David Krantz is a doctoral candidate at Arizona State University’s School of Sustainability, where he serves as a cofounder and vice president of the student-run Sustainable and Impact Finance Initiative.
More than 200 institutions of higher learning have divested from fossil fuels or announced commitments to do so. This movement attempts to align their investments with their institutional values — but it is not the only way to pressure publicly traded companies to better address climate change. At Arizona State University, we students are working with our school’s endowment to change companies like BlackRock and Chevron from within. That has meant buying, rather than divesting, shares.
University endowments are investment accounts held in trust for students, typically managed by foundations and used to support scholarships and research. Schools are effectively shareholders, and shareholders have the right to vote — in person or remotely via a proxy ballot — on proposals submitted by the corporate board or other shareholders. These proposals can change how companies address climate. For example, last month shareholders at Chevron voted in favor of more accurate methane-emissions reporting, and those at ExxonMobil voted in favor of disclosing climate risks.
As partial owners of a company, shareholders also can request meetings with corporate representatives to express their thoughts on the organization’s plans — many of them have a staff dedicated to such dialogue, much like lawmakers often have people assigned to meet with constituents.
Along with voting proxies and proposing shareholder resolutions, these informal meetings are a potentially powerful tool in what’s known as shareholder engagement. While some activists take a hard line on divesting from any and all fossil fuels, my perspective is that engagement is a complementary strategy, like good cop/bad cop for Big Carbon.
But most university endowments are managed by asset managers such as BlackRock, State Street, and Vanguard, which historically have often not permitted their clients to vote their own proxies and instead have voted the asset manager’s preferences. Additionally, students in general lack awareness of how endowments work, so they typically don’t advocate for a say in how they are managed.
At ASU, our involvement began in the fall of 2020, when an endowment staffer recruited 20 students to draft proxy-voting guidelines for the investment, which the school adopted the following spring. It was quite an accomplishment — we wrote 36 pages of rules to decide how the endowment would vote — but we were thinking even bigger. We wanted to change how university communities interact with their endowments and the companies in which those funds are invested. So we founded a student club called the Sustainable and Impact Finance Initiative to institutionalize our work.
We were given the chance to manage $1 million of the $1 billion endowment and prove that sustainable investing — ESG, short for environmental, social, and corporate governance — could be profitable. Arguably, it was a trap. If the university was truly interested in sustainable investing, then why dedicate just one-tenth of 1 percent of the endowment to that goal? And what would happen if our choices were not as profitable? Our failed effort could be an excuse to avoid ESG. Then again, if we accepted the offer, we could show that green investing can be just as profitable as Big Carbon.
In spring 2021, we selected investments in companies whose business models improve sustainability and that our research indicated would be profitable, such as solar, along with exchange-traded funds in ESG and clean energy. We also dedicated less than 5 percent of our funds to buy shares in companies we wanted to change, such as BlackRock, the largest asset manager in the world, and Chevron. Our allocations meet the minimum amount required by the U.S. Securities and Exchange Commission to initiate shareholder proposals. We set up a meeting with BlackRock.
BlackRock representatives came to the meeting prepared with talking points, the sort that could have been read from a corporate brochure on sustainability. But they were not prepared for our question: What could we at ASU, one of the world’s leading academic centers for sustainability, do to help BlackRock vote shareholder proxies to better reflect the values that it and our university profess to share?
Silence. The last thing BlackRock representatives expected from us was an invitation to help them do sustainability better, particularly in terms of proxy voting. Shareholder proposals often try to push companies to make greener choices. We told BlackRock that too often it opposes these proposals and, effectively, votes in favor of the unsustainable status quo. They have not accepted our offer.
This past academic year, we turned our attention to Chevron, America’s largest corporate contributor to carbon emissions. We met with corporate representatives and asked the company for greater transparency of its lobbying through third parties. Such information is key to understanding Chevron’s impact on policy, which we would like to see informed by the goals of the Paris Agreement.
Chevron’s lobbying report last year simply listed trade associations to which Chevron belongs and that may lobby on its behalf, or for positions it favors. Thanks in part to our engagement, Chevron released more data this year, providing ranges for the financial contributions it makes to each trade group, and adding a footnote to disclose donations to the nonpartisan National Conference of State Legislatures as well as to the right-wing American Legislative Exchange Council, better known as ALEC — a disclosure for which we asked specifically.
Next, we asked Chevron to disclose its ties to groups that may not be lobbying, per se, but are nonetheless actively working to shape public opinion on climate, such as through greenwashing and disinformation campaigns. We also asked the company to disclose the methodology it uses to determine when the climate stances of trade associations — including the American Petroleum Institute, Chevron’s biggest beneficiary and a pioneer in climate disinformation — are misaligned with its stated climate goals. We hope to have a response by our next meeting, scheduled for November.
Change via engagement can be slow, but it does come. In late 2021, BlackRock announced a revision in policy, allowing some shareholders to more directly control a portion of their proxies — something that conservatives have hailed as a weakening of supposedly woke asset managers, but that we at ASU celebrate as an opportunity to vote for sustainability. This year, our student group has been deciding how to vote the ASU endowment’s proxies based on the guidelines that we developed.
We want to facilitate a nationwide network of student groups to participate in shareholder engagement through their university endowments. Together we can share best practices and leverage our collective investments to better hold companies accountable on matters of sustainability. After all, both the school and the endowment exist primarily to serve us students. We should have a say in the investments that help fund our education.
The views expressed here reflect those of the author.
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