Princeton to ‘Dissociate’ Fossil Fuel Investments

Princeton University’s board of trustees has voted to dissociate from 90 companies as part of an administrative process established last year that focuses on companies involved in the thermal coal and tar sands segments of the fossil fuel industry, or that are engaged in climate disinformation campaigns.

Thermal coal, which is burned for steam and used to produce electricity, was made a priority because it emits significantly more carbon dioxide than alternative available fossil fuels, the university said. It also said that tar sands oil, which is derived from loose sands or sandstone, also produces much higher emissions than conventional crude oil, including in its extraction and production process. However, Princeton said thermal coal and tar sands businesses can be exempt from dissociation if they can prove they can meet a rigorous standard for greenhouse gas emissions.

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And in a move to help the university reach its goal of eventually having an endowment portfolio that is net zero of greenhouse gases, the Princeton University Investment Company, which manages the university’s $38 billion endowment, will also eliminate all holdings in publicly traded fossil fuel companies. PRINCO said it will also ensure that the endowment does not benefit from any future exposure to fossil fuel companies.

The university said that the 90 companies targeted are all active in the thermal coal or tar sands segments of the fossil fuel industry, adding that they are among the sector’s largest contributors to carbon emissions. The list includes giants such as Exxon Mobil, Dominion Energy, Glencore, and TotalEnergies. The quantitative criteria used to determine the dissociation list was based on recommendations made by a panel of faculty experts in a report released in May.

The university said the board’s vote is a result of a two-year process that included input from stakeholders among the Princeton University community. It also said it will set up a new fund to support energy research at the university, partly to offset research funding that is no longer available because of the dissociation.

“The creation of this new fund is one of several ways that the university is helping to provide Princeton researchers with the resources they need to pursue this work,” Princeton University President Christopher Eisgruber said in a statement.

Cambridge University to Divest from Fossil Fuels by 2030

Boston University Joins Harvard in Divesting From Fossil Fuels

Tags: dissociate, Endowments, Fossil Fuels, Princeton University, Princeton University Investment Company, PRINCO

The Teachers’ Retirement System of the State of Illinois has avoided a significant portfolio downswing despite the equity slowdown that has burdened asset managers with thus far in 2022. Through the second quarter, the fund has returned-1.17% net of fees, a favorable rate of return compared to other public pension systems across the country in fiscal year 2022.

At the end of FY 2022, the 40-year rate of return was 9.3%. This 40-year annualized return eclipses the system’s estimated long-term investment rate of 7%.

The net investment loss will not impact the plans’ ability to pay out benefits to its more than 434,000 members. In 2022, TRS will pay more than $7 billion in benefits to more than 128,000 members and their families.

The fund ended FY 2022 with $62.7 billion in assets, representing a 19.9% increase in the past two years, and a 38.4% increase since 2016. The system is 42.5% funded.

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The funding status of the pension guides its investment philosophy. To produce the outperformance, the plan implemented conservative investment strategies. TRS Executive Director and Chief Investment Officer Stan Rupnik shared regarding investment strategy that, “the most prudent strategy is a diversified portfolio that seeks to participate in the upside of the market but also is positioned to better protect assets in times of high market volatility.”

Instead of focusing its investments within a single asset class that presents downside risks, such as public stocks, TRS commits assets to a variety of investment types. At the end of FY 2022, TRS had 32.6% of the portfolio invested in domestic and international stocks, 24.3% in bonds and short-term assets, 19.7% in real estate and other tangible assets, 16.2% in private equity, and 7.2% in hedge funds and other diversifying strategies.

Rupnik stated that “the system’s primary objective is to protect member assets against large market drawdowns caused by economic volatility, such as we have seen this year.” The median investment return rate for public pension plans comparable to TRS for the 12 months ended on June 30 was -7.56%, according to the pension’s general investment consultant RVK, Inc, while data from the Wilshire Trust Comparison Service indicated that FY 2022 median rate of return for large public pension plans was -7.25%.