On 18 March 2022, UCT’s Council announced its decision to divest from fossil fuels. At that time, the endowment’s investments in fossil fuels amounted to around 3.6% of the total of R5.1 billion with allocations of 0.4% to local renewable energy. In line with UCT’s declared strategy of beginning the divestment process with offshore assets, the university had reduced its fossil fuels exposure to around 2.3% towards the end of September 2022. In addition, the foundation has recently committed a significant amount (greater than 1.5%) to fund local infrastructure opportunities, which include renewable energy, waste to energy and water in South Africa.
Fossil Free UCT Timeline
- 2013: Nine staff, students and alumni write to the then-UCT finance director urging divestment.
- 2014: We launch our campaign on campus, with endorsement by Archbishop Emeritus Desmond Tutu. Former UCT Chancellor Graça Machel says at the UN Climate Summit in New York: ‘You must have the courage to tell business that it is not only about the profits but about our collective survival and wellbeing.’
- 2015: The UCT Council appoints an ethical investment task team to look into divestment and related ethical investment issues. Former Vice Chancellor Dr Max Price meets with us and May Boeve, leader of the global climate movement 350.org.
- 2016: Our petition for UCT to divest is handed over to Dr Price in person by students.
- 2017: UCT’s Convocation, the gathering of all alumni and faculty, votes overwhelmingly in support of UCT divesting from oil, gas and coal. A UCT divestment think tank meeting is co-hosted by UCT vice chancellor Dr Max Price, Pro Vice Chancellor for Climate Change Mark New and the Climate Action Project. The UCT Council approves a responsible investment policy, based on the work of the ethical investment task team, that creates the framework for formal institutional consideration of issues such as divestment.
- 2018: The Fossil Free UCT campaign, including the Green Campus Initiative and Climate Action Project, submit testimony on why UCT should divest to the Institutional Reconciliation and Transformation Commission. We meet for the first time with new Vice Chancellor Dr Mamokgethi Phakeng, and hand over our petition again. She indicates the university has accepted the principle of divestment.
- 2019: Representatives of the UCT Retirement Fund attend our workshop on ‘Climate-Proofing Retirement Funds’. After a year without any visible action from the university, we pass a second motion to Convocation calling on the University to divest.
- 2020: Numerous academics, students, school pupils and NGOs write to the new Council urging divestment. The University Panel on Responsible Investment hears the case for divestment directly for the first time. Convocation votes for a third time in favour of divestment. VC Prof Phakeng indicates again that UCT has accepted divestment in principle, but as yet there are no signs of implementation.
- 2021: Led by UCT students, we staged a protest to put pressure on the recently launched UPRI – the university’s panel on responsible investment – to make a strong case to the UCT council in favour of divestment. Our memorandum of demands was received by UPRI chair, Professor Tom Moultrie. Fossil Free UCT campaign was also able to present the rationale for divestment to members of the leadership cadre at UCT. The UPRI urges Council to divest from fossil fuels. GCI students establish a new petition calling on Council to adopt the UPRI’s recommendations that attracts over 5,400 signatures. Council indicates that it is “not opposed” to fossil fuel divestment, but opts to get advice from the UCT Foundation Trustees and the Joint Investment Committee, and make a final decision on divestment in March 2022.
- 2022 (March): On 18 March 2022, UCT’s Council announced its decision to divest from fossil fuels.
- 2022 (September): The university reduced its fossil fuels exposure to around 2.3% (from 3.6%). In addition, the foundation had recently committed a significant amount (greater than 1.5%) to fund local infrastructure opportunities, which include renewable energy, waste to energy and water in South Africa.
The Fossil Free UCT campaign was the founding campaign of Fossil Free SA, and is an ongoing collaboration with partners such as the UCT Green Campus Initiative (GCI), the Climate Action Project, and UCT academic staff members.
Your questions answered
UCT is the leading university in Africa, and a centre of excellence in climate research. It has a profound responsibility to model the behaviour that its research and teaching shows is most likely to help secure a safer climate – that is, to do everything in its power to reduce its contribution to climate change. It has a duty of care to its students that does not include making socially corrosive investments.
For it to continue to invest in and profit from the causes of climate change is completely at odds with its purported socially progressive mission; it’s behaving like a doctor who smokes front of their patients.
Fossil fuel divestment by UCT could have a profound and positive ripple effect through society, other universities, and the financial sector. It would demonstrate the kind of leadership the university claims to advocate, yet in this instance, fails to actually demonstrate.
There are also excellent and very sound financial reasons why it would be prudent for UCT to divest, as this article (co-authored by associate professor Co-Pierre Georg) we had published in Business Day early in 2020 explains: ‘Investors are sitting on a time bomb of fossil fuel assets’.
In a positive step, the UCT Retirement Fund surveyed its members in June 2020 to ask how much attention it should pay to environmental, social and governance issues, including climate. However, the RF is separate from the UCT endowment, which has been the main focus of our activism.
More detailed accounts of the case for UCT to divest appear in our long-standing petition, in this guest post on the ACDI blog, and in our 2018 submission to the Institutional Reconciliation and Transformation Commission.
An endowment is an investment fund that provides income to the university to supplement its grant from government and its income from student fees. Not all SA universities have endowments, but UCT has one of the biggest endowments in South Africa, worth R7–8 billion, alongside Wits, Stellenbosch and UNISA. UCT’s endowment is part-managed by the arms-length UCT Foundation, whose trustees are not publicly listed or known to us. Different portions of the endowment are allocated to different fund managers, such as Allan Gray and Coronation, neither of which are responsive on climate issues.
UCT’s finances are overseen by:
- On a day-to-day basis, the Joint Investment Committee (a rather secretive body; we cannot find out who serves on it). The JIC answers to:
- Council, UCT’s highest decision-making body.
- The new University Panel on Responsible Investment (established in 2018 as a result of our lobbying), chaired by Professor Tom Moultrie, which will in theory advise the JIC on how to modify its practices to incorporate responsible investment considerations.
The Vice-Chancellor is a member of all three bodies.
However, it is not yet clear:
- How robust the UPRI’s advice will be
- Whether the JIC will follow the UPRI’s guidance, and,
- What will happen if the two bodies disagree.
UCT’s Convocation is ‘a statutory body administered by the Office of the Registrar. It comprises graduates and all holders of diplomas and certificates of the university, the Vice-Chancellor, the Deputy Vice-Chancellors and the academic staff, as well as emeritus professors and emeritus associate professors.’
As of December 2020, Convocation has now voted THREE times in favour of divestment, each time by an overwhelming majority. Unfortunately, Convocation’s votes are non-binding, and the administration has not implemented its resolutions.
In the past, most investors or savers had their own personalised share portfolios. But the modern asset management industry cuts costs by pushing its clients into joint funds such as unit trusts that give clients little or no choice over the individual companies in which we end up being invested. Many people do not want to invest any longer in companies like Sasol, but are essentially forced to do so by asset managers like Allan Gray, which have so far declined to create fossil fuel-free joint investment funds. Creating a new fund in South Africa generally requires “seed-funding” of between R100 to R300 million. UCT and other leading SA institutions could, by diverting very small portions of their current portfolios, seed-fund several new competing fossil fuel-free funds. Several SA asset managers have already indicated their willingness to manage such funds, and believe they could secure competitive returns from those funds. Overseas, fossil fuel-free funds have mostly produced similar or better returns than those that continue to invest in fossil fuels.
You can read the full history of this campaign on our timeline back to 2013. We have secured the support of around two to three thousand UCT academics and students, at different times, for divestment. Hundreds of people have signed letters to the 2020-appointed Council in support of divestment. In response to our work, UCT has appointed first an ethical investment task team in 2015; then, in 2018, a university panel on responsible investment, which has heard the case for divestment. The current VC, Prof Phakeng, has said more than once that the university accepts the principle of divestment. All this is progress, but we can only end our campaign once divestment has been institutionalised; that is, written into university policies and procedures, and demonstrated in practice by the commitment of substantial capital into ethical investment funds.
|Argument against divestment||Our response|
|Shareholder engagement with fossil fuel companies is a more effective strategy than divestment.||
• It is now nearly 30 years since the world established a consensus on the need to reduce global carbon emissions, in the form of the UN Framework Convention on Climate Change. SA asset managers have had decades to show the effectiveness of shareholder activism in persuading fossil fuel companies to change their ways. Yet most have only recently begun to engage on the issue, and none can point to any substantive changes in actual practice secured by their engagement. The time to engage is long past; calls for prosecution would now be more appropriate.
• The evidence for dangerous climate breakdown is now so overwhelming that no-one serving as a fossil fuel company executive can claim ignorance. These executives are consciously and deliberately prioritising continued profit over environmental damage. Like tobacco industry executives, they are highly unlikely to be open to moral suasion.
• The university has no track record of shareholder engagement. It is strange to argue that divestment would prevent the university from doing something it has never done before.
• Engagement, if adopted in all sincerity and not as a figleaf for inaction on divestment, can be pursued in tandem with partial divestment.
• Dialogue and engagement can be useful, but only when managed by institutions with the resources, clout and determination to undertake the necessary research and demand the attention of company boards. Even with all due good intentions, UCT is probably not such an institution. The Vice Chancellor has said (at the May 2017 divestment think tank) that UCT does not have and cannot afford the expertise/resources to pursue a meaningful engagement policy of its own.
• Engagement, if adopted in all sincerity, must be outcomes-based and set clear targets for success, failing which complete divestment should be announced. For example, the university could insist that investee companies such as Sasol must meet required global annual carbon emissions reduction targets, currently a minimum 7.6%, or face incremental divestment.
• There is, sadly, little evidence (goo.gl/mvv67w) that engagement with fossil fuel companies is ever effective in persuading them to adjust their core business models.
|The university will lose income from divestment.||
• It is more likely that the university is losing or will lose money by remaining invested in fossil fuels. For example, over the past five years, typical portfolios based on the JSE Top 100 would have outperformed when decarbonised (research by ET Index Research, London, available on request).
• The university has not, to our knowledge, yet sought to establish or quantify what income it might lose or assessed whether such losses might be acceptable. There is good reason to think it would have gained financially by divesting sooner, as unpublished research by both ET Index Research and S&P indicates that risk-adjusted returns over the past five years in typical SA portfolios would have been improved by excluding fossil fuels.
• Many overseas institutions have divested without loss of income. The Financial Times notes that, ‘The outperformance of ESG strategies is beyond doubt.’ (goo.gl/eL1WdB). Index company MSCI’s research showed that its MSCI ACWI ex Fossil Fuels Index outperformed the conventional MSCI ACWI index in five of the six years to January 2018 (goo.gl/X1utAs).
• ‘Legendary’ investor Jeremy Grantham considers it a myth that divestment threatens returns and has compiled research in support of that argument (goo.gl/ePSnvk).
• Risk-adjusted investment returns may sometimes look better when fossil fuel companies are included in portfolios, but equity risk assessments do not fully price in objective criteria beyond the horizons of most investors, such as the probability of continuing rapid technological change in the energy sector, new regulations, abrupt stranding of assets, damages caused by accelerating climate change impacts and litigation by victims of climate change (goo.gl/bxQU9q).
|There’s no point in divesting because other less scrupulous/less engaged investors will just buy up the shares.||
• Oil giant Shell has itself conceded the potential efficacy of divestment, noting in its 2017 annual report (p. 13) that: ‘Additionally, some groups are pressuring certain investors to divest their investments in fossil fuel companies. If this were to continue, it could have a material adverse effect on the price of our securities and our ability to access equity capital markets. The World Bank has also announced plans to stop financing upstream oil and gas projects in 2019. Similarly, according to press reports, other financial institutions also appear to be considering limiting their exposure to certain fossil fuel projects. Accordingly, our ability to use financing for future projects may be adversely impacted. This could also adversely impact our potential partners’ ability to finance their portion of costs, either through equity or debt… Further, in some countries, governments and regulators have filed lawsuits seeking to hold fossil fuel companies liable for costs associated with climate change. While we believe these lawsuits to be without merit, losing any of these lawsuits could have a material adverse effect on our earnings, cash flows and financial condition.’
• Divestment is as much a social as financial action. If announced publicly, divestment can deal rolling reputational hits to the companies concerned. As a 2013 Oxford Sustainable Finance Programme report on divestment notes: ‘The outcome of the stigmatisation process, which the fossil fuel divestment campaign has now triggered, poses the most far-reaching threat to fossil fuel companies and the vast energy value chain.’
• Divestment campaigns against slavery, apartheid and tobacco (now the target of renewed divestment efforts) have been part of many social movements that succeeded despite less ethical parties buying up shares.
• If funds can be redirected from fossil fuels into cleaner energy (admittedly not always simple), there is an undoubted direct benefit.
• In some contexts, divestment is now also having a financial impact on fossil fuel companies (goo.gl/XaYgzd).
|Divestment may lead to reduced research funding from Sasol.||
• UCT should not allow itself to be held hostage to a human rights-abusing fossil fuel company.
• There’s no predicting how Sasol might choose to respond to UCT divesting from its shares. But the two are not necessarily related. Sasol funds research because it benefits from doing so. For it to withdraw research funding would be self-defeating.
• UCT does not promise every donor that it will invest in them. There is no reason why Sasol should be a special case.
• Even if Sasol did withdraw research funding, more progressive companies, such as Axa which has both divested and funds the UCT African Climate Risk chair, are stepping in.
|The university should decarbonise its own operations and facilities before divesting.||We agree that the university should, while adopting an ethical investment policy, also work to reduce the various environmental impacts of its operations in all dimensions, and have always advocated for this. But efforts to reduce environmental impacts are usually incomplete and imperfect, and action in one domain cannot be predicated on first achieving perfection in another. Decarbonisation efforts in all realms are extremely urgent and must be pursued in parallel: UCT should divest and decarbonise its own operations.|
|We are still dependent on fossil fuels, and so it is hypocritical to divest from them. Also, people will lose their jobs.||
• In South Africa, numerous studies now show renewable energy would be a healthier, cheaper option in the electricity sector. Change will be slower in the transport sector, but the time to set clear targets for decarbonisation is now, as even other developing countries are already doing. (No less than 48 developing countries now have targets for 100% renewable energy.) Too many fossil fuel companies play lip service to the Paris climate agreement while in fact doing their best to stall compliance even with existing regulations for controlling air pollution, much less setting their own clear targets for phasing out emissions. Continued investment in any particular fossil fuel company can only be justified when that company has committed itself to science-based targets for decarbonisation in alignment with global targets. For examples of companies that have already done this, see sciencebasedtargets.org.
• Arguments that jobs will be destroyed by divestment ignore the fact that these industries are already destroying jobs and livelihoods in other sectors; they are cannibalistic.
• The One Million Climate Jobs campaign estimates that over 20 years, 1.7 million direct and indirect new jobs could be created by decarbonising the SA economy, while 115,000 jobs would be lost. These estimates are consistent with the experience of countries that have already substantially decarbonised. Jobs in the fossil fuel sector are often hazardous and low-paid compared to those in the renewable energy sector, and these jobs are already disappearing. Painful job losses can most likely be eased if fossil fuel companies commit early to a carefully planned ‘just transition’.
• It has been pointed out by the International Trade Union Confederation that ‘there are no jobs on a dead planet’.
Divestment is not just or even mostly about moving money; it is at its heart a social and moral movement that asks us all to take personal responsibility for climate change by examining how we are linked financially to the companies most responsible for it. Divestment works not just when money moves from fracking to wind power, but when a pensioner’s ethical decision about their savings turns them into an activist, when an engineering student decides they don’t want to go and work for Sasol, when a politician sees their constituents working to move their money and understands how important climate breakdown is.
The divestment movement has fostered many climate activists who have gone on to work in new arenas, such as Extinction Rebellion and Greta Thunberg’s FridaysforFuture.
The social and political nature of fossil fuel divestment (and its links to our own anti-apartheid struggle in South Africa) has been very well explained by Robert Massie, a senior advisor from Boston Common Asset Management in the US, speaking in 2015.
Well, I’ve heard [this claim] that divestment is ineffective and I would like to suggest otherwise. Taking the South African case, where I wrote a 700-page book on it, it’s absolutely true it had no effect on the stock price and that’s totally irrelevant. At no point during the South African divestment or in the fossil fuel movement does anyone care about the stock price of these companies. If you look at it through finance, you see no effect and therefore you conclude that there’s been no impact. But if you look at it through the discipline of history, you see that it’s incontrovertible that step by step by step it was the South African divestment movement that changed the public discourse, that transformed the decisions of corporations to get out of South Africa and our government, led by a Republican Senate, to pass a comprehensive sanctions bill. Well, one of the things that’s fascinating about it is that climate change has been one of those problems where we’ve been hoping that someone else would do something about it. But divestment has the impact of saying, what are your direct responsibilities? If you own stock in Exxon, if you’re receiving dividends from Exxon whose business model is to destroy the planet, do you feel comfortable with that? Do you endorse what they’re doing? Normally, when you own a stock, you’re endorsing their business plan. And so instead of pushing this off to someone else, it transforms people and institutions exactly as a democracy should.
- The current Vice Chancellor, Prof Phakeng, has now indicated twice, at a meeting in 2018, and publicly during the December 2020 meeting of Convocation, that the UCT administration accepts the principle of divestment. However, the university has to date not actually moved a rand of capital away from fossil fuels. Divestment has not been integrated into formal policies and procedures in any way.
- In response to our campaign, the university did create in 2015 an ethical investment task team (in which we participated), and then a University Panel on Responsible Investment in 2018. In October 2020, we were invited to present an in-depth case for divestment to the UPRI, which we did, to a generally warm reception. However, three years after the UPRI was appointed, it has (as of January 2021) yet to make a single formal recommendation to the university.
- The university has appointed a sustainability officer and made moves to integrate sustainability into its operations, with, e.g., solar installations being planned for new buildings. (We are not claiming full credit for these welcome changes.)
We can only declare success and end our campaign once divestment has been institutionalised; that is, written into university policies and procedures, and demonstrated in practice by the commitment of substantial capital into ethical investment funds. As of August 2021, the University Panel on Responsible Investment has recommended that Council adopt a policy of complete divestment by no later than 2030, which is a great step forward.
- Climate breakdown and other ill effects of fossil fuel use are already destroying numerous jobs and livelihoods.
- Divestment will not put fossil fuel companies out of business overnight, but will send a strong signal for transformation.
- Fossil fuel companies’ resistance to changing business models is a far greater threat to jobs than divestment.
- Multiple assessments suggest a just transition to a sustainable economy could create more jobs than the fossil fuel industry currently offers.
- The Fossil Free UCT campaign strongly supports the principle of just transition; that is, that individuals and communities vulnerable to losing employment in the energy transition should be supported in finding new opportunities and incomes.