American University's board of trustees rejected divesting fossil-fuel holdings from the Washington-based school's $550 million endowment fund, concluding the move would raise costs and not satisfy fiduciary responsibility standards, a trustees' memorandum stated.
The endowment plans to undertake a search for managers to create a green investment fund as an alternative to divesting.
Cambridge Associates, the endowment's investment consultant, which assisted in the board's finance and investment committee analysis of the divesting issue, “concluded they could not provide assurance that the effect of divestment would not be insignificant,” the memo stated.
“Divesting from these companies would require that AU investments be withdrawn from index funds and commingled funds in favor of separately managed funds,” said the memo dated Nov. 21. “Cambridge estimated this withdrawal would double the management fees, increasing from $1.1 million to $2.2 million per year as added costs.”
The endowment has 4% of its assets in fossil-fuel companies.
As an alternative to divesting, the board approved a committee recommendation to search for managers for the green investment fund. The “university will make it available for donors who specifically choose a green fund,” the memo said.
In other alternatives, “the committee directed Cambridge to add a new criterion in its evaluation” of new and existing active managers. It “will require Cambridge to consider whether the managers evaluate the environmental practices and policies of a prospective investment and whether they evaluate the impact of environmental compliance, remediation, and actual or contingent environmental liabilities in determining the investment merits of a security,” the memo stated.
In addition, the endowment will seek to influence corporate policy on climate change issues through shareholder engagement, including filing shareholder proposals, and proxy voting.