To the Carleton Community:
We write to share the news that the Carleton Board of Trustees voted today to take meaningful action to reduce exposure to fossil fuel investments in the College’s endowment.
Carleton has grappled for some time with the difficult question of whether to join the many peer colleges and universities that have expressed their commitment to sustainability through divestment from fossil fuels. The Board of Trustees has recognized the tension between two competing values: the desire to strengthen Carleton’s endowment so that it can continue to support the mission of the college, and the belief that the college should not derive profit from fossil fuel companies whose primary business contributes to the climate change that threatens our students’ futures.
In considering this issue, the Board of Trustees has appreciated the input it has received from students, including through the Divest Carleton Proposal of February 2022, the Carleton Student Association resolution of May 2020, and numerous editorials in The Carletonian; faculty, including through the “Sense of the Faculty” Resolution on Fossil Fuel Divestment of January 2023; the Carleton Responsible Investment Committee (CRIC) in its April 2022 letter; and alumni, including Alumni Divest Carleton in their April 2022 letter to the administration and Board. The increasing urgency of the climate crisis has given added weight to the arguments that have been made over the years about the importance of divestment for Carleton.
The Carleton College Board of Trustees has therefore resolved to take the following actions with regard to fossil fuel investments in the College’s endowment.
Building on our commitment in early 2020 of incorporating Environmental, Social and Governance (ESG) factors into the investment selection assessment process, and to accelerate the shift in balance between traditional and renewable sources of energy, Carleton will eliminate all direct holdings of fossil fuel companies and will not make new investments in private funds that focus exclusively on oil and gas extraction.
The endowment’s allocation to oil and gas investments has steadily declined over the past three years and stands at approximately 5% of the endowment today. We plan for and expect exposure to decrease as we will immediately sell and no longer purchase directly-owned publicly traded fossil fuel companies. Further, we will gradually eliminate private funds that focus exclusively on oil and gas extraction in a prudent manner that is consistent with an overarching emphasis on fiduciary responsibility. Given the illiquid profile of funds of this nature, we anticipate the remaining investments will decline over the next four to five years and will be fully liquidated by 2030. Finally, we will continue to favor investment managers who support the energy transition and companies that actively manage and minimize carbon emissions.
We will continue to report the portfolio’s fossil fuel exposure through the Investment Office’s fiscal year-end endowment review letters, which are publicly available on the Carleton website, and will review those results annually with CRIC (Carleton Responsible Investment Committee).
As a leader in environmental sustainability, Carleton has taken many significant steps over the years to incorporate ideals of sustainability into our campus operations and to support sustainable practices in the daily life of community members. Most recently, our pioneering geothermal wells project allowed us to transition the entire campus from steam heat to geothermal energy in 2021, resulting in a reduction of energy consumption by 46% compared to average use for the five years preceding implementation of our new energy plan. We are exceeding the targets set by our 2011 Climate Action Plan, and have charged a Sustainability Working Group with creating a new climate action plan that will accelerate our progress toward carbon neutrality. Our academic program in Environmental Studies is helping to educate the next generation of environmental scholars and professionals in the core scientific, humanistic, and social science perspectives that inform and seek to resolve environmental challenges around the world. These actions reflect Carleton’s longstanding commitment to being a model of responsible stewardship for the environment.
The climate crisis is the greatest challenge of our time, and will have an enormous impact on our students’ futures. While the consequences of a single endowment’s investment decisions may be limited, we join a growing community of colleges and organizations that can have collective impact and greater influence by acting together. Carleton’s action is part of the culture change that we know will be needed to successfully combat climate change.
We look forward to continuing to work with the entire Carleton community to promote sustainability in both education and practice, and appreciate your support of the College’s efforts to ensure that our students are prepared to approach the challenges of the future with knowledge, purpose, resilience, and hope.
Alison Byerly, President
Wally Weitz, Chair of the Board of Trustees
Frequently Asked Questions
What actions is Carleton taking related to divestment from fossil fuels?
We will immediately eliminate all direct holdings in fossil fuel companies and will not make new investments in private funds that focus exclusively on oil and gas extraction. With regard to direct holdings, the endowment currently owns two fossil fuel publicly traded stocks, and we will instruct the sub-advisors of the managed accounts that hold these companies to sell them and no longer purchase companies within the fossil fuel sector.
What is the timeline for Carleton’s divestment from fossil fuels?
We will immediately sell and no longer purchase directly-owned publicly traded fossil fuel companies. Further, we will gradually eliminate private funds that focus exclusively on oil and gas extraction in a prudent manner that is consistent with an overarching emphasis on fiduciary responsibility.
Private investments take longer to buy and sell as compared to their publicly traded counterparts because they typically do not transact on a secondary market or exchange. The structure of Carleton’s private fund investments allows for the return of principal and profits back to the endowment once the underlying private company investments are sold or liquidated. This process will result in a decline in these remaining investments over the next four to five years and will be complete by 2030.
What led the Board of Trustees to make this decision on divestment?
Fossil fuel divestment has been a topic of conversation within our community for over a decade, and the Board has thoughtfully weighed the benefits and drawbacks of divestment during this time. In the recent vote, the Board engaged in substantive research and discussion, with thoughtful and principled arguments made on both sides. Over the last several years, the Board has received advice to divest from numerous constituencies at Carleton, including formal proposals, letters, and petitions, from students, faculty, and alumni, making clear that community feeling, though not unified, is strong. The climate crisis is the major challenge of our time, and will have a substantial impact on our students’ futures. Carleton has a longstanding commitment to sustainability in our operations, and to environmental studies in our curriculum. This decision is consistent with those efforts.
Carleton’s history with the issue of divestment from fossil fuels spans nearly 20 years. Carleton established the Carleton Responsible Investment Committee (CRIC) in 2005 to play an advisory role regarding the ethical, social and environmental issues that arise in the management of the college endowment. The committee includes student, faculty and staff representation, and meets with the Investment Committee of the Board of Trustees, as well as the college’s chief investment officer and the vice president and treasurer. In early 2020, at the recommendation of CRIC, Carleton formalized its commitment to an Environmental, Social and Governance (ESG) investing process by incorporating related language into the college’s Investment Policy Statement. Before the most recent vote, the Board had twice taken a stance on divestment since CRIC was established. In 2013, the Board developed a statement on fossil fuel investment, and in 2015, CRIC put forth a proposal for divestment from fossil fuels, which the Board did not approve.
Why is divestment a Board decision?
The primary job of the Board of Trustees is to steward the college’s resources to ensure its long-term sustainability, and the endowment plays a critical role in that effort. Unlike other aspects of the college that are managed through administrative and shared governance structures, oversight of the endowment is the responsibility of the Board alone. The Investment Office, which has primary responsibility for managing the endowment, reports directly to the Board.
Will Carleton’s divestment policy negatively impact the College’s financial position, operating budget, or ability to provide financial aid?
The Investment Office will continue to manage a well-balanced portfolio, and does not anticipate a significant negative impact to the endowment as a result of this divestment policy. Given the limited amount of exposure in fossil fuel-related direct holdings and funds exclusively focused on oil and gas extraction, we believe we retain sufficient flexibility in the college’s investment portfolio to minimize potential impact on the endowment’s market value and corresponding support to the operating budget. The endowment supports 30% of college operations, including financial aid, and maintaining a strong endowment is critical to the college’s future.
Will Carleton continue to invest in the energy industry?
Yes. We will favor investment managers who support the energy transition and companies that actively manage and minimize carbon emissions. For example, we will maintain and pursue investments in companies that fund renewable energy projects, as well as businesses and technologies that help minimize carbon emissions (for example, environmentally-conscious infrastructure projects and wastewater management companies). We also will continue to support the energy transition through continued investments in green energies and sustainable practices on our campus, such as the geothermal heating and cooling project, construction of LEED-certified buildings, the planned installation of solar panels on new student residences, and the development of a plan to accelerate progress toward carbon neutrality by the Sustainability Working Group.
How does Carleton compare to its peers when it comes to divestment?
Similar to peer institutions that have committed to divesting in some form from fossil fuels, Carleton has adopted a set of constraints that will minimize its endowment’s exposure to fossil fuel investments. Fewer than 25% of U.S. colleges and universities whose endowments are over $1 billion have committed to some form of fossil fuel divestment. However, nearly 40% of Carleton’s liberal arts peers have committed to some form of fossil fuel divestment. While each school’s approach to divestment is unique, other schools that have committed to divesting from fossil fuels in some form include Williams, Amherst, Macalester, Vassar and Smith.