“We have a responsibility to take decisive action on climate change”: University of Toronto president
Meric Gertler announces climate change challenge, new investing strategy
University of Toronto President Meric Gertler today unveiled a 14-point plan of specific, targeted actions that aim to make a difference on climate change now.
Gertler outlined U of T’s plan to battle climate change in a bold report, Beyond Divestment: Taking Decisive Action on Climate Change.
Gertler said U of T’s approach to the investment of its endowment and pension funds should be broadened to consider environmental, social and governance (ESG) factors when appraising the long-term performance of firms in which it holds direct investments.
Beyond Divestment also outlines a plan of decisive action that calls on every facet of the University – as a leader in research, teaching, and as an energy consumer – to join in the fight against climate change.
“We must take action to limit the rise in global temperatures if we are to avoid catastrophic impacts on the planet and humanity,” Gertler said. “Universities in particular have a crucial and unique role to play in helping to meet that challenge, and as a publicly supported academic institution, the University of Toronto has a responsibility to take decisive action.”
Beyond Divestment is a response to the President’s Advisory Committee on Divestment from Fossil Fuels. That committee, led by environmental engineering professor Bryan Karney, released its own recommendations last December. The committee recommended that the University adopt a strategy of targeted and principled divestment as well as a number of initiatives in the broader field of sustainability.
U of T’s $6.5 billion long-term investments, mostly in pension and endowment funds, are managed by the University of Toronto Asset Management Corporation (UTAM). Gertler said he will ask UTAM to:
- Articulate principles that will enable consideration of ESG factors in undertaking direct long-term investments;
- Initiate the process to become a signatory to CDP (formerly known as the Carbon Disclosure Project);
- Evaluate signing onto the United Nations-supported Principles for Responsible Investment initiative;
- Determine ways in which it can vote proactively and deliberately on shareholder resolutions aimed at reducing climate-related risk for firms in which they are directly invested;
- Evaluate signing the Montreal Carbon Pledge, which commits investors to measuring and publicly disclosing the carbon footprint of their investment portfolios every year;
- Report annually on its efforts to assess ESG factors in making its investment decisions.
Finally, given the growing recognition of the importance of climate-related risk, the University should give serious consideration to extending a similar ESG factor-based approach to its indirect investments.
Gertler thanked Karney and the committee for their work.
Karney welcomed Beyond Divestment. “It is a thoughtful, ambitious, transparent and practical report, which certainly creatively takes our essential principles and works them out for the University. Significantly, the report calls on every part of the University to join in the fight against climate change and creates principles and approaches that will intelligently guide us to be progressively more sustainable in the future,” he said.
While the divestment committee chaired by Karney had concluded a “a blanket divestment strategy would be unprincipled and inappropriate” it had recommended that U of T divest immediately from fossil fuels companies that show “blatant disregard” for the 1.5 degree C threshold that forms the basis of the Paris Agreement.
Gertler confirmed that the University does not hold direct investments in any of the companies cited by the committee but he also said that U of T should broaden its focus beyond fossil fuel companies, since such companies only account for a quarter of Canada’s greenhouse gas emissions, with the balance produced by other sectors such as transportation, housing and manufacturing.
“An approach that considers ESG factors – including climate-related risk – as they pertain to all sectors of our economy would seem to offer the best chance of success in meeting the challenge of climate change, while fulfilling our fiduciary duties” to the University’s pension and endowment fund beneficiaries, the president argued. Such an approach would allow U of T to direct its investments actively, in a targeted and dynamic way, appraising the long-term performance of individual firms in a manner that accounts for their ESG practices, including climate-related risk. It could also take into consideration social considerations, such as the rights and wellbeing of Indigenous communities.
Although the Karney committee had recommended that U of T develop its own method of evaluating fossil fuels companies to determine whether they have disregarded the 1.5-degree threshold, Gertler concluded it would be more effective for the University to work with third-party organizations that have already developed tools and metrics by which to assess the ESG practices of firms. In considering a broader advocacy and leadership role for the University, he argued that it would be most effective for U of T to join with other groups promoting broader disclosure of carbon use and the adoption of measures to promote a low-carbon economy.
In particular, U of T would have more clout if it joined global coalitions such as the United Kingdom-based CDP, which “aims to inform investor decision-making, facilitate shareholder engagement, and encourage corporations to manage their carbon emissions more effectively.” Several of Canada’s largest pension funds, such as the Canadian Pension Plan Investment Board, are already CDP signatories and U of T would show leadership by becoming one of the first Canadian universities to become involved with the group, he said.
John Switzer, who chairs the UTAM board of directors, agreed that U of T should become a CDP signatory. “UTAM believes it is fitting that Canada's leading research-intensive University intends to become a signatory and we will work with the University as it becomes one of the first Canadian universities to join this organization.” He said that UTAM agrees that consideration of ESG-based factors is an important component of prudent investment management. “Although UTAM already incorporates many of these factors in its management of the University’s pension and endowment assets, we will work closely with the University to fully implement the President’s vision.”
Tessa Hebb, the director of the Ottawa-based Carleton Centre for Community Innovation, also endorsed signing on to the CDP. “When the CDP first started in Canada only a handful of Canadian companies responded,” Hebb told U of T News. “Our big investors then began to ask them to respond and now these companies are taking such requests seriously.”
Hebb said U of T’s ESG approach would be more effective in the fight against climate change than divestment.
“Divestment is not an effective strategy in the case of fossil fuel, it is a blunt instrument that doesn’t indicate what we want companies to do in order to achieve the 1.5 threshold,” Hebb said. “Our very largest institutional investors in Canada use an ESG approach – CPPIB, Ontario Teachers' Pension Plan, Caisse de Depot – to name a few. The approach being recommended here has the potential to be far more meaningful than selling a stock that someone else will buy.”
Ben Caldecott, the director of the Sustainable Finance Programme at the University of Oxford’s Smith School and a member of Oxford’s Socially Responsible Investment Review Committee, also endorsed the strategy outlined by Gertler, describing it as forward-looking. The U of T strategy, he said, “takes account of the latest work on how environment-related risks, including climate change, could affect investment portfolios. It will allow the University of Toronto to actively engage with and adopt new investment practices and products as they become available.”
The Karney committee report also recommended that U of T increase its commitment to environmental research and teaching and to promoting sustainability in the University’s own operations. In response, Gertler pledged that U of T will strengthen its support for environmental research, innovation and teaching, and will continue its efforts to make University operations more sustainable.
“The University’s most valuable and effective contributions to the global effort to avert and mitigate the consequences of climate change will flow from our fundamental role as an institution of research and education,” Gertler said. Among the initiatives he proposed are:
- a tri-campus clean-tech challenge to encourage environment- and energy-related entrepreneurship;
- $750,000 distributed over three years for climate-change related research and education initiatives;
- prioritizing climate change-related themes in selected programs and curricula;
- increasing the Utilities Reduction Revolving Fund by 50 per cent (from $5 million to $7.5 million) to encourage more extensive implementation of energy-saving retrofits;
- formally adopting substantially more rigorous energy efficiency standards for capital projects;
- pursuing opportunities to use our campuses as test beds for environmental and sustainability research and best practices;
- investigating the potential for development of other renewable energy projects.
Gertler also said he will establish a new university-wide committee on the environment, climate change and sustainability with a mandate to coordinate and advance U of T’s environmental research, innovation, education and energy consumption initiatives.