On Monday, October 30th, a coalition of students called The Solidarity Six from schools across the nation, including the University of Pennsylvania, submitted divestment complaints to their respective attorney generals’ offices. These complaints aim to hold universities accountable for their morally misguided and financially irresponsible ties to the fossil fuel industry.
What is a divestment complaint?
This is a legal complaint filed under the Pennsylvania Decedents, Estates, and Fiduciaries Code and Nonprofit Law, a law that outlines the fiduciary duty of nonprofits, like universities, to consider how their investments align with their social values as an institution. Outside of Pennsylvania, a similar law called the Uniform Prudent Management of Institutional Funds has been the basis for complaints
Is there any precedent for this type of complaint?
Yes! The wave of divestment complaints on the university level started with Fossil Fuel Divest Harvard’s complaint in spring 2021. That following fall, Harvard announced its divestment from fossil fuels. The next year, in spring 2022, the “Fossil Free Five”—consisting of Vanderbilt, MIT, Stanford, Yale, and Princeton—filed their complaints together. That following fall, Princeton not only divested, but cut its other professional ties with the fossil fuel industry.
Details of our complaint: Letter: The document begins with a short letter addressed to Attorney General Henry, which provides a high-level summary of the complaint’s reasoning. The letter asks the Attorney General to use the power of her office “to order the University of Pennsylvania Trustees to cease all direct and indirect investments in fossil fuels.” It concludes by noting the undeniable connections between the board of Trustees and the fossil fuel industry, and expresses the hope that further discussions will occur between Fossil Free Penn and the Attorney General’s Office “to discuss legal avenues to address this matter”. Supporting Documentation
The Board of Trustees’ Violation of Pennsylvania Law
By investing in fossil fuels, the Board of Trustees has violated its legal duties as the manager of Penn’s money.
The trustees are required to exercise reasonable care and prudence when making investments, in a manner they believe to be in the best interests of the corporation.
They are also required to consider an investment’s relationship to the charitable purposes of the trust, as well as the investment’s impact on the organization’s surrounding community.
The Board of Trustees has failed in both of these duties:
In light of the climate crisis and an increasing shift towards clean energy, fossil fuel investments are financially risky and volatile.
Investment in fossil fuels is in direct opposition to UPenn’s stated commitments to “taking action to mitigate climate impacts”. Both the fossil fuel industry and the impacts of the climate crisis negatively impact the Philadelphia community.
The University of Pennsylvania’s Social and Environmental Commitments
UPenn has very clearly demonstrated through policies and statements that they recognize the severity of the climate crisis and Penn’s responsibility to address it.
Initiatives include the Climate and Sustainability Action Plan, One Planet, One Penn, and the Wharton Initiative for Environmental Leadership.
Penn even divested directly from fossil fuels, a good first step, but this only represents a tiny percentage of the university’s total investment in the industry.
The Scientific Reality and Risks of Climate Change
Climate change is happening as a direct result of greenhouse gas emissions, which are caused by production and use of fossil fuels..
The effects of climate change will be environmentally devastating, negatively affecting the local, national, and global community.
The Societal Effects of Climate Change and Fossil Fuel Infrastructure
Climate change and the fossil fuel industry disproportionately affect marginalized communities, exacerbating inequality and poverty.
Climate change also has a negative effect on overall public health, causing more heat and severe weather-related disease and death.
The Failure of Fossil Fuel Companies to Address Climate Risks
Fossil fuels have known about the harmful effects of greenhouse gasses for several decades, and have engaged in a deliberate misinformation campaign to skew perceptions on this issue.
The fossil fuel industry has shown unwillingness to shift to cleaner energy production, or to even consider climate risk in their business plans.
The industry actively undermines climate-friendly policy and attempts to silence and delegitimize climate protestors.
The Financial Risk of Fossil Fuel Investments
Financial data over the last decade demonstrates a clear decline in the fossil fuel sector, as consumer demand drops and emissions regulations become stricter.
Given this trend is likely to continue, investing in the fossil fuel industry is an imprudent financial decision.
The Financial Prudence of Fossil Fuel Divestments
Two major financial management firms, BlackRock and Meketa, have found that divestment from fossil fuels has no negative financial impacts; if anything it improves returns.
As divestment does not threaten the profitability of funds, there is no financial reason for Penn to avoid divestment.
Industry Fraud and the Fiduciary Duty to Avoid Fraudulent Investments
The fossil fuel industry’s fraudulent attempts to hide the financial risks inherent in fossil fuel investment are well-documented and widely-known.
Despite a plethora of lawsuits and shareholder concerns, fossil fuel companies still fail to provide a plan to address the effects of climate change on their industry and businesses.
The Fossil Fuel Industry’s Scientific Misinformation Campaigns and Attacks on Academia
The fossil fuel industry has actively obscured scientific research and deceived the general public about climate change and its effects.
Fossil fuel companies have discredited and attacked legitimate academics, including Penn-affiliated scholars, and funded biased and inaccurate research to promote their interests.
Divestment by Other Large Institutions
Many institutions in a similar position to Penn have already divested, including “universities, insurance companies, foundations, and major asset managers”.
Many of these institutions have done so for the same moral and financial reasons outlined in this complaint.
Penn’s Ties to the Fossil Fuel Industry and Conflicts of Interest
Many influential people within the Penn network, including members of the Board of Trustees and the Boards of Advisors for different schools, have personal ties to the fossil fuel industry. This creates a clear conflict of interest when these same individuals are responsible for deciding whether or not to invest Penn’s money in the fossil fuel industry.
ExxonMobil is a sponsor of a Wharton based career development program, and both Vanguard and Chevron donate significant amounts of money to Wharton. This gives the fossil fuel industry even more influence within Penn.
The Trustees’ Refusal to Consider Fossil Fuels Divestment
The Board of Trustees has refused for almost a decade to engage with concerned students and faculty over the issue of fossil fuel investment.
Fossil Free Penn was founded in 2014, and has since run an active campaign for fossil fuel divestment. Their repeated attempts have been met with resistance and reluctance to make any meaningful change.
As a result, they are now filing this complaint in the hope that legal action will finally compel the Board of Trustees to act in a manner consistent with their ethical and financial responsibilities by fully divesting from fossil fuels.