John Harvard's Journal
Addressing Climate Change
Even as the University operated remotely during the second half of spring term, it announced new measures to address the other great global challenge, climate change. In an April 21 announcement tied to the fiftieth anniversary of Earth Day, Harvard unveiled an initiative to make the endowment’s assets “net-zero”—meaning the holdings would contribute no overall release of greenhouse gases—by 2050. The plan depends on significant advances in research and portfolio management (and, of course, in the operations of the companies and technologies in which the endowment might invest).
The announcement was framed as a broader response to the Faculty of Arts and Sciences’ (FAS) February vote calling for divestment from investments in enterprises that produce fossil fuels (for background, see harvardmag/fas-divestdebate-feb-20)—and drew on some of the ideas broached in faculty discussions leading up to that motion. The initiative also comes as petition candidates campaign for election to the Board of Overseers on a platform of divestment and other changes in investment policy. (Voting, as reported in “Divestment Digest,” May-June, page 25, has been delayed until this July, to accommodate effective distribution of ballots that may be delayed in the mail or delivered to offices vacated during social-distancing; see here for information on the aspirants.) Updated June 16, 4:15 p.m.: Voting is now scheduled for July 1 through August 18.
• Toward a “net-zero” endowment. The Corporation has directed Harvard Management Company (HMC) “to achieve net-zero greenhouse gas (GHG) emissions by 2050”—a goal that Harvard believes is consistent with the Paris Agreement on addressing climate change. This charge and the underlying mechanics are described in an HMC “portfolio commitment” (available at hmc.harvard.edu/content/uploads/2020/04/Net-Zero-Commitment.pdf) as part of “HMC’s holistic approach to managing sustainability considerations, consistent with its fiduciary duty to manage risks and achieve target investment returns.” The commitment envisions HMC collaborating with asset managers “to emphasize GHG emissions reduction outcomes in the real economy” and “with peer institutions who have made or are interested in making a similar commitment.” Success is conditioned on governments living up to their Paris commitments; and “perhaps most important, a net-zero portfolio, no less a net-zero economy, will ultimately require important scientific advances and structural change in both the economy and consumer behavior.”
Fulfilling the commitment will take work. The document notes that as a limited partner in funds managed by external investment professionals, HMC “by definition and design, has little role in the day-to-day operations of the fund and its investments.” But as a large institutional investor and “valued thought partner to our external managers, Harvard does have the opportunity to influence” their approach to climate risk.
Doing so, in turn, will require collaborating closely with external fund managers “to achieve the necessary portfolio transparency,” as well as collecting data and creating methods to generate “the most accurate picture of the endowment’s carbon footprint.” Determining a methodology to assess portfolio emissions; applying it across the universe of investment managers; engaging them and the underlying companies in which they invest to mitigate climate-change risks; and, ultimately, reducing GHG emissions “will take extensive study, thoughtful deliberation…and, most importantly, time.” HMC is to report on its initial progress by late 2020; the document notes the Paris Agreement requirement to set emission targets for 2025, 2030, and 2040, with reports at five-year intervals.
Harvard’s plan is billed as the first of its kind among endowments. Announcing the “multiyear” undertaking, in collaboration with faculty members and outside experts, President Lawrence S. Bacow said: “With this commitment, our focus is on reducing the demand for fossil fuels, an action that is consistent with the University’s overall commitment to reduce our operational carbon footprint [on campus].…If we are successful, we will reduce the carbon footprint of our entire investment portfolio….”
Beyond its substantive aims, the new policy is the University response to that FAS advisory vote of February 4. Bacow had promised to report back to the faculty once the Corporation had reviewed its vote. Given the pandemic-driven cancellation of the April FAS meeting, he wrote a separate letter explaining the April 21 HMC announcement. Noting “our shared goal” of confronting the threat of climate change via “research, education, and institutional efforts to reduce our own use of fossil fuels,” he turned to “the role that investment policy might play”—and thus, the net-zero target as the pathway toward “decarboniz[ing] the overall endowment portfolio.” He contrasted that with a narrower approach of “simply targeting the suppliers and producers of fossil fuels,” while acknowledging that this decision may fail to satisfy proponents of divestment. (Read more at harvardmag.com/hmc-ghg-neutralpledge-20.)
• Divestment advocates’ response. In one sense, faculty members, alumni, and students who have campaigned for divestment could declare victory. The Corporation has in effect agreed to the principle that at least one overarching nonfinancial objective (reducing GHG emissions) ought to shape endowment investment policy and its implementation—an overlay beyond earning targeted returns within acceptable levels of risk.
But the devil is in the details. In a response to Bacow, core members of the faculty divestment group declared that, “while the path is the right one, the pace is too slow. The goal of a carbon-neutral portfolio by 2050 is simply not ambitious enough”—and included some specific, interim goals for each decade in a separate document. They also continued to criticize the stance on divestment: “It is incongruous, if not counterproductive, to pursue a decarbonized portfolio while continuing to invest in the very companies that supply the carbon and…do far more to perpetuate that supply—and the demand for it—than…to reduce it.” That said, they were “greatly encouraged” by this rethinking of investment policy: “It augurs well for constructive action across the University to address the climate crisis.”
Student activists wrote that “Harvard has finally acknowledged that its investment strategy must play a role in mitigating the climate crisis,” but called the net-zero commitment “insufficient” for permitting continued investments in fossil-fuel enterprises; allowing the University “a wide margin to calculate portfolio emissions however it chooses”; and setting a “far too protracted” timeline. “As the world burns,” they concluded, “Harvard continues to defend the arsonists.” A subsequent letter, signed by student and alumni divestment advocates, the Harvard Forward candidates for Overseer, and others, and endorsed by the faculty divestment group, called the University plan “radically insufficient.”
• The Overseers’ election. Alumni can weigh in on these issues directly as they vote for Overseers this summer. The pandemic has, for now, shut down Harvard Forward’s global gatherings to gather votes for its petition nominees (who advocate divestment and an array of Harvard governance reforms—read details at harvardmag.com/overseer-slates-20). In the meantime, it is posting statements of support on its website, headlined by former U.S. vice president Al Gore ’69, LL.D. ’94, and author Bill McKibben ’82, co-founder of 350.org, which has spurred much of the campus divestment movement (and other climate-change activism) nationwide.
Not coincidentally, Harvard Forward’s organizers chose Earth Day to unveil a clone, Yale Forward, backing the candidacy of Maggie Thomas, a 2015 graduate of the Yale School of Forestry & Environmental Studies, for election to that university’s corporation. (She was a climate adviser to Governor Jay Inslee and Senator Elizabeth Warren during their campaigns for the Democratic presidential nomination.) Significantly, the Yale Corporation, unlike its Harvard counterpart, has some trustees elected by alumni—and is the fiduciary, decisionmaking governing board in New Haven. In that regard, of course, it plays the same role as Harvard Corporation, not the advisory and oversight responsibilities that are the province of the Board of Overseers.
Thomas and Yale Forward must gather 4,394 nominating signatures by October 1 to qualify her for the spring 2021 vote. If they succeed, both instutions’ alumni will have some say on how they wish their alma maters to address global warming.