Fossil Fuels Panel Looks at Smith’s Investments

More than 100 students, faculty and other members of the Smith community gathered February 24 in the Campus Center to discuss fossil fuel investments and the college’s endowment. Sponsored by the President’s Office, the panel discussion was the third in a series of campus conversations in relation to the fossil fuels divestment campaign. Previous sessions on fossil fuels and divestment, in the fall semester, were organized by CEEDS and the students of Divest Smith College.

President Kathleen McCartney opened the panel discussion by noting that the series of campus conversations was “helping to educate me and our campus about the opportunities and trade-offs associated with any kind of investment strategy.” She introduced panelists Alice Handy, CEO of Investure, the firm that manages Smith’s investments; trustee Peggy Eisen ’75, chair of the Smith College Investment Committee; and Bob Litterman, chairman of the risk committee at Kepos Capital and a noted speaker on the pricing of carbon emissions and climate risk.

President McCartney set the conversation in context, noting that one-third of Smith’s operating budget comes from endowment income. “The earnings are intended to provide intergenerational equity,” she said. “The same quality of education you experience today should be available to generations to come, which is why alumnae and other friends of Smith are motivated to give.”

Following President McCartney’s introduction, Eisen began the panel conversation by explaining trustees’ duty to sustain the college’s mission.

“We are charged as fiduciaries with making sure the resources that are available to the college are deployed most effectively to support and advance the mission,” Eisen said.

Eisen was followed by Alice Handy, CEO of Investure, who noted the complexities of investment holdings in the modern market and the increased complications of trying to separate individual holdings in pooled investment funds.

While endowment portfolios were once invested fairly directly, Handy said, today most are invested through pooled structures or partnerships where colleges don’t own a particular security but instead own shares in a pool. Because of the way these funds are structured, Handy said, Smith would have to sell about 70 percent of its portfolio in order to totally divest of fossil fuel holdings or any potential for fossil fuel holdings.

At the same time, Handy said, managers of Smith’s endowment portfolio have a mandate to act responsibly. Sustainable investments, such as “a hydroelectric plant, or a new piece of technology that’s helping in a sustainable world, or a management that explicitly says that they’re going to do ESG [environment, social, and governance] investing” now represent 7 percent of the Smith portfolio.

According to Investure, Smith’s endowment has a total fossil fuels exposure of 6.5 percent. This includes 2.7 percent in publicly traded investments – 1.3 percent of which are in the “top 200”– and 3.8 percent in private equity holdings.

Handy was followed by Litterman, the risk manager, who emphasized that “We are wasting a scarce resource: the atmosphere’s ability to safely absorb emissions.” Litterman went on to discuss the need for world governments to incentivize the reduction of fossil fuel emissions.

After a question-and-answer session, President McCartney concluded the panel by stressing, while no decision has been made about Smith’s investments in fossil fuels, the tools to fight climate change extend beyond divestment. “It’s everyone’s responsibility,” McCartney said. “There are a number of strategies that have been articulated here today–like pressing Congress. We all have responsibility, and I take that responsibility very seriously.”