Objective #1: Divest from the top 200 coal and oil/gas reserve owners
The Carbon Underground 200 is recognized as the standard for going fossil-free. These are the top 100 coal and the top 100 oil and gas publicly-traded fossil fuel reserve holders globally, ranked by the potential carbon emissions content of their reported reserves. Companies in the Carbon 200 include
- Royal Dutch Shell
- TotalEnergies
- ExxonMobile
- Chevron
The full list of the Carbon Underground 200 is updated each quarter and is available from fossilfreefunds.org
Objective #2: Evaluate all carbon-intensive companies for the existence and quality of a low-carbon transition plan.
Many companies outside the carbon underground 200 have high greenhouse gas (GHG) emissions. These include companies that produce energy-intensive products such as vehicles and engines. Many vehicle manufacturers, such as Ford, have set net-zero emissions targets and published plans of how they intend to achieve their climate goals.
NAUF should work with their investment manager to implement a screening process to identify carbon-intensive companies in the portfolio and determine the existence and quality of a low-carbon transition plan. Criteria should be developed to determine if a carbon-intensive company is included in the endowment portfolio based on the quality of its transition plan.
A carbon-intensive company can be defined by a number of qualifications
- Industry: energy, utilities, manufacturing, steel, aluminum, concrete, chemicals, aviation, marine shipping, and heavy trucking
- Carbon efficiency: carbon efficiency of a company is calculated by dividing annual GHG emissions into annual revenue.
- Carbon footprint: the carbon footprint of a portfolio company is equal to its financed emissions (annual GHG emissions * attribution factor).
A low-carbon transition plan should be evaluated against specific criteria assessing carbon performance and energy transition initiatives.
- The Transition Pathway Initiative provides a widely regarded framework for evaluating the quality of a company’s low-carbon transition plan. Data is publicly available.
NAUF should also consider evaluating portfolio companies more broadly for their support of a just transition. The International Labour Organization defines a just transition as “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”. Climate Action 100, an initiative to hold carbon-intensive companies accountable for action on climate change, has developed indicators to assess the quality of a company’s commitment to advancing a just transition.
Objective #3: Gather feedback from NAU students, faculty, alumni, and staff on priorities for a socially responsible investment (SRI) policy
NAUF should develop a socially responsible investment (SRI) policy using input gathered from the community. The socially responsible investment policy should make clear that NAU’s non-pecuniary values, such as environmental stewardship and GHG emission reduction, are reflected in the endowment investment strategy. Common SRI approaches include
- Negative screening: What kind of companies do not align with NAUs values and therefore are screened from the portfolio? Fossil fuel companies are clearly misaligned with NAU’s elevating excellence strategy, specifically the carbon neutrality goal, so they should be screened from the portfolio.
- Positive screening: What companies hold similar values to NAU and help advance the mission of the university? Through positive screening, these companies would be selected for investment.
- Engagement: As a shareholder in companies, NAUF can vote at board meetings and support various shareholder resolutions.
NAUF and the endowment exist for the sole purpose of benefiting NAU. Therefore, it makes sense that the broader NAU community should have opportunities to engage with NAUF on the endowment’s investment policy. Possibilities include
- Annual NAU community survey, sent to students, faculty, alumni, and staff, to collect data on priorities for the endowment investment policy.
- Annual state-of-the-endowment meeting, open to the public, where NAUF presents on endowment performance, initiatives funded in the past year, and investment policy details.
Objective #4: Disclose endowment holdings and investment policy annually
It’s important to increase transparency around holdings in the endowment and the investment policy. This can be achieved by expanding the 2023 Supplemental Fund Report to include details on investment holdings and investment policy. The annual report should include at minimum
- A list of all index funds the endowment is invested in
- The top holdings from each index fund
- An inventory of financed emissions from the previous fiscal year
- A detailed description of the investment policy