Office of the Assemblies

Dear Matthew,

Thank you for submitting the University Assembly’s Resolution 6, Divestment from Companies Producing Fossil Fuels and Holding Fossil Fuel Reserves. I respect and share the Assembly’s commitment to the well-being of our planet and its populations, as reflected in the resolution.

All of us at Cornell take seriously our responsibility to be leaders in confronting climate change through research, education and engagement, and the reduction of the university’s carbon footprint. Our work to help make clean energy more attractive than fossil fuels is one important area of impact, as is our ongoing set of actions to reduce further our campus’s carbon footprint. Additionally, the university can influence the leaders of key energy companies through dialogue. However, at this time, I do not support endowment divestment, for the following reasons.

Over decades, generous benefactors have made gifts to our endowment in order to advance Cornell’s academic mission. With their gifts comes the university’s essential duty to be a fiduciary steward of the assets. Because of this duty, I believe that, in general, decisions about asset allocation should be based, first and foremost, upon sound financial analysis. I do not support the current call for divestment because, as I have said repeatedly, I am uncertain of the financial impact on the university at this time of constrained budgets. No new information has surfaced that would change the fact that the impact of the suggested divestment is uncertain. We depend on the payout from the endowment for a significant fraction of our ongoing operating expenses, throughout the university.

While the resolution’s goals associated with divestment are admirable, the financial results of divestment could be significantly detrimental. Our endowment returns are a key determinant of our financial stability; given the current state of the university’s balance sheet, any change in these returns will have a substantial impact on Cornell’s operations. Our current operating margins cannot absorb an annual loss of anywhere from $2 million (the lowest estimates of impact from fossil fuel divestment) to $260 million (the highest estimates). As this range of estimates demonstrates, the specific impact of divestment cannot be precisely predicted.

Instead of divestment, I propose providing an option for those donors making gifts to the endowment who share the University Assembly’s views. This “green fund” option would invest donor funds in companies that focus on renewable and sustainable forms of energy as well as the technology and infrastructure necessary for further adoption of these energy sources in the broader economy. In addition, companies seeking to improve the energy efficiency of existing technologies could be included in this fund. While details have yet to be developed, the intent is for donors to be able to consider this option when making endowed gifts to Cornell. Our overall endowment, which currently holds $84 million in alternative energy investments, would continue to hold assets determined by our managers to yield the greatest return.

Further, the university will provide an annual report to the shared governance groups on our efforts to promote sustainable energy approaches and technology and sound environmental policies through our research and teaching, our progress toward a reduced carbon footprint, and university holdings in renewable energy companies.

While our consideration of the current resolution on divestment has concluded, our work on stemming the progression of climate change and mitigating its effects will continue. We can be proud of our long-standing commitment to sustainability. I thank the campus community for its engagement in the divestment campaign. In particular, I recognize and respect the important role campus groups have played in highlighting the issue of climate change. I am excited to witness the progress Cornell will make in this area over the coming years.

Regards,

David Skorton