University System of Maryland to direct its endowment away from fossil fuels

The University System of Maryland will no longer invest in certain fossil fuel sources.

The foundation that oversees the state university system's $1 billion endowment said Tuesday that it will stop investing directly in coal, oil and natural gas companies — a victory for a student-led movement to direct more of the portfolio toward clean energy.

The University System of Maryland Foundation, which helps fund scholarships, endowed professorships and more, said it would sign on to a United Nations pledge to be more socially aware in its investments, and appoint a staff person to identify opportunities in renewable energy.

"It's because of the students and the positions they took that caused us to focus on it this year," said Leonard Raley, president and CEO of the foundation. "But the world is changing and we're paying attention to it. We're concerned about climate change and I think the actions that our foundation took reflect that."

More than 500 colleges across the country and around the world have divested from coal, oil and other fossil fuel sources since 2012, according to the advocacy group 350.org. They include Stanford University, the University of California system, the University of Massachusetts system and Georgetown University.

"More than ever climate change is affecting the lives and livelihoods of people around the world," said Lindsay Meiman, a spokeswoman for 350.org. "With the impact of climate change hitting harder every day, we need everyone to do everything in their power to do everything they can to address this crisis."

It might take some time to divest from all coal, oil and natural gas companies, Raley said, because some investments come with a penalty for pulling out early. The change applies only to direct investments, not investments in indexes such as the S&P 500 that may include oil and coal stocks.

About 7 percent, or $70 million, of the university system's endowment is invested in the energy sector, which includes some fossil fuel and some clean energy sources, said Pamela Purcell, the foundation's vice president for finance. The foundation relies on fund managers to manage investments, and officials could not say exactly how much was invested in fossil fuel sources.

The foundation's stated mission "is to advocate and support the advancement of public higher education in Maryland through visionary leadership in philanthropy, asset management, and stewardship."

Officials said they will instruct fund managers to stop investing in the 200 coal, oil and gas-related companies on a list complied by Fossil Free Indexes, which ranks the companies by the potential carbon emissions content of their reported reserves.

Maya Spaur, a member of the Student Government Association at the University of Maryland, College Park, said students who organized for the shift were pleased with the announcement, but wanted to see the foundation focus on direct investments in clean energy companies and shift away from investments in indexes that may include fossil fuel stocks.

"I thought it was definitely progress," said Spaur, 20, of Mount Airy. But "we need to keep pushing further if we really want to be a green model for the nation."

Students at College Park began the push to divest from fossil fuels in 2013, circulating a petition with nearly 600 signatures from students at Towson University, the University of Maryland, Baltimore County and other colleges.

In response, Purcell said, officials instructed fund managers to choose clean energy investments instead of those related to fossil fuels. Their move Tuesday takes that a step further by ending investment in certain companies.

"I think managers got this same message from many universities and foundations across the country," Purcell said. "They're paying attention to it."

Betsy Monseu, the CEO of the American Coal Council, a trade group, called the switch a "shortsighted strategy" that will reduce returns on investment. If universities are concerned about the climate, she said, they should invest in creating technology to control emissions.

"Coal demand continues to increase globally, and coal will continue to be used throughout the world and the United States," Monseu said. "So how to address this from a practical standpoint, that would be a more productive approach."

Raley said the intent was to have the new investment strategy offer the same financial return.

"The board members have a legal fiduciary duty to managing the fund and getting the best returns possible, or they can be sued," he said.

cwells@baltsun.com

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