What We Know About Harvard’s Investments in and Entanglements with the Fossil Fuel Industry
Divest Harvard is a student-led grassroots movement that has been fighting since 2012 for Harvard to act ethically in the face of the climate crisis. In that time, the university has refused virtually all measures of transparency and accountability for its role in perpetuating the injustices caused by global climate change. Far from divesting its endowment from the fossil fuel industry and ethically reinvesting those funds, Harvard actually keeps nearly its entire investment portfolio a secret. In this report, we dive into what we do know about Harvard’s ongoing love affair with the fossil fuel industry.
At present, Harvard discloses only about 1% of its now $39.2 billion endowment. After close analysis and research, Divest Harvard found that, of this 1%, a total of $5.6 million is invested in the fossil fuel industry in companies that produce or own reserves of oil, natural gas, and coal, and large utilities powered by natural gas and coal. If that 1% is a representative sample of the whole endowment, that would mean that Harvard has $560 million in fossil fuel investments — providing significant financial support for the companies driving the climate crisis. Of course, that 1% could be over-representing the extent of Harvard’s fossil fuel investments (in which case, we welcome the university to share that information), or it could be under-representing Harvard’s exposure to fossil fuel investments, meaning that Harvard could have much more — potentially billions of dollars — invested in the fossil fuel industry (again, we invite Harvard to correct us). We cannot know how representative that 1% is unless Harvard sheds light on the 99% of investments that it currently keeps hidden.
Beyond the endowment, Harvard also remains entangled with the fossil fuel industry in its structure of governance and academic programming. Members of the Harvard Corporation have both direct and indirect ties to the industry and oil and gas companies continue to sponsor campus research and events. Since these companies have their own political agendas, Divest Harvard believes that stakeholders in the Harvard community and the broader public are entitled to know about their influence on campus.
Divest Harvard is calling on Harvard University to meet the following three demands by Earth Day of 2020: 1) Disclose its investments in the fossil fuel industry. 2) Divest the endowment entirely from the fossil fuel industry. 3) Reinvest in environmentally sustainable and socially responsible funds. At the heart of this Disclose, Divest, and Reinvest call is a demand for leadership and accountability from Harvard, one of the world’s most powerful and privileged academic institutions.
Divest Harvard will continue to escalate its actions on campus in accordance with the growing severity of the climate crisis so long as Harvard refuses to meet these demands. However, our vision extends far beyond divestment. This is just the most clear step the university can and should take toward a broader position of climate leadership in a time where such leadership is more imperative than ever.
For a full explanation of what we do know, how we know it, and what Harvard won’t tell us about its endowment holdings and entanglements with the fossil fuel industry, read on…
I. Breaking Down the Endowment
Harvard’s endowment, which supports the operation of the university, is virtually unparalleled. Totalling around $39.2 billion, it is the largest university endowment in the country, and is larger than half the world’s economies. In 2018, only about $1.8 billion or 4.6% of the endowment was distributed to cover university operating revenue — with much of that funding earmarked for specific donor-dictated purposes — meaning that most of the endowment remains stored in investment funds under the purview of the Harvard Management Company (HMC). This nonprofit subsidiary of the university manages the investment of the nearly 13,000 individual funds comprising the endowment.
At present, Harvard is only required to disclose its direct investments, which total $392 million as of May 2019, or about 1% of the endowment. The quarterly SEC 13F Form provides lists of the funds in which Harvard’s endowment is invested, and the market values of Harvard’s holdings in each of them. The website Fossil Free Funds houses information regarding what percentage of each fund’s assets is invested in fossil fuel stocks. For each fund listed on the 13F, Divest Harvard multiplied the market value of Harvard’s holdings in that fund by the percentage of the fund invested in fossil fuel companies to find the amount invested in the fossil fuel industry by way of that particular fund. We then added the sums for each of the funds listed in order to derive the total.
For example, as of May, Harvard held $20,834,000 worth of stock in iShares Core S&P 500 ETF, which is managed by Black Rock. Fossil Free Funds indicates that 9.65% of this ETF’s assets are flagged as invested in fossil fuel stocks — and 9.65% of $20,834,000 comes out to $2,010,481. When we did the same calculation for the nine funds which consistently show up in Harvard’s 13Fs filings and added them together, we got our total: $5.6 million.
Large endowments such as Harvard’s tend to be heavily invested in exchange-traded and mutual funds, which are funds that hold stock in a wide variety of industries. Unsurprisingly, the fossil fuel industry is typically one of them. These funds are extremely widespread, and through them, many people are implicated in the financing of the fossil fuel industry. If you or your parents are among the 90 million Americans who put money away in a mutual fund, it is likely that a percentage is indirectly invested in the fossil fuel industry, in the very same way.
Despite the broad scope of its investments, Harvard is only legally required to disclose its direct holdings to the Securities and Exchange Commission. These disclosures — most recently made in May, February, last November, and last August — are all publicly available. It is unclear to what extent this 1% of Harvard’s holdings is representative of the entire endowment, since the university does not disclose the contents of the remaining 99%. This is why Divest Harvard is calling on Harvard University to disclose in full the amount of money it has invested through the endowment in the fossil fuel industry. Without this disclosure, Harvard continues to evade public accountability for how it employs its sizable economic influence.
In our analysis of the publicly disclosed 1% of the endowment, Divest Harvard found that a total of $5.6 million (about 1.4% of the disclosed funds) is invested in the fossil fuel industry. Scaled up, we are talking about hundreds of millions of dollars of the total endowment that might be invested in the fossil fuel industry if this 1% is representative. Of the eight funds that appear consistently in the endowment disclosures over the past year, all but one fund scored a 0 or 1 “badge” on a scale from 0 to 5 for being fossil free or “avoiding stock investments in different fossil fuel sectors” by Fossil Free Funds. These seven funds — abbreviated as IVV, IJH, IJR, VIG, VGTSX, VTMGX, and VT — each invest around 5–10% of their assets in fossil fuel stocks.
This continued investment in the fossil fuel industry is morally indefensible. It actively supports the activities of the very companies fueling the climate crisis and global climate injustice, and it contradicts Harvard’s mission and public responsibility as an institution of higher education. As Divest Harvard activists have noted, this is an example of sheer hypocrisy. To combat the climate crisis and support climate justice, Harvard must divest from the fossil fuel industry and reinvest its funds in an environmentally and socially conscious way.
Under HMC’s Sustainable Investment Policy, there is a stipulation for divestment on “very rare occasions … when companies’ activities are so deeply repugnant and ethically unjustifiable as to warrant the University’s institutional dissociation from those activities.” However, even this policy only applies to direct holdings and investment advisers trading in the name of Harvard. HMC “[does] not extend these restrictions to investment advisers of commingled funds where Harvard is not the sole investor.” That means that while Harvard has publicly committed to divestment from the manufacture of tobacco products, for instance, it may still invest in commingled funds that have holdings in the tobacco manufacturing industry. We reject the hypocrisy of this policy, which enables the Corporation to feign an ethical stance without committing to real divestment. Harvard has yet to divest even its direct holdings from the fossil fuel industry, let alone its holdings in commingled funds (such as the funds listed above). As we continue to call for HMC to make an immediate commitment to divest the endowment from its unjustifiable fossil fuel holdings as soon as possible, we emphasize that all of its endowment must be made fossil-free.
II. Reinvesting in a Fossil Free-Future
Though Harvard often presents fossil fuel divestment as infeasible and incompatible with fiduciary duty, the reality is that divestment is a step that has already been taken by many institutions and individuals around the world. To date, over 40 U.S. colleges, the country of Ireland, and the Norwegian sovereign wealth fund have all committed to divestment, with a total of nearly $10 trillion divested from the fossil fuel industry worldwide.
The counterpart to divestment is reinvestment. This represents the third demand of Divest Harvard’s Disclose, Divest, and Reinvest call. Reinvesting in environmentally sustainable and socially responsible business is a crucial part of the transition to a more just and stable society. There are clear principles underpinning the philosophy of reinvestment: support of a just transition from a fossil fuel to a clean energy-based economy that ensures that workers currently in the dirty energy industry are provided new job opportunities in a clean economy, and that the economic benefits of this new economy are shared by the communities who have been marginalized and victimized by environmental oppression and the ever-worsening climate crisis.
As the international fossil fuel divestment campaign has grown — and as demand for sustainable investment options has increased — investment managers have responded to these demands, and have made it far easier for their clients to refrain from supporting the fossil fuel industry. There are now hundreds of Fossil Free Funds for individual and institutional investors to choose from: these exchange-traded and mutual funds maintain diverse holdings, but avoid the fossil fuel industry, often outperforming their conventional counterparts.
This means that if Harvard commits to divestment, it has clear options for sustainable and socially responsible reinvestment that remains profitable, thereby honoring HMC’s fiduciary duty to maximize returns on the endowment. Such reinvestment could in principle even allow for greater returns than HMC is currently achieving, especially as Harvard’s returns have in recent years fallen short of the returns of rival universities. To begin the process of divestment, HMC could put a “negative screen” on fossil fuel-containing funds while making a concerted effort to invest in the many Fossil Free Funds now available.
Some funds marketed as “sustainable” have only superficially divested from the fossil fuel industry, meaning that they have taken only minimal or partial steps toward being fossil-free, such as by divesting from coal but not from oil and gas. However, there are numerous tools that investors can use to guard themselves against making these problematic investments and to find fully fossil-free funds, such as the Fossil Free Funds database used in this report. There is also a growing range of low-carbon alternative funds.
Nowadays, the range of fossil free funds available is enormous; it includes funds managed by Vanguard (VNQ, $64 billion net assets, 5 out of 5 fossil free badges), T. Rowe Price (TRBCX, $60 billion, 4 badges), Harbor Capital Appreciation (HACAX, $31 billion, 5 badges), Janus Henderson Enterprise (JDMNX, $20 billion, 4 badges), Parnassus (PRBLX, $17 billion, 4 badges), JP Morgan (JLGMX, $15 billion, 5 badges), Eaton Vance Atlanta Capital (EISMX, $12 billion, 5 badges), MainStay Investments (MLRRX, $12 billion, 5 badges), and John Hancock (GOGIX, $9.5 billion, 5 badges).
With $68.76 billion in net assets, QQQ represents the largest fund to earn one of the highest possible ratings — 4 out of 5 badges — from Fossil Free Funds for being fossil free, with only 0.38% of QQQ assets in fossil fuel stocks. Already, HMC has invested $8 million in this fund. HMC could easily direct more of the endowment’s assets to funds like this one to radically reduce the endowment’s exposure to the fossil fuel industry without undertaking a massive overhaul of its investment strategy. With an abundance of up-and-coming funds that are truly fossil-free, the path to divestment is clear to envision.
III. Harvard’s Fossil Fuel Entanglements
Outside of the investment of its nearly $40 billion endowment, Harvard maintains other entanglements with the fossil fuel industry. Many people may not realize the extent to which fossil fuel and dirty energy interests are embedded in the university. These interests impact, among other things, the governance of the university, the research the university produces, and the sponsorship of academic programming and university events.
GOVERNANCE
The most glaring manifestation of the influence of the fossil fuel industry on the university’s governance lies in the composition of the Harvard Corporation, the twelve-person decision-making body at the top of the university food chain. Alarmingly, Harvard Corporation member Theodore V. Wells Jr., also known as Ted Wells, was hired by ExxonMobil in 2015 as a top lawyer in response to an inquiry regarding the company’s deliberate misinformation campaigns regarding climate change and the environmental risks of GHG emissions. Exxon has also attacked research by Harvard’s own reputed scientists Dr. Naomi Oreskes and Dr. Geoffrey Supran into the extent of the company’s climate denialism.
Beyond this explicit and unacceptable conflict of interest, several members of the Harvard Corporation maintain less explicit ties to the fossil fuel industry. While these ties alone are not necessarily contradictory to Corporation members’ duties, they raise concerns around members’ impartiality in conversations about divestment, and reflect a disposition toward the fossil fuel industry that may be reflected in the university’s governance, and particularly in its management of its endowment. For instance, Corporation member David Rubstein’s company, The Carlyle Group, actively invests billions of dollars in oil and gas exploration and extraction worldwide. Harvard Treasurer Paul Finnegan’s company, Madison Dearborn Partners, has also invested in coal production and petroleum refining in the past, during Finnegan’s tenure on the Harvard Board of Overseers.
RESEARCH
Fossil fuel companies actively fund research and maintain relationships with faculty at Harvard, a phenomenon that is particularly apparent at the Harvard Kennedy School. While determining the scale at which fossil fuel funding impacts HKS’s operations remains difficult and requires further analysis, Divest Harvard members have uncovered troubling connections that tend to remain hidden from public view. In 2015, former Divest Harvard organizer Ben Franta mapped out the fossil fuel influences present in energy research at HKS.
Citing this analysis in a 2017 article published in The Guardian, Franta commented on the troubling implications of this reality:
Funding from Shell, Chevron, BP, and other oil and gas companies dominates Harvard’s energy and climate policy research, and Harvard research directors consult for the industry. These are the experts tasked with formulating policies for countering climate change, policies that threaten the profits — indeed the existence — of the fossil fuel industry.
The fossil fuel industry also funds climate and energy-related research outside of HKS in other areas of the university, including notably in the Structural Geology & Earth Resources Group led by Professor John H. Shaw, who chairs the Department of Earth and Planetary Sciences. The group states on its website that its work “has direct applications in…oil & gas exploration” and receives support from numerous energy companies. Among its petroleum industry sponsors, the group lists Chevron, ExxonMobil, Shell, and the Saudi Arabian national petroleum and natural gas company Saudi Aramco.
Similarly, the Harvard Environmental Economics Program, led by Professor Robert N. Stavins, was initially endowed by a gift from Enel, a multinational energy company. It supports research on and holds events about natural resource economics, energy politics, and environmental issues — while receiving funding from Shell, BP, and Chevron. The program is comprised of 33 Faculty Fellows from different schools at Harvard who hold or have held positions at institutions including the UN International Panel on Climate Change, World Health Organization, and the National Academy of Sciences, and its graduates go on to teaching positions at prestigious universities.
According to Franta, the prevalence of this fossil fuel funding can have a chilling effect on faculty, a number of whom support divesting Harvard’s endowment from the fossil fuel industry but fear that vocalizing such support would cause them to lose funding for their research or face blowback from the administration.
Additionally, to Divest Harvard’s knowledge, FAS faculty are required to publicly disclose significant financial conflicts of interest, but there is no formal policy requiring FAS faculty to publicly disclose all funding they receive for their research. We are not aware of any specific examples of faculty failing to disclose research funding. But, the absence of an explicit public disclosure requirement is troubling because it could allow fossil fuel interests to have greater influence on research than the public is aware of.
SPONSORSHIP
Fossil fuel companies also sponsor academic programming and events on Harvard’s campus. As a result, seemingly innocuous or neutral initiatives can have a hidden dirty energy agenda. One of the most striking examples of this phenomenon was the Rational Middle Series sponsored by Shell at the Harvard Kennedy School in 2017. An article published by Divest Harvard organizer Ilana Cohen in the Harvard Political Review in 2018 cited the event in articulating the role of the fossil fuel industry in campus programming:
Last February, Shell Oil Company sponsored the screening of a film with a Shell-affiliated director as part of the Harvard Kennedy School’s “Finding Energy’s Rational Middle” event, including a Shell representative on the film’s discussion panel. Divest Harvard activist Ben Franta revealed that the Kennedy School had “received at least $3.75 million” from Shell at the time. Harvard has also received funding from Chevron and Exxon Mobil, both of which are involved in current research projects at Harvard’s Department of Earth and Planetary Sciences, as well as from BP.
Today, fossil fuel companies continue to give generous gifts to the university and its graduate schools. Only last year, the Campaign for Harvard Kennedy School received donations of at least $1 million from Shell Exploration & Production Company, at least $250,000 from Chevron Energy Technology Company, and at least $50,000 from the ExxonMobil Corporation.
To date, Divest Harvard has not discovered any case in which such gifts have compromised the integrity of research produced by Harvard faculty. We firmly believe that such companies’ sustained efforts to influence the world of higher education and academia carries deeply troubling implications for educational institutions’ independence from these companies.
Corporations hold a fiduciary duty to maximize profit to their shareholders. This fact leads us to believe that fossil fuel companies view giving money to Harvard’s research and programming as a profit-generating activity. The reasons behind the money are not always clear — the money could be an attempt to encourage research favorable to their bottom lines or to create political cover for their questionable models of business by association with the Harvard brand. Yet regardless of the exact intention behind the money, when Harvard continues to take fossil fuel money it is supporting these companies’ agenda of discrediting climate science and delaying climate action. This agenda stands in direct contrast to the long-term interests of Harvard, its faculty, its students, and the global community.
As Divest Harvard continues to demand public accountability and climate leadership from Harvard University, we will also continue working to uncover and expose the various ties that Harvard maintains to the fossil fuel industry through its investment practices, governance, research, programming and sponsorship, and otherwise. We hope that our peers, faculty, alumni, and community members both within and beyond Harvard’s walls will join us in fighting for divestment and for the just and stable future it represents.
