UNC endowment fund reports highlight change in fossil fuel investments

At the beginning of March, the UNC Management Company released the UNC Investment Fund and Chapel Hill Investment Fund 2023 annual reports, which reveal a decrease in investments in energy and natural resources from 4.8 percent to 4.6 percent from the fiscal year before.

On Feb. 8, Sunrise UNC, the UNC chapter of the national youth-led Sunrise Movement launched to address climate change, released a report estimating that the University owns at least $243 million in fossil fuel commodities — excluding stocks, bonds and debt — through the UNCIF.

The fund is a portfolio of asset allocations among the UNC System’s 32 members,and Sunrise’s report is based on the fund’s annual reports from fiscal years 2010 to 2022.

The UNC Management Company, the nonprofit organization that determines asset allocations of the UNCIF, is overseen by the CHIF's Board of Directors. The CHIF is the controlling member of the UNCIF.

According to UNCIF’s Annual Report for the 2022 fiscal year, the management company was working with a total of $10.433 billion to allocate across all seven asset classes, including energy and natural resources.

Roughly $5.245 billion of this went to the CHIF, 4.8 percent of which was invested in energy and natural resources, which includes oil, natural gas, power and other commodity-related investments.

CHIF’s FY2020 report stated that the UNCIF owned $9.8 million in sustainable, clean energy-focused investments by the end of the year, constituting 3.26 percent of the fund’s total energy investments. Sunrise’s report stated that if this percentage remained consistent between 2020 and 2022, UNCIF and CHIF’s investments in fossil fuel commodities would likely have reached at least $243 million in 2022. 

In September 2014, the UNC Board of Trustees passed a resolution requesting that the management company research specific investments to advance environmentally friendly clean energy strategies.

Sallie Shuping-Russel, a former BOT member from 2007 to 2015 and UNCIF board member from 1995 to 2020, said the resolution was part of a package of efforts to make the University more environmentally sensitive.

"At the same time, it was recognizing that this is a huge industry that has a huge impact on asset values and for us to say, ‘You’re not going to do this anymore,’ would be irresponsible,” Shuping-Russel said.

For the majority of UNCIF and CHIF investments, the management company staff hires managers to invest directly in companies, Steven Lerner, former chair of the BOT’s Finance and Infrastructure Committee from 2013 to 2015, said.

"Part of the problem then is they don’t always know what those managers have in their portfolios at that point, and they pick managers to maximize returns for the endowment — for the students, for the University,” he said.

Lerner added that because of this delegation, it would be structurally difficult for the management company to divest from all fossil fuel-related companies.

Last June, the N.C. General Assembly passed House Bill 750 which prohibits state institutions from considering environmental or social factors when evaluating investments unless they present economic risks or opportunities.

Nina Levret de Melo, a Sunrise UNC member, said that without full transparency regarding where the University's money and investments are being allocated, there is no way to know whether it is abiding by this law.

The Sunrise report also stated that energy and natural resources have “provided little added value to the UNCIF portfolio.” According to the 2022 UNCIF report, energy investments have returned a 6.9 percent profit over the last ten years — less than the 11 percent annualized return rate for the entire portfolio.

Levret de Melo said the group’s first press release on Feb. 8 aimed to shed light on how the University’s endowment is being allocated.

“I hope that we send a message to the UNC Management Company and the Board of Trustees that we’re watching,” Shiva Rajbhandari, hub coordinator for Sunrise UNC, said. “This is a public university, and we demand that it serves public interests and fossil fuels are certainly not in the public interest.”

@lena-miano

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