Climate friendly investing, how is Ghent University doing that?

Duurzaam geld

Duurzaam geld

Dare to opt for an ambitious climate policy

According to ancient activist tradition, Ghent University students are not left undisturbed in the social debate. Every Friday morning a group of students gather at the front door of the rectorate to develop a collection of requirements for a more climate-friendly university.

On Thursday the Students For Climate will participate in the climate marches. And the students of the Green Office of Ghent University are creatively tackling all kinds of climate challenges. They inspire the university board to do more and to accelerate. Fortunately, they are not alone. For example, there is comedian Bert Gabriėls who calls on banks and insurers to make their investment and savings products more sustainable ( De Standaard, 18 February 2019 ). Students from the Fossil Fuel Divestment Movement have been encouraging university boards worldwide to take this step for several years. Ghent University responded to this plea for a sustainable investment portfolio.

In addition to the self-evident ecological aspect, a financial consideration also plays a role. Analysis predict in the long term a decline in the valuation of companies with fossil fuel reserves. The Paris Climate Agreement stipulated that, in order to keep the global average temperature below 2° C, 80% of the currently known reserves must remain unused. These assets will lose their value, which could have a negative effect on share prices.

The banks that invest the liquid assets of Ghent University, in anticipation of the need to include them for research projects or for infrastructure works, were asked to invest only in sustainable investment funds. A Sustainable Investment Committee, in which all sections of the university, including students, are represented, was given the assignment to critically follow this process, enter a dialogue with the banks and make recommendations to the university board.

It soon became clear that each bank uses its own definition of sustainability and that it maintains its own methodology to make it true. That did not suffice. So the university board decided to write out a framework itself, which excludes investments in fossil energy companies and companies with a high CO2 footprint.

Companies that look for coal, oil and gas, and how they develop, refine and transport them, and that generate electricity based on fossil fuels, should no longer appear in the Ghent University investment portfolio. In addition to the exclusion of the fossil sector, it is requested to include companies that are involved with renewable energy sources and with a circular economy. In this way, the investment universe is kept sufficiently broad and the future-oriented technologies are actively supported. The expected return remains unchanged; enough studies and prognoses indicate that sustainable investments are at least as profitable as the traditional ones.

The banks were challenged to help realize this ambition level. The solutions provided are very diverse. One launched new equity and bond funds based on the framework of Ghent University. And opened it to other institutional investors. Another bank refined the selection method for the existing investment products, so that only investments in those companies that meet the framework of Ghent University remain. All examples show that it can be effective.

Because we believe that sustainable investment can be a lever to help achieve the climate targets, we call on other institutional investors - public institutions, cities, municipalities, non-profit organizations, but also pension funds and companies - to take that route. Only then can we ensure that climate-friendly investing no longer remains exceptional or customized, but that it becomes mainstream.

Dare to write your own goals, together with your stakeholders, employees and customers. Dare, as a client of the bank, to enter a positive-critical dialogue with them and to express expectations. Ask them about transparency about the climate impact of their investment decisions. Dare to opt for an ambitious climate policy.

Jeroen Vanden Berghe
Chief Administrator Ghent University