands development.

“All of this should be lauded to a certain extent but we want to go further,” he said. “There’s no evidence that UBC is using its position to influence these companies.”

Canada's largest universities are no small stakeholders. UBC and McGill both topped $1 billion last year, and the University of Toronto holds the country's largest endowment at more than $1.5 billion.

Is Divestment Merely Symbolic?

One of the primary criticisms of movement to divest, Katic said, is that it would be no more than a symbol because the moment a large university withdrew its money, other investors would rush in to fill the gap. Katic disagrees.

“It’s not symbolic to say we’re not going to profit from the destruction of our planet and have our teachers be a part of that and our students be a part of that. It’s not symbolic to say the oil sands is not the direction to take our country and to take our planet.”

The good news is that the ESG method of responsible investing is growing rapidly, putting more pressure on companies to develop strong policies and on financial firms to invest in them. The long-term outlook of ESG investing is well suited to university endowments, some of the most long-term portfolios around.

In a paper released earlier this month by American institutional investment firm Commonfund outlines the shift from socially responsible investing (SRI) to (ESG) investing. According to the paper, ESG investing aims to take a broader view than socially responsible investing or corporate social responsibility, evaluating funds and companies based on the strength of their environmental and social policies, thereby making success in those domains crucial to the success of the portfolio as a whole.

Portfolio evaluations based on ESG overweight companies with higher ESG rating and underweight those with lower ratings, but no particular companies or industries are excluded on principle.

Universities are notorious for citing fiduciary responsibility as a reason for refusing to divest from questionable industries, such as tobacco and energy companies. This is also the primary criticism of the SRI model of ethical investing. Opponents of these methods say that it’s too restrictive, thereby preventing funds from producing adequate returns, the primary goal of an investment portfolio. But restrictive is exactly what divestment groups want: absolutely no money going to dirty energy companies.

UBCC350 is taking steps to include the broader community in its work, including high school students and teachers and residents of the Point Grey neighbourhood next to the university. In the lead up to the provincial election in May, a committee of students and community members had a door-knocking campaign to raise awareness about environmental issues and to encourage residents to vote with the climate in mind. Katic feels the campaign contributed to premier Christy Clark losing her seat in Point Grey.

“This is a movement and there are calls of divestment springing up all over Canada, so this is a problem and we are taking a stand on it.”

UBC and Beyond

UBC students are not the only ones who feel this way. Groups at universities across North America are pressuring their administrations to divest from the energy sector. So far only a handful of small American schools have agreed.

Curtis Murphy, a recent McGill alumni and member of Divest McGill, said his university doesn’t employ a particular responsible investment strategy.

“There’s no proactive ethical investment strategy in place, which is something we’d love to see for sure.” On May 23, campus environmental organization Divest McGill presented a brief to the university’s Board of Governors outlining the social injury caused by the exploitation of fossil fuels. The group was told that proof of social injury is the only reason the board would consider divestment. The groups gave a 15-minute presentation, including 1200 signatures of McGill students in support of divestment. The board said no.

While he wasn’t surprised by the rejection, Murphy said, he finds it shocking that an industry built on the theft and destruction of land and responsible for millions of climate refugees could be innocent of social injury.

“Their definition of social injury is inadequate,” he said. “It seems to define it as breaking national or international laws. Murphy cited divestment from tobacco companies and companies who were involved in Apartheid South Africa as examples of the Board of Governors’ faulty logic.

“Tobacco is and was very legal but it’s still very harmful,” he said. “Apartheid was the law. They were following their own laws but breaking some very important moral principles.”

The board rejected the proposal based on a recommendation by its review body, the Committee to Advise on Matters of Social Responsibility (CAMSR).

Michael Boychuck, a member of the Board of Governors told the McGill Daily that the university only survives by its investments and government funding.

“Whether you like it or not, Canada is a resource-based company. That’s a fact. It’s not going to change any time soon.”

There was, however, a small ray of hope to come out of discussions with the board and with CAMSR, Murphy said. The terms of reference used to define social injury is under review this summer, and Murphy said Divest McGill plans to make another push after that has happened. He'd love to see McGill lead the way in divesting from fossil fuels, but he believes it would only take one university taking a stand to create have a ripple effect on other institutions.

“We’re definitely waiting for the first one to break, and then I think well see others get on board.”

Photo credit: Photo courtesy of Divest McGill