Frequently Asked Questions

What are we asking the Board of Regents to do?

We are asking the Board of Regents to certify that the University’s long-established standard for forming an ad hoc committee to determine the propriety of a set of investments owned by the University has been met in regard to oil and coal. That standard has been met because:

(1) There is a consensus on campus about climate change (as evidenced through statistical data, the academic and research pursuits of students and faculty, the University’s operations, and the University’s greenhouse gas reduction commitments).

(2) The actions of the industries and the nature of their products are antithetical to our core value of sustainability and our core academic values (this includes their campaign to undermine the science of climate change, a campaign to prevent progress in addressing climate change, and that the intended use of their products destroys the planet).

(3) The industries are uniquely responsible for climate change (because (a) their products are the most greenhouse gas intensive forms of energy in the world and (b) for decades that have prevented global progress on addressing climate change).

Is this a slippery slope?

            No. Climate change is a unique issue. The University purposely has set a high bar to forming a committee to avoid a “slippery slope,” where committees are being formed for all sorts of causes. But when that bar has been met, as it has been here, it’s important to form the committee to ensure that the University isn’t investing in industries which contradict its fundamental principles.

Why we are asking the Regents to form this committee (ie, What is the purpose of this?)

            The purpose is to form a committee to determine whether the University should continue to invest in the coal and oil industries, or whether continued investment in those industries would be inconsistent with the University’s core mission and values.

Ending the association between the University and the oil and coal industries is an important question for a committee to consider for two primary reasons. First, as the top public university in the country, the University of Michigan’s actions and associations have effects on society at large. Our current association creates social impact, and our disassociation would create social impact too. Specifically, our disassociation would create social momentum to address climate change. Simply put: when Michigan acts, people listen. Given what we know about climate change, how can we not act?

Second, exploring whether we should end the association between Michigan and these industries is important because that association does not comport with our University’s core values. There is a measure of hypocrisy when the University continues to associate with (and profit from) these industries, while at the same time claiming to “lead the global quest for a sustainable future” (according to its vision statement).

Are we trying to destroy the industries?

            No. To paraphrase Stanford President John Hennessey’s statement after Stanford divested from coal, we are not on a campaign to put coal out of business, we’re just on a campaign to prevent ourselves from being complicit in the continued use of it. This is about disassociation, not destruction. It’s about not being complicit in these industries’ campaign to perpetuate global dependence on their products.

If the Assembly votes for this, does it also have to vote for SAFE’s resolution / other future resolutions?

            No. Any current or future resolution to form an ad hoc investment committee should be judged against the University’s established standard for forming such a committee. The first prong of that standard requires a campus consensus on the underlying issue. The issue of climate change is unique in that it has that consensus and also easily meets the other two prongs of the standard. No other current issue meets the standard. No other current issue can claim the campus consensus that exists for climate change.

What are some examples of oil/coal companies that the University owns?

            The truth is that this is really the wrong question. The question to be examined by the committee is not just whether the University’s current investments ought to be sold, but whether investment in the oil and coal industries is inappropriate in general, such that we should sell our current investment and refrain from making future investments in the industries. So, the question is not “what do we currently own,” but “what could we own.”

            To explain this in another way: The University’s investments change daily. So, right now, we may have stock in Exxon/Mobil or we could not. We may have stock in the world’s largest coal company, or we may not. The point of the committee is to determine whether owning stock in Exxon, for example, should be an option.

But, to satisfy curiosity, we recently owned stock (and it’s implausible to say whether we own it at this moment or not) in Peabody Energy and Shenhua Group. Peabody is the largest privately owned coal company in the world, and Shenhua is the largest coal company in Mainland China. So, we do or recently did, own the worst of the worst.

Financial Implications / Size of the Investments

            First, the financial implication of any action is a factor that the committee should consider. Questions like this are exactly why we have traditionally formed committees in the first place.  That said, any decision arrived at by the committee should be executed in a financially responsible manner. This can be accomplished by selling investments over a longer period of time, committing to selling only certain categories of investments, etc. Again, ultimately, determining the most financially responsible avenue for a potential disassociation is a question for the committee to consider.

           Finally, the size of the investments in coal and oil fluctuate on a daily basis as investments are made and sold. But, in general, coal is a tiny, tiny fraction of the endowment. A fraction of a percent; a snapshot in 2011 showed about $35 million in coal stocks/bonds, which is next to nothing in our $10 billion endowments. Oil is a larger chunk, which also varies in size. Much of this is comprised of private equity investment which can only be divested from over long periods of time. The rest is in publicly traded stocks/bonds. There is no way to determine the exact size of oil investments, but it is probably between $750 million – $1 billion, the vast majority of which is in private equity investments (based on conversations with the CIO and the 2014 Report of Investments).

Points on the “consensus” prong

The “consensus” needs to be about the underlying issue, not that ending investment in the industry is the appropriate response to the issue. This conception of consensus was made clear by both the apartheid and tobacco committees.

Evidence of consensus: SCIP data (listed on page 7 of the Report); Campus Sustainability Integrated Assessment Goals (p.7); info. From Coleman speech (p.7-8);  Univ. operations (p.8); Student/faculty activities and academics (p.8-9); LSA & prev. SA resolutions (p.9).

Points on the “antithetical” prong

Sustainability core value:<span “font-size:12.0pt;line-height:115%;=”” font-family:”times=”” roman”,serif”=””> The nature of oil & coal is counter to this core value because the industries’ entire business model is based on extracting and combusting these products, leading to tremendous GHG emissions which cause climate change. In short, oil and coal are inherently the most unsustainable products in the world.

Academics as a core value: The actions of the oil and coal industries parallel the actions of the tobacco industry. Both waged decades-long misinformation campaigns to deny the scientifically proven link between their products and a social evil. This was one of the primary reasons why we divested from tobacco. See Report, pages 11-15 for evidence of oil/coal industry misinformation campaign.

Points on the “uniquely responsible” prong

            The coal and oil industries are uniquely responsible for climate change for two reasons. First, and most obviously, is that their products are the most GHG intensive and most widely used forms of energy in the world. Second, and relatedly, is that the industries have waged a campaign to promote perpetual global reliance on their products, despite the devastating effects of that outcome. This has prevented the social and legislative progress needed to address climate change.

What about companies that donate to Michigan and/or fund legitimate climate change research? 

First, we are not obligated to own stock in a company just because they donate to the University. That kind of arrangement would be quid pro quo corruption. Second, funding legitimate climate change research does not absolve the coal and oil industries of their wrongdoings and does not change the nature of their products. The tobacco industry funded a lot of research too (much of it illegitimate).

But, funding legitimate research may be indicative of a larger trend, one which certainly warrants consideration. If a coal or oil company is rapidly and deliberately trying to end their coal and/or oil operations and transition to renewable energy production, the committee can issue an instruction that the University may continue to invest in such companies. A similar instruction was issued with regard to companies doing business in apartheid South Africa that was committed to equality.   

What about the fact that the University relies on oil operationally?

            The University’s reliance on oil is irrelevant in the decision to form a committee. This is so for three primary reasons. First, there is an important difference between the University’s choice to invest in an industry and its necessary reliance on the industry’s product. The existence of a choice creates moral/social implications. Second, the University is actively trying to minimize its dependence on oil (precisely because there is an operational choice, and not choosing to do so would have moral/social implications). Third, that the University and society more broadly are so reliant on the product is exactly the point. If it weren’t for the industries’ actions, the University would not be so dependent on a product that causes climate change.

Also, check out this article in The Guardian: 10 myths about fossil fuel divestment put to the sword (March 9th, 2015) if we didn’t answer your question! Stay tuned to Divest and Invest Campaign for more details.