There’s been a lot of philosophical and theoretical talk about fossil fuel divestment lately. As an investor, I don’t care for philosophical debates, and I don’t like getting bogged down in abstract concepts. I like money. I like account numbers that get bigger. I like putting my money where my mouth is and winning. It seems fitting, then, that one consider the investment side of the issue.
For those of you who don’t know: the University of Georgia has an endowment of around $550 million. Donors give the University big checks, the checks turn into big numbers in the endowment fund and smart guys and gals at the Board of Trustees use those funds to build an investment portfolio — think hedge funds, stocks, bonds, et cetera. Simply put, the name of the game is to make money.
Taking a quick look at the breakdown of the endowment portfolio, I can make a safe bet that UGA has a decent position in a notorious fossil fuel corporation: Southern Company (SO). To be honest, SO is a great investment: the stock price doesn’t change much, the company has the Southeast on lock and they pay you 4.4 percent a year on your holdings in the form of a dividend.
Now let’s say, hypothetically, UGA has $10 million invested in Southern Company common stock. Keeping the stock price constant and reinvesting the dividends, over the course of the next ten years that holding will yield us about 54 percent, or $5.4 million. This is assuming no major stock crash in the next ten years, which, let’s face it, is highly improbable.
The question now is: can we find an alternative investment with a risk level equal to SO stock that can beat the 54 percent return on investment? The magic total to beat here is $15.4 million.
If I were investing my own money, I would reinvest that $10 million in sustainable energy infrastructure on campus. By overhauling old building AC/ventilation systems, replacing old light fixtures with cutting-edge new ones, installing solar thermal water heating units on residence halls and educating the campus about smart energy practices, we can obtain a six-year payback on our initial investment, according to findings from the National Renewable Energy Lab. Returns would come in the form of decreased electricity, natural gas and coal purchases.
At the end of that same ten-year period, we would end up with $16.7 million. In other words, we would outperform the fossil fuel stock by more than $1.2 million with less risky investments.
I urge the University administration, chiefly President Michael Adams, Provost Jere Morehead and Vice President of Finance Tim Burgess, to consider the above scenario. As a land-grant university, we have an obligation to invest morally. As a taxpayer-supported institution, we have the need to be as capital-efficient as possible. As Bulldogs, we have the obligation to invest in ourselves and in each other.
Though it will take considerable political pressure and some clever legal maneuvers, fossil fuel divestment should play an important role in UGA’s brighter future.
—Tyler Faby is a sophomore from Milton majoring in finance