In the mid-1980s, resistance to apartheid in South

Africa reached critical mass, becoming one of the

most pressing international issues of the period. It

began when black South Africans protested the

1983 South African Constitution, which included

racially segregated Parliaments. In response, the

South African government, Apartheid, sent thou-

sands of troops to quell the protests, as millions

around the world watched on television.

The events in South Africa galvanized

college students across the United States to start

campaigns and pressure their universities to di-

vest from companies directly related to the South

African regime. The movement spread, with 55

campuses eventually divesting, and more than 80

cities, 19 counties, and 25 states taking some

form of binding economic action against compa-

nies connected to the Apartheid.

While this campaign did not single hand-

edly end Apartheid, South African Archbishop

Desmond Tutu noted, “it could not have been

achieved” without “the use of non-violent means,

such as boycotts and divestment” that “encouraged

their governments and other corporate actors to re-

verse decades-long support for the Apartheid re-

gime.”

The actions taken by the college students

against apartheid represented the first major divest-

ment campaign. Divestment, which simply means

getting rid of unethical or morally ambiguous

stocks, bonds or investments, has since grown to

become a prominent strategy in the fight against

climate change.

Large institutions such as the Rockefeller

Brothers Fund, more than 30 U.S cities, and a

growing number of American Universities and reli-

gious institutions have taken the steps to divest

from fossil fuels, but the movement requires more

participation to become an agent of social change.

To date, the nation’s largest university, Arizona

"Moral Cents: The Ethical and Financial Case for Fossil Fuel Divestment at Arizona

State University"

Nick Di Taranto

State University, has yet to divest its endowment from

fossil fuels.

Arizona State University takes climate change

seriously. The University has the nation’s first School

of Sustainability, established in 2006. Tens of millions

of dollars fund tremendous amounts of research and

practical solutions to sustainability challenges in Ari-

zona and around the world as part of President Crow’s

New American University vision, while educating a

new generation of sustainability scholars and practitio-

ners.

One would expect that a leader in sustainability

would take the lead in divestment, but after research

and multiple conversations with the ASU Foundation—

the organization that handles ASU’s endowment—I

found that to not be the case and took it upon myself to

understand and unwind the complexities that prevent

the Foundation from taking action against fossil fuel

companies.

Divestment: a grassroots campaign to combat the

climate crisis

For my Masters in History, I focus on environmental

policy, so naturally, a global grassroots campaign

peaked my interest. Three numbers stuck with me—2

degrees Celsius, 565 gigatons, and 2,795 gigatons.

These numbers form the foundation for the divest-

ment campaign and were first brought to prominence

by environmental activist Bill McKibben three years

ago.

The first number comes from the 2009 Copen-

hagen Conference, where 167 countries recognized

the “scientific view that the increase in global tem-

perature should be below two degrees Celsius.” To

keep temperatures below that threshold, global car-

bon emissions cannot exceed the second number, 565

gigatons. The problem lies with the third number,

2,797 gigatons, or the amount of carbon already con-

tained in proven fossil fuel—coal, oil, and gas—

reserves worldwide. In other words, the carbon we

plan to burn short of any action to curb either its

extraction or use.

Despite the overwhelming scientific evi-

dence supporting anthropogenic climate change,

few political solutions exist to curb carbon emis-

sions. Meanwhile, fossil fuel interests continue to

spend large sums of money to fund climate denial

research, lobby policymakers, and explore options

for extracting more oil, gas, and coal from the

ground. In 2013, fossil fuel companies spent $213

million dollars lobbying U.S. and European offi-

cials, an OxFam International study reported. The

study also concluded that fossil fuel companies

spent nearly $700 billion on exploration and de-

velopment projects in 2012.

To combat the influence of fossil fuel in-

terests, McKibben’s non-profit, 350.org, called

for a grassroots movement to break the power of

the top 200 fossil fuel companies—100 oil and

gas and 100 coal companies—by bankrupting

them, not financially, but morally, and, in doing

so, pressuring political officials and businesses to

take action that curbs emissions. Since 2012, pub-

lic, private, and individual investors with collec-

tive assets worth more than $50 billion have

pledged to drop their fossil fuel holdings.

My interest in divestment stems from McKibben’s

passion, energy, and earnest activism, but there was

something more than that. The political process of-

ten seems inaccessible and climate change is a

problem too “wicked” for individual action to have

a meaningful impact. The divestment campaign

seemed like something I could support and maybe

make a difference. I began following campaigns

around the nation and researching the arguments for

and against divestment to determine if it was a

worthwhile cause for Arizona State University to

pursue.

Where does the New American University stand?:

weighing divestment at ASU

Choosing to divest requires navigating an

institutional bureaucracy. Endowments consist of

money or other financial assets donated to a univer-

sity or organization. Most often, donors gifts’ come

with strings attached, meaning the university must

use the donation to achieve an end goal designated

by a donor. According to its 2014 Financial Audit,

the ASU Foundation manages $626 million in the

New American University’s endowment. The Foun-

dation consists of six voting board members, who

steer the overall strategies of the organization’s

investment policies. Approximately, fifty different

firms make the actual investment decisions,

though, each of whom invest in about 300 to 500

companies based on their own investing strategies.

Initial attempts to learn how the Founda-

tion invests the University’s endowment through

financial reports provided vague answers: 40 per-

cent goes into global equities, 10 percent in global

fixed incomes, 20 percent in private capital and so

forth. Moreover, due to its status as an independent

and private organization, the Foundation has no

legal obligation to make more information avail-

able. So, I started contacting people at the Founda-

tion. I sent multiple e-mails that eventually led to a

meeting with Virginia DeSanto—known in the of-

fice as “Ginny”—the Foundation’s vice president

of finance, CFO, secretary and treasurer and Lisa

Jacobson, the assistant treasurer.

Ginny sat with a note-filled legal pad in

front of her, which signaled she took me seriously,

and she started things off by introducing herself

and explaining that the Foundation is “an inde-

pendent tax-exempt organization from ASU that

exists solely to support ASU.” Then, after intro-

ducing myself, I proceeded with my questions.

Ginny and Lisa explained that divestment could

result in financial losses that prohibit the Univer-

sity from meeting its fiduciary obligation to do-

nors. Moreover, the Foundation focuses on achiev-

ing the best possible return on investment for do-

nors. Ginny noted that large oil and gas companies

have the finances and ability to make large-scale

changes in energy infrastructure, so divesting from

those companies may actually undermine divest-

ment campaigns’ goal of reducing carbon emis-

sions. For instance, ASU collaborates with Shell in

its “Gamechanger Program.” Yet, the theme this

year implores students to come up with innovative

ways to take oil out of the ground more efficiently;

meanwhile Shell and other oil and gas companies

are abandoning their renewable energy investment

projects.

Well, OK, I thought, but how much of the

endowment is tied into fossil fuel companies? Nei-

ther Ginny nor Lisa knew. They cited the difficulty

of tracking hundreds of investments that that any

one of the fifty investment managers may trade on

a given day. They explained the Foundation

would not likely disclose individual stock invest-

ment information because some managers con-

tractually forbid that type of disclosure since it

could risk weakening the investment manager’s

competitive edge in investing.

When asked how the New American Uni-

versity values such as being socially embedded,

globally engaged, and aspiring to transform soci-

ety influenced investment strategies, Ginny ex-

plained that the Foundation has no policies in the

investment strategy that specifically includes or

excludes any particular environmental, social or

governance concept. She mentioned, however,

that the Foundation was considering setting up a

separate sustainable investment fund for inter-

ested donors to invest. The Foundation, also, re-

cently held a sustainable investing conference that

included 30 to 40 universities from across the

U.S.

She transitioned into explaining that the

New American University values guided some of

the ways the Foundation spent its revenue,

through public outreach, scholarships and by re-

ducing its carbon footprint from operations. Still

though, the Foundation had no clear or well-

defined sustainable investment strategy and it cer-

tainly was not seriously considering divestment. It

remained unclear if, or how, those values guided

investment strategies.

The meeting lasted roughly 45 minutes.

Ginny wished me luck on finishing school, told me

to e-mail her if I had any other questions, and

showed me out. On the walk home, I plugged in my

earphones and began digesting the conversation.

Ginny and Lisa answered my questions to the best

of their ability and provided important context to

how the ASU Foundation operates. Still, the lack of

specific answers nagged at me.

A few days later, I flew home to Philadelphia for

Spring Break where I mulled over my next steps. I

decided to look into some of the barriers to divest-

ment mentioned by Ginny to see if I could find po-

tential solutions. Google proved to hold a wealth of

information. To Ginny’s first point about financial

loss, I found some studies that supported her

claim—albeit funded by fossil fuel interests—but

most put forth evidence that demonstrated that di-

vestment makes financial sense.

Investment is about managing risk and the

concept of “stranded assets” makes investment in

fossil fuel investments dangerous. An Oxford Uni-

versity study defined stranded assets as “assets that

have suffered from unanticipated or premature

write-downs, devaluations or conversion to liabili-

ties.” Coal, oil, and gas risk becoming stranded

assets due to potential regulatory policies that limit

carbon emissions through a carbon tax, emissions

trading program, or some other regulatory mecha-

nism that internalize the cost of carbon pollution.

Carbon pricing schemes cover more than one-fifth

of global emissions, with the European Union and

23 U.S. states under some form of carbon regula-

tion policy. A larger proportion of emissions will

likely come under regulation after the U.N climate

talks in Paris this December.

Mainstream financial institutions provide

some of the most compelling evidence in favor of

divestment because it can result in financial gain.

For instance, a research team from Standard and

Poor (S&P) modeled the performance over the

past decade of the S&P 500 index stripped of its

fossil-fuel stocks. A $1 billion endowment in-

vested in carbon-free S&P 500 companies would

have yielded an additional $119 million in profit

through 2013. Studies from other investment firms

yielded similar results.

I also discovered that on average, U.S. uni-

versities have only two to three percent of their

endowment invested in fossil fuel companies.

Based on the average, ASU has between $12.52

million and $18.78 million invested in fossil fuels.

While that seems like a lot of money, it represents

only a drop in the bucket of the $12 trillion total

market capitalization of fossil fuel companies.

Last, I looked at divestment commitments at other

universities and found a wide range of options.

Pitzer College, for example, committed to divest-

ing 99% of its endowment from fossil fuels, while

the University of Sydney created a plan to reduce

investments in fossil fuel companies by 20% over

the next three years and then reassess its situation.

Armed with this information I decided to

take Ginny’s offer for follow up questions and af-

ter a few e-mail exchanges I headed back to the

ASU Foundation to meet Ginny, as well as Rick

Shangraw, CEO of the Foundation.

Prior to his appointment as CEO in 2011,

Shangraw served as the director of the Global In-

stitute of Sustainability. He demonstrated both

knowledge of and engagement with sustainability

issues as he went through my questions in a

power point presentation he made for the meet-

ing, taking care to stop when I asked for further

clarification, and expressing personal frustration

with the political apathy toward the climate crisis.

I found that we shared an admiration for McKib-

ben and his public outreach on climate change,

although he was less enthusiastic about the target-

ing of University endowments. He seemed on my

side, and even if he disagreed, I liked him because

he listened patiently to my perspective and took

care and consideration in explaining his.

Shangraw agreed that getting to a carbon

free investment portfolio was a desirable goal, but

also a journey, one ASU had just begun. He gid-

dily described a new investment opportunity or

tool that tracks companies’ behavior for socially

responsible indicators

such as human rights,

treatment of labor, and,

yes, carbon emissions.

Shangraw explained that

this tool could help move

the Foundation toward sustainable investing. He

emphasized that the Foundation planned to provide

new options for donors, such as a sustainable in-

vestment fund, which—along with a sustainable

investment statement—will be voted on at the next

Investment Committee meeting.

Additionally, Shangraw mentioned the need

for groups like 350.org to reach out to donors to

encourage them to push for sustainable options as

an important step for moving this topic forward

with similar investment organizations. Yet most of

the discussion focused very little on the endow-

ment. In Shangraw’s opinion, the endowment repre-

sented only one of the University’s and the Founda-

tion’s “sustainability levers” and he expressed the

need for a more holistic approach to moving the

needle on sustainable investing. While I never got

the impression the Foundation was seriously con-

sidering divestment, they made it clear that they

were pursuing other sustainable investment strate-

gies.

Conclusion

The facts are simple and clear: humans are

changing the climate by releasing carbon dioxide

and other greenhouse gases into the atmosphere

and the main source of those emissions come from

burning fossil fuels. To prevent the most catastro-

phic impacts of climate change, we need to keep

fossil fuels in the ground. Divestment campaigns

aim to pressure businesses, institutions, and or-

ganizations into stopping the flow of finance to

these companies, not to inflict financial harm, but

as a value statement: it is wrong to ruin the earth’s

climate and therefore wrong to profit from it.

If the ASU Foundation for A New Ameri-

can University’s sole purpose is benefitting the

University, then it should be held to the same val-

ues and standards. Climate change is a social, eco-

nomic, cultural, and political problem, pervasive at

the local, national, and international level, that is

largely attributable to burning fossil fuels. Divest-

ment from fossil fuels and the message it sends

could not fit more perfectly with the University’s

aspirations to become a force for societal transfor-

mation, embedded socially and connected with

communities, to encourage innovation, and to ad-

vance global engagement.

ASU and the Foundation should commit to

combating climate change through all its sustain-

ability levers. While the University has a Carbon

Neutral Plan that covers many “sustainable lev-

ers,” investment strategies are notably missing.

Still, ASU and the Foundation do not operate in an

ideal world and as with other climate-related chal-

lenges and any large institution, solutions are often

more difficult to implement in the real world and

change will likely occur slower than one might

hope. The Foundation is indeed moving in the

right direction, but it can do more.

To fully realize its goals and mission,

ASU should divest from fossil fuels. First, the

Foundation should assess the greenhouse gas emis-

sions embedded in its investment portfolio. Many

companies already disclose emission information

due to EPA greenhouse gas reporting regulations

and the push for corporate social responsibility.

Next, ASU and the Foundation can discuss to what

extent they want to divest from fossil fuels. Again,

options abound as many universities and other in-

stitutions have already divested or partially divested from fossil fuels. Last, ASU and the Foundation can work

together with their current investment managers, or seek out new ones, to develop a low carbon investing strat-

egy that does not jeopardize the University’s fiduciary obligations. For instance, Morgan Stanley Capital and

other investment firms offer sustainable or low carbon investment strategies. Fossil fuel companies comprise

only 11 percent of the S&P 500 so divestment hardly restricts investment strategies.

The University’s endowment is one quiver in the arrow, but when our society is dealing with a chal-

lenge as pervasive as climate change, it needs all the arrows available. When considering divestment, Univer-

sity and Foundation officials should reflect not on my words, but ASU President and Foundation board mem-

ber Michael Crow’s: “Do you replicate what exists, or do you design what you really need?” ASU has already

changed the university model through its interdisciplinary approach and it is time that kind of reevaluation take

place concerning the University’s endowment, to create what Mr. Crow calls the “maximum societal impact.”

End Notes

“What is Fossil Fuel Divestment,” Fossil Free, http://

gofossilfree.org/what-is-fossil-fuel-divestment/ (accessed Febru-

ary 1 2015). For a full list of commitments, see ibid, “Divestment

Commitments.” For Tutu quote, see “Divesting From Injustice,”

Guardian 13 June 2010. http://www.huffingtonpost.com/

desmond-tutu/divesting-from-injustice_b_534994.html

(accessed April 1 2015).

See the School of Sustainability website at https://

schoolofsustainability.asu.edu/about/school-of-sustainability/

The numbers come from Carbon Tracker Initiative, a project of

the non-profit Investor Watch. It’s report has been utilized by

several large investment firms and banks, including Standard &

Poor and HSBC, to calculate risk to carbon exposure. The total

reserves do not include shale gas. See, Bill McKibben, “Global

Warming’s Terrifying New Math,” Rolling Stone August 2 2012.

http://www.rollingstone.com/politics/news/global-warmings-

terrifying-new-math-20120719?page=2 (accessed March 3

2015).

See OxFam International, Food, Fossil Fuels, and Filthy Finance

(October 17 2014, 4. The Figure adapted from European Climate

Foundation http://www.europeanclimate.org/documents/

nocoal2c.pdf

See OxFam International, Food, Fossil Fuels, and Filthy Finance, 2

-3.

For the board of directors, see http://www.asufoundation.org/

about-us/board-of-directors.

Personal Correspondence with Virginia DeSanto, February 18,

2015. For figures on ASU’s endowment, see Arizona State Uni-

versity Foundation for a New American University and Affiliates,

Consolidated Financial Statements and Additional Information

(July 30, 2014), 5.

For the Gamechanger Program., see http://

www.asushellchallenge.com. For more information on Shell and

other oil and gas companies withdrawal from renewable energy

sources, see Tom Bergin. “Shell goes cold on wind, solar, hydro-

gen energy,” Reuters 17 March 2009. http://www.reuters.com/

article/2009/03/17/us-shell-renewables-

idUSTRE52G4SU20090317 (accessed March 28 2015); Terry Mac-

alister, “Shell accused of abandoning solar power buyers in the

developing world,” Guardian 2 January 2010. http://

www.theguardian.com/business/2010/jan/03/shell-sri-lanka-

solar-warranty-row (accessed Mach 28 2015); and Antonia Ju-

hasz, “Big Oil’s Big Lies About Alternative Energy,” Rolling Stone

25 June 2013. http://www.rollingstone.com/politics/news/big-

oils-big-lies-about-alternative-energy-20130625 (accessed

March 28 2015).

For an example of a often cited study purporting the finan-

cial risk involved with divestment see Daniel Fischel, Fossil

Fuel Divestment: A Costly and Ineffective Investment Strat-

egy. The study was funded by the Independent Petroleum

Association of America.

http://www.smithschool.ox.ac.uk/research-programmes/

stranded-assets/ (accessed March 20, 2015).

Sheila M Olmstead, “Applying Market Principles,” 220-221

and Henrik Selin and Stacey D. VanDeveer, “Global Climate

Change: Beyond Kyoto,” in Kraft and Vig, Environmental

Policy, 287-292. As of 2013, there are three regional cap and

trade programs. For example, ten Northeastern states cre-

ated the Regional Green House Gas Initiative and in 2009,

and California launched a cap-and-trade program. See, Barry

Rabe, “Racing to the Top, the Bottom, or the Middle of the

Pack? The Evolving State Government Role in Environmental

Protection,” in Kraft and Vig, 32-49 and Ken Portney,

“Sustainability in American Cities: A comprehensive look at

what cities are doing and why,” in Daniel Mazmanian and

Michael Kraft, Toward Sustainable Communities, 232-236.

For carbon pricing scheme statistic, see Fabian, “Support

low-carbon investment,” 28.

For other examples, see MSCI ESG Research Team, Respond-

ing to the Call for Fossil-fuel Free Portfolios, December 2013

and IMPAX Asset Management, Beyond Fossil Fuels: The

Investment Case for Fossil Fuel Divestment, 2013. See Car-

bon Tracker’s website for a multitude of reports on the mat-

ter of unburnable carbon.

The S & P study was commissioned by the Associated Press.

See Tom Zeller Jr., “Fossil Fuel Divestment: Smart Bet or

Losing Strategy,” Forbes February 10 2015. (accessed March

24, 2015).

Atif Ansar , Ben Caldecott, James Tilbury, Stranded assets

and the fossil fuel divestment campaign: what does divest-

ment mean for the valuation of fossil fuel assets?, Oxford

University Stranded Assets Programme at the University of

Oxford’s Smith School of Enterprise and the Environment

(2013), 53-57, 66-67.

For Pitzer College divestment see Pat Morrison, “Why Pitzer

College decided to quit carbon,” Los Angeles Times October

21, 2014. http://www.latimes.com/opinion/op-ed/la-oe-

morrison-gould-20141021-column.html#page=1 (accessed

March 9 2015). For the University of Sydney, see “Sydney

University announces plan to reduce fossil fuel invest-

ments,” Australian Broadcasting Corporation.. February 8

2015.

http://www.abc.net.au/news/2015-02-09/sydney-university

-announces-plan-to-reduce-fossil-fuel-investme/6080802

(accessed March 9 2015).

Bill McKibben wrote the first book about climate change for

a general audience in 1989, The End of Nature.

Personal Correspondence with Rick Shangrew on March 24

2015.

Ibid.

This was taken with permission from the power point pres-

entation made by Mr Shangrew for our meeting on March

24, 2015.

For examples, see MSCI ESG Research Team, Responding to

the Call for Fossil-fuel Free Portfolios, December 2013 and

IMPAX Asset Management, Beyond Fossil Fuels: The Invest-

ment Case for Fossil Fuel Divestment, 2013. Also, see Car-

bon Tracker’s website for a multitude of reports on the mat-

ter of unburnable carbon as well as the US Forum for Sus-

tainable and Responsible Investing website.

Tim Dickinson, “The Logic of Divestment: Why We Have to

Kiss Off Big Carbon Now,” Rolling Stone 14 January 2015.

http://www.rollingstone.com/politics/news/the-logic-of-

divestment-why-we-have-to-kiss-off-big-carbon-20150114

(accessed March 14 2015).

Collin Macilwain, “The Arizona Experiment,” Nature Volume

446 No 26 (April 2007), 968.

President Crow uses this phrase often and is a core value of

the New American University. For examples, see Michael M.

Crow. Ed. A New American University Reader: Selected Writ-

ings On University Design And Related Topics (2011). The

Phrase appears in numerous articles within this text and

within other cited by Crow in the forward.