The University of California today (Sept. 10) announced a series of measures to make UC a national leader in sustainability, efforts that range from proposals to actively use its $91 billion portfolio to invest in climate solutions to a major agreement to boost solar energy use.
Among the findings of the president’s Task Force on Sustainable Investing, scheduled for discussion at the UC Board of Regents’ Committee on Investments meeting Sept. 12, are recommendations to:
- Allocate $1 billion over five years for direct investments in solutions to climate change.
- Adhere to the United Nations-supported Principles for Responsible Investment (PRI), the largest university and the first public American university to do so.
- Establish and implement a framework for sustainable investment with the goal of completion by the end of the current fiscal year.
- Integrate environmental, social and governance (ESG) factors as a core component of portfolio optimization and risk management. Evaluate all strategies for achieving ESG goals as soon as practical, including whether to use divestment.
In addition, as part of President Janet Napolitano’s goal of bringing university operations to carbon neutrality by 2025, the university has signed agreements to secure substantial solar energy for the university for the next 25 years.
The agreements with Frontier Renewables, a company that develops photo-voltaic solar power projects, include the use of two solar fields to be constructed in Fresno County. The project will enable the university to put 206,000 megawatt-hours per year of solar energy back into California’s electrical grid — enough to power 30,000 homes and avoid more than 88,000 metric tons of carbon annually.
“Today’s announcements show the very real commitment of the University of California to invest our human and financial assets in finding solutions to global climate change,” Napolitano said. "From our research scientists, to our students, to our investment professionals, we are tackling these problems with vigor and determination.”
Earlier this year, Napolitano established the President’s Global Climate Leadership Council, which brings together external and internal stakeholders, including students, faculty, and staff, and experts on sustainability research and practices. The group convened for the first time in June to guide UC sustainability efforts and meet the 2025 carbon neutrality goal, in part by reexamining the energy sources powering the university’s 10 campuses and five medical centers.
The university became an energy service provider (ESP) in 2014, which allows it to procure energy on the wholesale market and supply electricity to some of its campuses and medical centers, potentially as early as next year. The ESP registration will allow UC to use more renewable energy resources and will create more energy price transparency for the campuses, ensuring a steady supply of cost-effective, climate-neutral electricity.
In June, the 11-member Task Force on Sustainable Investing began meeting to consider issues related to the university’s investments in fossil fuels. The task force, headed by Chief Investment Officer Jagdeep Singh Bachher, included three UC regents, faculty and student representatives, and experts in finance and sustainability from within and outside the university.
While the task force unanimously agreed that climate change is a serious issue that must be addressed, the majority of members were opposed to advocating that UC immediately divest its fossil fuel holdings, which account for about $10 billion in assets. The majority believed that addressing and accounting for this issue in a holistic way would produce the best possible returns in the long-term and align the university’s investment practices with its demonstrated commitment to sustainability.
“We believe we now have an effective plan of action to both protect and bolster the long-term returns for the university and to make a significant contribution to climate change solutions,” said Bachher. “We could have made a narrow divestment decision, but the university is not in the business of taking the easy route. This is a more difficult path but one we feel will be more effective over time.”
The task force held four meetings as a group and had an ongoing dialogue that involved the sharing of information and data throughout the process, which members estimated covered hundreds of hours over four months. The task force was supported by an internal working group that measured the university’s exposures, engaged third-party consultants to back test performance, estimated transaction costs, reviewed literature and spoke with leaders in the field.
After the task force recommendations are discussed at the Committee on Investments meeting, they will be scheduled for a vote by the full UC Board of Regents on Sept. 18.