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Should Northwestern Divest–Again?

Members of Northwestern’s DivestNU campaign hosted a panel discussion on Thursday night to discuss the costs and benefits of divesting Northwestern’s funds from coal to renewable energy sources. DivestNU has three main goals: first, to completely divest from coal; second, to increase investment in renewable energies; and finally, to completely divest Northwestern’s endowment from fossil fuels. The three panelists, moderated by Northwestern Economics professor Mark Witte [full disclosure: Witte is the faculty moderator for the NBR], discussed the feasibility of divestment as well as the future of renewable and fossil fuel industries.

The state of the coal and fossil fuel industry in 2014, according to panelist and Greenpeace coal campaigner Kelly Mitchell is, in a word, bleak. Mitchell described coal companies as having “an absolutely miserable time” over the last few years, dealing with EPA regulations on carbon restrictions and reports by banks like Goldman Sachs and Citibank outlining what Mitchell calls the “sunset years” of the coal industry. And though coal companies have huge political power, according to Mitchell two of the top coal companies in North America have lost about 70% of their value over the past few years.

The University itself, despite the complex logistics of a energy system that must service two research-focused campuses, has taken on opportunities to reduce its carbon emissions. Panelist Rob Whittier, Northwestern’s Director of Sustainability, outlined a few of them, including the geothermal heating and cooling methods to be installed at the new Visitor’s Center and Kellogg graduate school buildings. According to Whittier, Northwestern can afford to cut emissions by up to 25% and still be cost-positive; that is, the investment in cutting emissions would save more than it costs.

Northwestern’s $8.9 billion endowment generates money for the University to be used for its benefit through things like scholarships and academic buildings. Panelist Will McLean, Northwestern’s Chief Investment Officer, estimates Northwestern’s endowment to be about the 8th largest in the country. Currently, Northwestern holds about 10% of its endowment in energy companies, mostly through publicly traded companies, and as McLean emphasized, Northwestern does have a history of divestment, having disassociated itself with companies who have done work in Sudan and Iran; however, McLean cautioned listeners that some institutions, though not necessarily Northwestern, have steered away from divesting because many Universities view the endowment as an economic resource instead of a political tool: if they just divest in companies for moral reasons, other companies will simply make the money that the University will not. But what are the chances Northwestern will divest from coal?

Fossil fuel companies are impacted both by technological breakthroughs and by environmental regulations. According to Mitchell, oil and gas companies are having an “existential crisis” because of regulations, not only from the EPA but also from abroad (China has recently reduced its level of carbon emissions because of dangerous air quality), that will affect all parts of the industry, albeit unevenly. Whittier explained that the increased investment in wind technology has both made it less costly to erect a wind farm, but that they are now becoming competitive with coal and gas energy sources, even without traditional government tax credits.

McLean pointed out that a substantial portion of Northwestern’s endowment is dedicated to nascent industries, and that if they prove their profitability, then there would be no reason to not invest in them; however, McLean, unlike Mitchell, believes that if Northwestern in its current state does not invest in the companies that have proved profitable, then someone else will.

However, both Whittier and McLean emphasized their desire to see increased transparency in investors who want to see disclosure over companies’ involvement in fossil fuels. If companies start becoming more transparent and alternative energies become more profitable, then divestment is, by all accounts, a distinct though not assured possibility. The future of investment in fossil fuels is unstable, but the key to the future of alternative energy is profitability.

Photo Credit: Jaysin Trevino, via Flickr

About Jack Hopper

Jack Hopper covers finance and politics for NBR. Originally from Pennsylvania, he's a die-hard Steelers fan... Even if this year it's not going so well for them.

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