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Divest or net-zero pathway?

Universities world-wide, faith-based or secular, often come under pressure from their students and faculty for the investment practices of their funds (endowments, etc.) -- we hear similar movements within faiths too. A major focus for several years has been on fossil fuel holdings – simply Google the many news articles like this one. Protesters held that Harvard was “lending its prestige and power” to the “fossil fuel industry”, despite a University pledge to be net-zero by 2050.

Which gets to a common question in our faith-asset owner discussions, do you restrict / divest or engage? MIT recently documented the reasoning behind their decision to not divest, but rather “we have created long-term targets for a net-zero carbon portfolio and are exploring various was of reaching that goal.”

Why?

“We prefer the net-zero approach instead for several reasons.

First, it encompasses the whole energy system rather than simply targeting the producers of fossil fuels.

Second, we believe divestment could lead to fossil fuel holdings moving into the hands of investors who do not care about climate issues and thereby preclude the opportunity for constructive engagement with companies about their climate policies.

Third, the net-zero approach acknowledges the need for an energy transition in which fossil fuel use is phased out as rapidly as possible, rather than assuming we can shut off fossil fuel investment today without any unintended impact on life’s necessities such as heat, electricity, and the production of agricultural fertilizer products."

More in the attached, though a notable lack of detail on how they will implement net-zero in the portfolio (beyond carbon credits from real-estate investments), including their “constructive engagement” intentions.

MITIMCo-15-Year-Letter (1)
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