The University of California Office of the Chief Investment Officer of the Regents announced today (May 19) that its investment portfolios are fossil free after the sale of more than $1 billion in assets from its pension, endowment and working capital pools. At the same time, the office has surpassed its five-year goal of investing $1 billion in promising clean energy projects.
Both moves are in accord with UC Investments’ comprehensive ESG (environmental, social and governance) policy, which requires weighing environmental, social and governance issues as an essential risk factor in making all investment decisions and broadly aligns with UC’s systemwide sustainability efforts.
“Today’s announcements on our investment strategy underscore our hopeful view of the future,” said Richard Sherman, chair of the UC Board of Regents’ Investments Committee. “As long-term investors, we believe the university and its stakeholders are much better served by investing in promising opportunities in the alternative energy field rather than gambling on oil and gas.”
Said UC Board of Regents Chair John A. Pérez, “UC’s leadership in sustainable investing will serve our stakeholders well. While no one can know for certain how financial markets will perform, by examining the data and gauging potential risk, we have charted a long-term, sustainable course.”
UC’s Chief Investment Officer Jagdeep Singh Bachher noted that UC Investments’ journey with ESG began five years ago and that the office sold all its coal and oil sands assets a year later. “Today we remain convinced that continuing to invest in fossil fuels poses an unacceptable financial risk to UC’s portfolios and therefore to the students, faculty, staff and retirees of the University of California,” he said.
“While we certainly could not have predicted the speed nor depth of the recent downturn in the traditional energy sector, signs point to a structural shift — not merely another cycle of boom or bust. Given geopolitical tensions and likely, a bumpy and slow global financial recovery in a post-pandemic world, lowered demand and oversupply could portend an even longer price drought in oil and gas.”
Said UC President Janet Napolitano, “The University of California uses more green power than any other university in the nation, and we are also the leader in the amount of renewable electricity we generate on our campuses. Sustainable climate solutions and sustainable investing are more important than ever, especially given the challenges we face in a world altered by COVID-19.”
Since September 2019, UC Investments has sold $900 million of fossil fuel assets in the pension and in the working capital pool. Last year’s fossil fuel sales from the endowment, announced at the September regents meeting, totaled some $150 million.
As of April 30, 2020, UC Investments had a total of $126 billion in assets under management, including $68 billion in the pension, $13.4 billion in the endowment, and $15.9 billion in working capital.
From a practical standpoint, UC Investments’ implementation of the decision to avoid fossil fuel investments was made easier by MSCI’s creation, at UC’s request, of a publicly available index that excludes tobacco and fossil fuels.
The company credited UC’s early adoption of an ESG policy as the impetus behind its own publication earlier this year of “The MSCI Principles of Sustainable Investing,” a framework designed to illustrate specific, actionable steps that investors can and should undertake to improve practices for ESG integration across the investment value chain.
To date, UC’s new energy investments have developed and accelerated 9.2 gigawatts (GWs) of wind and solar capacity across all the platforms in which it has invested. Directly attributable to UC Investments’ share of the platforms is 1.47 GWs of wind and solar energy capacity in the United States, Canada, the United Kingdom, Japan and India.
According to the U.S. Department of Energy, 1 gigawatt of power is comparable to the energy produced by 3.125 million photovoltaic panels or 412 utility-scale wind turbines.
UC Investments’ commitment to clean energy now stands at $1.036 billion, with the lion’s share — $750 million — allocated to two best-in-class, utility-scale wind and solar developers, and an aggregator strategy to own and operate commercial and industrial solar opportunities.
The UC Investments team continues to invest actively in the areas of renewable energy, waste conversion, sustainable agriculture and supply chains, and the technology related to these sectors.