Frank Russell Foundation, 16 Others to Drop Fossil Fuel Holdings

(February 3, 2014) – Ben & Jerry’s Foundation, the Russell Family Foundation, and Google founder Eric Schmidt’s foundation have joined 14 other charities in divesting from fossil fuel investments.

The group, which represents $1.8 billion in assets, has argued that as long-term investors they have a fiduciary responsibility to battle climate change by supporting only clean energy companies.

Furthermore, they said divesting protects portfolios from the “carbon bubble”—a theory that oil, gas, and coal-related securities are overvalued because reserves cannot be fully exploited while maintaining a livable climate.

“Foundations can divest and achieve superior returns for their endowment,” the organizations stated, encouraging their peers to join the “Divest-Invest Philanthropy” initiative.

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“All portfolios can be readily structured around themes of climate-related strategic asset allocation, carbon risk mitigation, sustainability solutions, and positive environmental impact,” they said.

The John Merck Fund, Park Foundation, Educational Foundation of America, Compton Foundation, and Wallace Global Fund have all signed on to the initiative. Some members, such as the Sierra Club Foundation, have explicitly environmentalist mandates. Others do not, including the Quaker-led Joseph Rowntree Charitable Trust, which “seeks to transform the world by supporting people who address the root causes of conflict and injustice” via grants from its $300 million fund.

The announcement of the initiative came days after a $67 billion Norwegian pension provider said it had sold its holdings of 10 coal-fueled power producers in a bid to reduce its carbon footprint. Other Scandinavian asset owners have recently funded renewable energy projects via the Danish Climate Investment Fund.

Student groups at many leading universities have petitioned their endowments to divest of fossil fuels with middling success. Nine small colleges and universities have thus far agreed to do so, including Hampshire College in Massachusetts and San Francisco State University.

Harvard University denied a strong campaign for divestment in 2013, stating that “funds in the endowment have been given to us by generous benefactors over many years to advance academic aims, not to serve other purposes, however worthy.”

The 18 foundations that have signed on to the “Divest-Invest Philanthropy” initiative compare it to the widespread selloff of South African securities in the 1970s and 1980s. However, a 1999 study of the campaign’s impact found that “the South African boycott had little effect on the financial sector… despite the prominence and publicity of the boycott and the multitude of divesting companies.”

(January 31, 2014) – Scott Stringer, New York City’s new comptroller and overseer of its pension system, has announced a bevy of ethics rules for plan trustees and investment staff.

His six-point plan started with a proposal to ban all use of placement agents in the city’s five retirement systems. At present, agents are only prohibited in private equity transactions. Stringer promised to offer a resolution to trustees covering all asset classes, which he said would act as a “steel barrier against pay-to-play abuses.”

“The city’s pension funds and our Bureau of Asset Management have an open-door policy,” Stringer said in a speech on January 30. “We are willing to meet with any qualified firm interested in serving as an investment manager. Nobody needs a middleman to get them in our door.”

Furthermore, the comptroller also vowed to appoint senior risk and compliance officers who would report directly to him.

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Employees with control over investment decisions will also be subject to new ethics policies, according to the speech. In addition to the current practice of annually reporting their personal holdings to a city regulator, he said staff would be required to regularly report trading to the senior compliance manager.

Stringer also plans to ramp up training on ethics, compliance, and conflicts of interest issues, with a focus on foreign asset control regulations, anti-money laundering protocols, and the Foreign Corrupt Practices Act.

Finally, in the wake of the disability benefits fraud scandal that recently led to the arrest of 72 city police officers, Stringer vowed to “develop an enhanced internal process for reviewing disability payments.”