Subjects: ENI, ESG
University of Toronto Divesting $4 Billion Endowment from Fossil Fuel Investments, Commits to Net Zero Carbon Emissions by 2050
U of T is world's first university to join UN-convened Net-Zero Asset Owner Alliance
TORONTO, Oct. 27, 2021 /CNW/ - University of Toronto President Meric S. Gertler announced today that the University will divest its $4.0 billion endowment from investments in fossil fuel companies by the end of 2030. He also announced the University's target to cut the net greenhouse gas emissions from its endowment portfolio to zero by 2050, and that UTAM will allocate 10 percent of the endowment portfolio to sustainable and low-carbon investments by 2025. Based on the current size of the endowment, this represents an initial commitment of $400 million to such investments.
As part of the commitment to net zero carbon emissions associated with the endowment portfolio, the University of Toronto Asset Management Corporation (UTAM), the University's investment manager, has joined the UN-convened Net-Zero Asset Owner Alliance. The Alliance has established a framework to guide its members towards the 2050 net zero objective. The framework includes setting ambitious five-year targets, and alliance members must report regularly on their progress towards these targets. UTAM's membership in the Alliance on behalf of the University's endowment makes U of T the first university in the world to join this group of institutional investors, which together represent in excess of US$9 trillion in assets under management.
In his announcement, President Gertler commended the progress UTAM has made over the past five years in terms of integrating environmental, social and governance (ESG) factors into its investment decisions and stewardship activities (proxy voting, engagement and advocacy), as well as its transparency and reporting.
Driven by UTAM's commitment to responsible investing, the carbon footprint of the University's long-term portfolios1 decreased by 37% from 2017 to 2020, coming very close to achieving the University's stated objective of a 40% carbon footprint reduction by the end of 2030, approximately one decade ahead of the target timeline2.
President Gertler stated that, despite this tremendous progress on the decarbonization of the University's long-term portfolios, the University and UTAM must take additional, immediate and decisive action. This includes utilizing new tools to combat the climate crisis and further reduce greenhouse gas emissions from the endowment portfolio. UTAM's continuous efforts are reflected in the following commitments:
- To divest from all direct investments in fossil fuel companies within the next 12 months
- To divest from indirect exposure to investments in fossil fuel companies, typically held through pooled and commingled investment vehicles, by 20303
- To allocate 10% of the endowment portfolio (approximately CAD $400 million) to sustainable and low-carbon investment strategies by 2025
- To continue to engage with current and prospective asset managers to emphasize GHG emissions reduction in their portfolios and climate impact in the real economy
- To aim for net zero emissions in the endowment portfolio by 2050
- To set five-year targets following the framework developed by the Alliance
- To work with peer asset owners and investment managers to drive industry-wide commitment to net zero
- To report to stakeholders regularly on the progress towards divestment and net zero goals
President Gertler stressed that the divestment signals the University's strong commitment to the global fight against climate change. In tandem with this initiative, UTAM will continue its ESG integration approach through investment manager selection and stewardship activities, including active ownership. The University and UTAM strongly believe that engagement with companies, policy-makers and investment partners is a critical component of the strategy to achieve a net zero portfolio by 2050. Therefore, UTAM will continue to engage both directly and indirectly with the world's highest greenhouse gas emitters, including fossil fuel companies, through its affiliations with aligned initiatives such as Climate Action 100+, CDP, University Network for Investor Engagement, and the Canadian Coalition for Good Governance, as well as through our third-party collaborative engagement service provider, EOS at Federated Hermes.
The University and UTAM believe this multi-pronged approach and joint commitment to allocate more capital to sustainable investment strategies are reflective of U of T's uncompromising stance on climate change and its commitment to achieving a net zero endowment portfolio by 2050.
"At UTAM, we continue to intensify our focus on responsible investing. Divestment from fossil fuel companies and net zero carbon emissions for the endowment are the next steps in the journey that we began in earnest in 2016, when we became a signatory to the Principles for Responsible Investment on behalf of the University's endowment and pension portfolios," says Chuck O'Reilly, UTAM's President and Chief Investment Officer. "Responsible investing is integral to our mission, and we hope that our commitment to divestment and net zero inspires other institutional investors to support the transition to a lower-carbon economy."
1 Based on equity and equity-like holdings in public equity and private equity portfolios, including private infrastructure and real estate, and calculated as tonnes of CO2 equivalent per million dollars invested. |
2 Over the same period, the absolute total emissions of the long-term portfolios fell by more than 21%. |
3 Given UTAM's size, it typically invests in pooled and commingled investment vehicles alongside many other investors. This is typically the case for public market, hedge fund and illiquid private market strategies. Going forward, UTAM will actively encourage existing and potential investment managers to develop and launch fossil fuel-free or low carbon versions of their standard strategies, and where such strategies are available, UTAM will transfer or allocate exposures to them. This process of engaging with managers and migrating into new strategies may take several years to complete. |
About UTAM
UTAM is the investment manager of the University of Toronto's Pension, Endowment and short-term working capital assets. UTAM's Board of Directors delegates day-to-day investment management activities to UTAM. Our team of almost 30 professionals works closely with the Board, the expert Investment Committee, the university administration and various governance bodies in our management of the university's assets.
Related Links
U of T News: U of T to divest from fossil fuel investments, create climate-positive campus
SOURCE University of Toronto Asset Management Corporation (UTAM)
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