Harvard’s Fossil Fuel Investments Are Illegal, Alleges Complaint

Legal Strategy Has the Potential to Reshape Institutional Investing Nationwide

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or nearly a decade, the Fossil Fuel Divest Harvard (FFDH) campaign has argued that in an age of climate crisis, it’s wrong to invest in the companies destroying the planet. Today, FFDH escalates that argument to the Massachusetts attorney general, asserting that Harvard’s fossil fuel investments aren’t just immoral — but also illegal. The legal strategy has the potential to reshape institutional investing in a time of climate crisis.

Fossil Fuel Divest Harvard is a movement that believes that if it’s wrong to destroy the planet, it’s wrong to invest in that destruction.

The argument takes the form of an official complaint filed this morning, in which student organizers, alongside concerned faculty, climate scientists, alumni, political leaders, civic groups, and community members, allege that Harvard’s estimated $838 million invested in the fossil fuel industry represents a violation of its fiduciary duty under the laws of the Commonwealth.

Specifically, the complaint addresses the failure of the Harvard Corporation — the university’s highest governing board — to comply with the 2009 Uniform Prudent Management of Institutional Funds Act (UPMIFA). Under this act, charitable institutions such as Harvard are bound by three overarching duties: the duty to consider charitable purpose in investments, the duty to invest with prudence, and the duty to invest with loyalty.

Harvard’s charitable purpose is the advancement and education of young people — a mission that is undermined by the university’s investments in an industry that has spent years sowing doubt about climate science, lobbying against meaningful climate action, and even attacking Harvard’s own faculty. The extraction of fossil fuels damages the world’s natural systems and disproportionately harms youth, poor people, and communities of color, and thus, profiting from such destructive activities violates Harvard’s obligation under the law.

“Seeking profit from such activities today, or in the future, cannot be squared with Harvard’s charitable purposes,” said former SEC commissioner Bevis Longstreth (Harvard Law School ‘61), an attorney and legal scholar who was influential in UPMIFA’s original drafting. “For the reasons set forth in the complaint, the duties of care, skill and caution, together with the overriding command of this Act to consider the charitable purposes served by Harvard University and its endowment, compel a decision not to hold or invest in companies whose businesses are materially dependent on carbon-emitting energy.”

APPENDIX C from the complaint: financial performance of the stock market generally (top) versus financial performance of fossil fuel companies specifically (bottom) since 2011. Fossil Fuel Divest Harvard began calling on Harvard to divest in 2012.

The law also requires the Corporation to manage Harvard’s assets with prudence. But given the fossil fuel industry’s poor financial performance (the world’s largest oil companies lost nearly $90 billion in value in the first three quarters of 2020), Harvard’s continued investment in fossil fuels is “a losing proposition,” as the complaint puts it. This risk is amplified by the industry’s well-documented pattern of fraud, with AG Healey currently suing ExxonMobil for covering up climate risks in its public disclosures.

“We need actions like this to change the legal status quo,” said Ted Hamilton (Harvard Law School ‘16), co-founder and staff attorney at the Climate Defense Project, the environmental litigation group with whom FFDH prepared the complaint. “Harvard and the fossil fuel industry have enjoyed decades of lax enforcement and scant oversight, but the legal system is starting to catch up to them. The attorney general is fully empowered to investigate and correct these violations, and we hope this will be a first step toward climate accountability.”

The final overarching requirement, loyalty, is the legal duty to act in the best interest of the institution as a whole — one undermined by various fossil fuel conflicts of interest. Several of Harvard’s trustees have or had significant ties to the industry; in the case currently being prosecuted by AG Healey, for example, Harvard Corporation trustee Ted Wells represents ExxonMobil. Other trustees, such as private equity CEOs David Rubenstein and Paul Finnegan, have touted fossil fuels on national television and invested in pipelines. Additionally, many of the faculty responsible for crafting Harvard’s climate policies accept significant funding from fossil fuel companies. The result is that industry interests are privileged in Harvard decision-making, even as their actions put the university at risk.

The nearly 70 signatories include top climate scientists such as Dr. James E. Hansen of Columbia, Dr. Robert Howarth of Cornell, Dr. Daniel Kammen (Harvard Graduate School of Arts and Sciences ’88) of UC Berkeley, Dr. Geoffrey Supran of Harvard, and Dr. Michael E. Mann of Penn State; former U.S. Senator and Harvard Board of Overseers member Timothy Wirth (Harvard College ’61) and two other former members of the Harvard Board of Overseers; and members of the Massachusetts Legislature and the city councils of Cambridge, Boston, Somerville, and Newton.

“To preserve hope for a just and stable climate future, we need to dramatically cut our greenhouse gas emissions. We need to shift away from fossil fuels as fast as possible, said Kammen. “And we know that divestment works.”

APPENDIX A from the complaint: long-term flood risk to Harvard’s campus under the status quo (left) and under a more optimistic emissions reduction pathway (right). Maps prepared by Dr. James E. Hansen, Columbia University.

This complaint reflects a broader trend of using legal strategies to target the fossil fuel industry for its environmental destruction and injustice, and is part of a growing strategy that uses investment law to take on industry malfeasance and institutional inaction. And since some version of the UPMIFA exists in nearly every U.S. state, if the complaint is successful, and if the AG were to find fossil fuel stocks unacceptable for investment by Harvard, it could set a precedent nationwide.

“Our generation needs Harvard to step up and fight for us,” said FFDH Organizer Morgan Whitten (Harvard College ‘21). “As peer institutions like Oxford, Cambridge, Brown, Cornell, and the University of California lead the way on divestment, Harvard’s inaction only grows more untenable. We’re hopeful that this complaint will push Harvard to recognize the reality of the climate crisis, and to take up the opportunity to help secure a more just and stable future.”

Read the full complaint: https://climatedefenseproject.org/wp-content/uploads/2021/03/Harvard-Fossil-Fuel-Investment-Complaint.pdf. And see the updated list of signatories: https://divestharvard.medium.com/support-continues-to-grow-for-ag-divestment-complaint-277a42898385

Follow Fossil Fuel Divest Harvard on Twitter, Facebook, and Instagram. Want to join one of our meetings and see what we’re all about? Fill out this interest form!

We call upon Harvard to #divest its endowment from fossil fuel companies and reinvest responsibly.

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