In April 2020, Harvard announced a set of general net-zero climate principles for its investment portfolio — and pledged that more specific details would be released by “late 2020.” Yesterday, February 25, Harvard followed through, releasing an initial report on its commitments. The report reflects some positive developments — but also includes significant shortcomings, such as a refusal to divest from the industry most responsible for this crisis, that undermine Harvard’s stated commitments and reflect the continued and seismic disconnect between Harvard’s actions and its espoused rhetoric about the urgent need for climate action.
The report contains two important victories for the student, alumni, and faculty communities. First: disclosure. For years, the fossil fuel divestment campaign has called on Harvard to disclose the percentage of its endowment invested in fossil fuels. And for years, Harvard has refused, arguing that it does not have access to such information and that such disclosure would put its investment strategy at risk. The new report, on the other hand, discloses this percentage (currently about 2%, or roughly $840 million). This transparency represents an important and welcome shift and is a testament to the impact of activism from the Harvard community — even though $840 million is an unacceptable amount of investment in an industry fixated on destroying the planet.
Second, Harvard also reports that it has reduced its overall exposure to “companies that explore or develop further reserves of fossil fuels” from approximately 11% in 2008 to less than 2% in 2020. To be sure, this in all likelihood is less due to some conscious strategy by Harvard and more due to the industry’s collapse in value (the reduction in exposure very much matches the trend of the fossil fuel industry’s weighting in the S&P 500). Nevertheless, the reduction vindicates the argument that reducing fossil fuel exposure is prudent and possible. This is another important and appreciated shift, since from the beginning of the divestment campaign, Harvard has claimed that reducing exposure to such assets would hurt Harvard’s bottom line and that the mission to revoke the industry’s social license is symbolic and ineffective. The reduction in percentage, and acknowledgement of the fact that these “companies are increasingly vulnerable to reputational damage,” is a recognition of what activists have been saying all along — that fossil fuel assets are financially untenable.
We appreciate Harvard’s disclosure and reduction in fossil fuel exposure. But we remain severely disappointed in Harvard’s failure to commit to fully divesting and reinvesting its fossil fuel holdings. Even as Harvard has repeatedly acknowledged the “urgent” need for “immediate” action on climate change, it has failed to take these necessary and impactful first steps.
If Harvard is to demonstrate meaningful climate leadership and live up to its prestigious reputation, it will need to commit to a truly effective decarbonization plan — one that is crafted in collaboration with the Harvard community and informed by the principles of climate justice. That starts with addressing the serious shortcomings and contradictions that are on display in Harvard’s most recent net-zero report, which we have enumerated below:
- Failure to commit to divestment: Even as countless peer institutions recognize the financial and moral need to divest, as the Harvard community expresses a clear will in favor of it, and as the fossil fuel industry itself admits the tactic’s efficacy, the report yet again fails to commit to divestment. Harvard’s continued embrace of the companies most responsible for our present crisis undermines any of the university’s decarbonization commitments. That’s why we’re calling on the Harvard Corporation and Harvard Management Company to immediately formalize a policy of non-investment in fossil fuel companies that explore or develop further reserves of fossil fuels, including in both its direct and indirect investments. Harvard’s success thus far in reducing overall exposure makes it clear that a workable and practical pathway to divestment exists for the university, and a recent move by Columbia University to formalize such a policy of non-investment in oil and gas companies shows its feasibility and importance.
- Lack of scientific alignment: The report professes a desire to align Harvard’s investment portfolio with science “by taking into account the best available scientific knowledge, using standards set by the United Nations Intergovernmental Panel on Climate Change (IPCC).” The IPCC’s 2018 Special Report lays out two distinct pathways to 1.5 degrees C (which the report unambiguously lays out should be the maximum allowable temperature rise). One pathway requires global carbon reductions of 50% by 2030 and net-zero 2050, leaving humanity with a 50% chance of keeping temperature rise below 1.5 degrees C. The other pathway requires net-zero pollution by 2040 in order to attain a two-thirds chance of avoiding 1.5 degrees C temperature rise. Harvard offers no explanation or defense as to how a 50–50 chance is more aligned with the best available scientific knowledge than a two-thirds chance. Worse, by failing to set any interim goals whatsoever, Harvard’s plan is not in line with even the more dangerous pathway. Peer institutions, on the other hand, have committed to far more robust and immediate net-zero goals. So long as Harvard omits interim benchmarks from its greenhouse gas reductions commitments and treats 2050 as an aspirational goal rather than a last-case scenario, it cannot claim to be in line with the science.
- Refusal to ensure impactful proxy voting: In its rhetoric, Harvard has shifted from claiming no responsibility for external managers to acknowledging their importance in terms of carbon impact. But in its policy, the report reaffirms Harvard’s hands-off approach to the people managing its money. While shareholder engagement with the fossil fuel industry has proven an ineffective strategy, shareholder engagement with other industries (those whose business models are more compatible with climate action) can be an important part of a decarbonization strategy. Unfortunately, Harvard has given up the ability to lead on this front. Harvard does not require third-party external managers of the endowment to follow any environmental, social, or governance proxy guidelines it sets, making them largely meaningless, given that a vast majority of the endowment is under such managers’ control. This is in contrast to several top peer institutions, which have extended shifts in climate investment policy to include indirect investments. Moreover, the proxy guidelines that Harvard does have are deeply flawed and prevent the use of proxy votes to seriously advance climate action.
- Incomplete carbon accounting methods: Harvard’s pledges to seek endowment-wide decarbonization are important. But the report reveals that Harvard has made use of flawed carbon accounting mechanisms to measure progress towards this goal. For example, Harvard writes that it plans to record portfolios’ “carbon intensity.” It’s no wonder why such a measure is a favorite of fossil fuel industry interests: It’s a very gameable metric, since carbon intensity can decrease even as net carbon emissions (the relevant metric when it comes to hopes of preserving a livable future) increases. Moreover, the fact that Harvard is calculating mostly at the portfolio rather than the company level allows the companies and industries with outsize emissions to hide in the aggregate. Finally, Harvard has not ruled out the possibility of heavy carbon offset use to achieve these goals, making it unclear whether they plan to meaningfully decarbonize their portfolio or just offload environmental responsibility onto others.
- Reliance on engagement: The report continues to endorse the dangerous and disproven view that shareholder engagement will convince fossil fuel companies to change their ways. Harvard itself has admitted that shareholder engagement is not an appropriate tool for changing a company’s core business model, so it’s a mystery why they expect it to effectively change the fossil fuel industry, whose decades of attacking Harvard faculty, undermining scientific consensus, and lobbying against meaningful climate action make clear that they’re no partner in change. A number of the examples the report cites as proof of shareholder engagement’s efficacy, moreover, are in reality loophole-ridden and flawed commitments. No major fossil fuel company has Paris-compliant carbon reduction plans — continued investment in such companies directly undermines stated commitments to decarbonize.
Fossil Fuel Divest Harvard is willing to work with the university to remedy these shortcomings, and to help craft a truly meaningful pathway to a just and stable future. We hope Harvard will accept the offer.