Tuesday, October 4, 2022

“The money’s saying that they don’t care”: MSU divestment at a standstill

September 13, 2022
Scenery near the T B Simon Power Plant on Sept. 8, 2022.
Scenery near the T B Simon Power Plant on Sept. 8, 2022. —
Photo by Zari Dixson | The State News

“A better tomorrow is up to us," MSU says.

The About Sustainability section of the university’s website says “sustainability is rooted in MSU’s foundations of education, research and outreach, reaching first across Michigan and then extending globally.”

But given MSU’s nearly $90 million dollar oil and gas investments portfolio, organizers with Sunrise MSU see hollow words.

“As long as the institution invests money, the money talks and the money's saying that they don't care,” Sunrise organizer and comparative cultures and politics sophomore Jesse Estrada-White said.

The MSU chapter of Sunrise is a youth-led movement that tasks itself with “stopping climate change and creating millions of good-paying jobs in the process.” Sunrise has been engaged in a year-long campaign to push MSU to fully divest from fossil fuels.

The group made some progress when, in 2018, MSU exited all of its public non-renewable energy investments and made a commitment to not invest in new public or private funds.

But as of Dec. 31, 2021 – the last time MSU disclosed their investments – the university still held $88,605,622 in private fossil fuel investments; these holdings make up about 2% of MSU’s $4.4 billion dollar endowment.

The largest among these investments are $32 million in Lime Rock Partners and $31 million in EnCap Investments, two Texas based firms which specialize in investing in upstream and midstream oil and gas production.

A full list of firms and individual funds can be viewed here.

The issue for Sunrise is that if MSU did choose to exit those investments today, the university would likely be in breach of contract with the firms in question.

MSU Deputy Spokesperson Dan Olsen would not speculate on what the university would have to pay for the breach and said no one at MSU would “disclose our legal strategy" on the topic.

The eventual expiration of these funds is not controlled by MSU. Instead, they’re controlled by asset managers. Though, Olsen said MSU expects “the total value of these to almost entirely disappear by 2031.”

Estrada-White said that Sunrise has been so vocal about the issue because even if MSU is fully divested by 2031, it would be too late.

“The point we've made consistently over the past year is that we believe that MSU is not lying when they say the investments will run out in 2031," Estrada-White said. "We believe them when they say that, our point has been divest now. We cannot wait until 2031. So it's divest now, divest fully and reinvest."

Sunrise Organizer Noah Doederlein, a comparative cultures and politics Senior in MSU’s James Madison College, said that Sunrise is currently in a “standstill” with the Board of Trustees over divestment.

“The chair of the investments subcommittee (Trustee Melanie Foster) is not receptive whatsoever to our messaging about divestment,” Doederlein said.

“The goal?”

Doederlein and Estrada-White agreed that MSU should be investing for the long-term health of the endowment and the proliferation of the university’s values.

MSU Board Trustee Pat O’Keefe, businessman and member of the board’s investment advisory committee, sees a simpler goal for MSU’s investments.

“The goal?" O'Keefe said. "To preserve our capital and make as much money as we can. That’s basic to us."

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O’Keefe described the committee and its advisors as an “all-star team,” led by Chief Investment Officer Phillip Zecher, a MSU graduate and co-founder of Investor Analytics. Zecher declined to comment, instead allowing Olsen to speak on his behalf.

Zecher and the committee are advised by a 21 member board of directors, chaired by Randolph “Randy” Cowen, a longtime Goldman Sachs executive and graduate of the Eli Broad School of Business.

O’Keefe emphasized that the success of the investments has a direct benefit to students.

“If I'm trying to provide you scholarships, the students at Sunrise scholarships, am I going to pick an idealistic?" O'Keefe said. "I'm gonna say bad policy, and short-change my ability to help you get an education? I'm not gonna do that, because I'm a fiduciary. I'm trying to help out the students that don't have the money to go to school.”

O’Keefe also said, despite the market’s diminished performance over the last year, the energy sector has been a consistently safe investment.

The Sunrise organizers said that the short term financial gains were unimportant, as they believe reliance on fossil fuels will hurt the long term viability of the endowment. 

They pointed to comments by UN Secretary General Antonio Guterres, who in June called investments in fossil fuels “delusional.” O’Keefe disagreed with their analysis, saying multiple times that investing in renewables and divesting in fossil fuels was foolish.

"There's been no energy source that has been displacing. It's always been additive," O'Keefe said.

O’Keefe pointed to current energy restrictions and predicted shortages in Europe as a precedent for American energy if renewables become the standard.

O’Keefe said given that trend it's crazy not to invest in fossil fuels.

"Unless you're prepared to turn off the heat in your dorm room and show that you're a true patriot for the cause."

Despite the market trends and his analysis of world energy supply, O’Keefe said that he doesn’t believe MSU will continue its fossil fuel investments past 2031, based on his time in the committee and discussions with Zecher.

“Go get a STEM degree and be part of the solution”

At an April, 2022, meeting of the board of trustees, O’Keefe told Sunrise organizers speaking about divestment that they should change their majors, and pursue stem degrees, so that they could study the science of energy and develop solutions.

O’Keefe said he stands by those comments today.

“Their advocacy is good, I don't fault their advocacy one bit," O'Keefe said. "But I think it's misdirected. My pitch to them was go get a STEM degree and be part of the solution. Because there's great opportunity in trying to figure this out. We need alternative energy sources … The solution is not divesting from fossil fuels. Fossil fuels are not going away."

Estrada-White wrote in an email that the purpose of these comments is to "shield the board and university from any moral responsibility in the fight against climate change."

Sunrise’s larger goal

Divestment is only one battle. Sunrise has a grander goal: Student representation on the investments subcommittee of the Board of Trustees.

Last year the Associated Students of MSU, or ASMSU, introduced bill 5744 to the Board of Trustees, which would add a voting student member to the investments subcommittee. The bill was passed by ASMSU but was not adopted by the board. ASMSU reintroduced a parsed version that would add a non-voting student to the subcommittee, which was passed but not adopted as well.

O’Keefe explained his opposition to the bill, saying that a student representative could never bring investment insight that would compete with the professionals on the committee.

“I say to myself, tell me who that Sunrise person is that’s going to be smarter than Phil Zecher," O'Keefe said. "Or is he just going to get in the way with a lot of idealistic ideas that make no sense?”

Doederlein wrote in an email that student representation "provides a voice for a key constituency."

Looking ahead

In the upcoming weeks, Sunrise will host introductory meetings and “visioning sessions” to involve the club’s new members in the planning of their organizing for the new academic year.

Doederlein and Estrada-White said that while they believe the members will keep divestment a priority, November’s midterm elections will likely become the centerpiece of Sunrise’s fall organizing.

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