coal divestment at unc

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Jeremy Godsell | Sapna Patel | Stella Radford | Nikhil Umesh Coal Divestment at UNC - 4.24.15 ENST 698

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Page 1: Coal Divestment at UNC

Jeremy Godsell | Sapna Patel | Stella Radford | Nikhil Umesh

Coal Divestment at UNC - 4.24.15 ENST 698

Page 2: Coal Divestment at UNC

Executive Summary

●  UNC  Management  Company  Divest  from  Coal-­‐holding  funds  and  stocks  ●  Tracking  of  investments  being  made  in  the  endowment  to  ensure  transparency  ●  Stakeholder  input  and  formal  stance  from  Trustees  on  corporate  governance  

 

Highlights   Concerns   Recommenda3ons  

Problem:  Examining  the  efficacy  of  dives3ng  from  stocks  and  funds  held  in  coal  in  UNC-­‐Chapel  Hill’s  about  $3  billion  endowment,  and  crea3ng  frameworks  for  corporate  social  governance.  

Outcomes    

[insert  screenshot  of  relevant  slide]  

Page 3: Coal Divestment at UNC

What is Divestment?

●  Refers to the sale or reduction of an asset via liquidation or exchange.

●  Euphemistic for “socially responsible investing”

●  Justifications: ○  Financial ○  Political ○  Ethical

●  Strategies may include: ○  Disaggregation ○  Shareholder Advocacy

Page 4: Coal Divestment at UNC

History of Divestment at UNC ●  Apartheid South Africa (1987) disinvestment led by Anti-Apartheid Support Group1

●  Sudan Divestment Resolution (2008) resulted in all companies with ties to Sudan being added to Management Company’s “Prohibited List”2

●  Board of Trustees pass a non-binding resolution requiring Management Company to research investing in “environmentally-friendly clean energy strategies” (2014)

1987 2008 Present

Page 5: Coal Divestment at UNC

Precedent for Coal Divestment

●  20+ colleges & universities have divested in the U.S.3

●  Stanford represents the largest “purge” from coal with a $21.4 billion endowment

●  Months later, Stanford invested in three oil and gas companies, to the dismay of many faculty

Page 6: Coal Divestment at UNC

Management of the UNC Endowment

●  The majority of the UNC endowment is managed by the UNC Management Company, Inc., established in 20034

●  It is a professionally staffed company

●  Four primary teams that make up the UNC Management Company

●  The Management Company is governed by a Board of Directors including UNC Chapel Hill leadership

Page 7: Coal Divestment at UNC

Allocation of the UNC Endowment

●  The UNC Endowment is subdivided into eight categories similar to most mutual funds5

●  6.5% of the endowment is invested in the Energy and Natural Resources sector

●  This amounts to approximately 172 million dollars tied up in energy interests

Page 8: Coal Divestment at UNC

Coal’s Future in the Market

•  Resource royalty taxes likely to increase in the future → less financially attractive to investors6

•  More expensive coal = more competition from renewables

•  Policy changes: EPA proposal to limit tones of CO2/megawatt hour/power

•  Competition from natural gas → severance tax decreased recently7

Result: emerging trend of decreasing return on coal

Page 9: Coal Divestment at UNC

Prospects for Natural Gas Investment

●  Production and use of natural gas especially in the United States is quickly increasing

●  Projections for coming years paint a positive picture overall for investment in natural gas commodities

●  Natural gas causes 50% fewer emissions than coal, and is a bridging technology

Page 10: Coal Divestment at UNC

Investment into Renewables •  Market drivers:

•  Renewable portfolio standards implemented in 37 states (March 2013)10

•  Federal incentives: Production Tax Credits11

•  Global trends for investments in renewable energy12

•  increasing steadily until 2011 •  Torrefied wood - alternative viable

energy source and also a promising area for reinvestment

Page 11: Coal Divestment at UNC

Recommendations

1. Divestment

2. Transparency

3. Stakeholder input

Page 12: Coal Divestment at UNC

Executive Summary

●  UNC  Management  Company  Divest  from  Coal-­‐holding  funds  and  stocks  ●  Tracking  of  investments  being  made  in  the  endowment  to  ensure  transparency  ●  Stakeholder  input  and  formal  stance  from  Trustees  on  corporate  governance  

 

Highlights   Concerns   Recommenda3ons  

Problem:  Examining  the  efficacy  of  divesFng  from  stocks  and  funds  held  in  coal  in  UNC-­‐Chapel  Hill’s  about  $3  billion  endowment,  and  creaFng  frameworks  for  corporate  social  governance.  

Outcomes    

[insert  screenshot  of  relevant  slide]  

Page 13: Coal Divestment at UNC

Sapna Patel Nikhil Umesh Stella Radford Jeremy Godsell

Thank You!

Page 14: Coal Divestment at UNC

References 1.  "Anti-Apartheid Support Group of the University of North Carolina at Chapel Hill Records, 1980-1987." Collection Number:

40143. UNC Archives, n.d. Web. 20 Apr. 2015. 2.  "The Case for UNC to Divest from Coal." Board of Trustees Presentation (n.d.): n. pag. Web. 20 Apr. 2015. 3.  Wines, Michael. "Stanford to Purge $18 Billion Endowment of Coal Stock.The New York Times. The New York Times, 06

May 2014. Web. 20 Apr. 2015. 4.  "About UNCMC." UNC Management Company Inc. N.p., n.d. Web. 20 Apr. 2015. 5.  "Fiscal Year 2013 Annual Report." UNC Management Company (n.d.): n. pag. 2014. Web. 6.  Testa. B. M. “Coal’s Uncertain Future.” Planning. Vol 80, Iss 8. Aug 2014. 7.  Kuykendal. T. “W.Va. Eyes Natural Gas to Replace Declining Coal Revenues.” The State Journal, vol 28, iss 46. 20 Nov.

2012. Web. 20 Apr. 2015. 8.  Glassman, James K. “Betting on the Natural Gas Boom.” Kiplinger’s Personal Finance. June, 2013. Web. 20 April 2015. 9.  “How To Invest In Natural Gas.” CommodityHQ. Web. Accessed 20 April, 2015. 10.  Rabe, Barry. “The Expanding Role of State Renewable Portfolio Standards.” Pew Center on Global Climate Change. June

2006. Web. 20 Apr. 2015. 11.  Bird, L.; Parsons, B.; et al. “Policies and Market Factors Driving Wind Power Development in the United States.” National

Renewable Energy Laboratory. July 2003. Web. 20 Apr. 2015. 12.  “Global Trends in Renewable Energy Investment 2014: Key Findings.” FS-UNEP Collaborating Centre for Climate &

Sustainability Energy Finance. Web. 20 Apr. 2015.