Investments in the Fossil Fuel Industry

The following summary and recommendations, dated May 26, 2021, were submitted to the Board of Trustees by the Advisory Committee on Socially Responsible Investing for its consideration:

Tasked in December 2020 by the Boston University Board of Trustees with spearheading the efforts “to ensure inclusive, University‐wide conversations and processes to gather relevant constituent perspectives and information, in advance of the Board of Trustees’ fall 2021 review of the issues surrounding climate change and related investment and divestment opportunities,” the Advisory Committee on Socially Responsible Investing (“ACSRI”) planned its information‐gathering activities in January 2021 and then held various events over the next several months.

  • To educate itself and the broader Boston University community on the current scientific understanding of climate change and gain more perspectives on the associated issues’ breadth, the ACSRI hosted three virtual forums via Zoom during February and March:
Climate Change and the Prospects for the Rapid Decarbonization of Energy Supplies by Peter Fox‐Penner, Director, Institute for Sustainable Energy, and Professor of the Practice, Questrom School of Business and Cutler Cleveland, Associate Director, Institute for Sustainable Energy, and Professor, Earth & Environment, College of Arts & Sciences;
Climate Change: The Global Dimension by Adil Najam, Dean, Frederick S. Pardee School of Global Studies, and Professor, International Relations and Earth & Environment, College of Arts & Sciences; and
Urban Heat: Rising Temperatures and Population Vulnerability in Cities by Katharine Lusk, Co‐Director and Founding Executive Director, Initiative on Cities; Lucy Hutyra, Associate Director, BU URBAN Program, and Professor, Earth & Environment, College of Arts & Sciences; and Patricia Fabian, Associate Professor, Environmental Health, School of Public Health.

(Videos of these forums and related materials can be found here)

  • To offer the Boston University academic community opportunities for input into the ACSRI’s deliberations regarding a possible fossil‐fuel‐divestment recommendation, the ACSRI’s student and faculty members organized separate listening sessions for their respective constituencies during March and April. Both sets of representatives reported that attendees were strongly in favor of divestment from fossil fuel.

Over the course of the ACSRI’s meetings during the 2020‐21 academic year and via its various forums and listening sessions, the ASCRI members explored and discussed (a) the differences between what was known in 2016 and what is known today regarding climate change’s science and impacts; and (b) where the fossil fuel‐free economy was in 2016, is today and could potentially be in several decades.  Based on the data and discussion, ACSRI members concluded that the degree of  social harm caused by fossil‐fuel‐related emissions outweighed any potential negative consequences of the ACSRI’s recommended actions, “including the risk of censorship of competing views within the University or the risk that the wisdom of the decision will fail to withstand the test of time.” (See Principles here.)

For its divestment recommendations, the ACSRI chose to define “Fossil‐Fuel exposure” as investments in companies that extract oil, natural gas, coal and tar sands.

The ACSRI’s recommendations to the Board of Trustees are as follows:

I.  To continue the endowment’s recent downward trend for its Fossil‐Fuel exposure, the University should immediately:

A. Commit to no new, Direct, Fossil‐Fuel investments
B. Divest of current, Direct, Fossil‐Fuel exposure
C. Commit to no new dedicated Fossil Fuel products, in any asset class

II.  Divest fully of Fossil‐Fuel exposure, over time and in an orderly manner, while making best efforts to limit Fossil‐Fuel exposure during that divestment process, recognizing that:

A. It is in the best interest of the University to avoid likely losses associated with a “fire sale” of current finite‐lived Private exposure;
B. The current Private Fossil Fuel exposure could take more than a decade to run off;
C. The ability to remove indirect Fossil‐Fuel exposure from the University’s endowment should improve over time as more Fossil‐Fuel‐Free investment products become available;
D. Eliminating 100% may prove challenging, given the endowment’s scale and resulting dependence on commingled investment products and index‐based ETF’s; and
E. The Investment Office should have the discretion to determine how best to balance the University’s dual objectives of (a) steadily reducing and then ultimately divesting of all Fossil‐Fuel exposure and (b) supporting the critically important alternative energy transition. For example, it should not be prohibited from investing in an alternative energy‐transition‐focused product, which has Fossil‐Fuel exposure that is either di minimis or relatively small and declining. In order to ensure transparency, such decisions will be reported to and reviewed by the Board of Trustees’ Investment Committee.

III. Prioritize investing in Fossil‐Fuel‐free products.

IV. Annually, report progress and remaining Fossil‐Fuel exposure to the ACSRI, the Investment Committee and the Board of Trustees.

The table below compares these divestment and investment‐related recommendations to the current Coal and Tar Sands prohibitions, which were put in place by the Board of Trustees in 2017 in response to the ACSRI’s first fossil‐fuel‐divestment recommendation to the Board of Trustees in 2016 (both are described more fully here).

Divestment/Investment Directives: Comparison
Proposed Current
Hydrocarbon Oil, Natural Gas, Coal & Tar Sands Coal & Tar Sands
Company Types Extractors1 Extractors1
Endowment Exposure All Directly Held
Timing Directly Held: Immediately
Indirect & Private: Orderly
Manner & Over Time
Other Make Best Efforts to Limit Fossil Fuel2 Exposure  N/A
Prohibited New Investments
Endowment Exposure Directly Held and Dedicated Products in Any Asset Class Directly Held
Hydrocarbon Oil, Natural Gas, Coal & Tar Sands Coal & Tar Sands
Company Types Extractors1 Extractors1
Implementation Immediate Immediate
Other TBD “On a best-efforts basis … avoid investing in Coal + Tar Sands Extractors; perfect implementation cannot be assured, however, given the University’s inability to have total investment control due to the Endowment’s external use of (a) commingled vehicles for which the manager has complete investment authority and (b) passive index-linked investments”
Focus Fossil-Fuel-Free Products Investments in Renewable Energy Sources and/or Technologies to Reduce Green House Gas Emissions

1 Any company with >5% revenue from extraction
2 Oil, Natural Gas, Coal and Tar Sands

V. Monitor the development of (a) tools to measure Green House Gas emissions generated by the endowments’ underlying company holdings and (b) methods to offset their net emissions, with the goal of considering adopting a GHG‐Net‐Zero‐by‐2050‐year policy at a point in the future when implementation is possible; periodically, report development progress to the ACSRI, Investment Committee and Board of Trustees.

The ACSRI’s recommendations were presented to the Board of Trustees Executive Committee in the summer of 2021. The Executive Committee reviewed the recommendations and agreed to bring them to the full board for its consideration at the annual meeting in September 2021. A special meeting of the Board of Trustees was held on September 15, 2021, devoted solely to reviewing the recommendations.

Trustee consideration of a divestment proposal is guided by certain principles which are set forth here.

At the annual meeting, after considering the recommendations, the Board took actions as described in a letter to the Community from President Brown.

A BU Today article about the Board’s actions can be found here.