UT’s Dirty Investments

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photo courtesy Enoch Lai/Wikimedia Commons

While many universities have stopped investing in companies that do business in Sudan, the University of Texas still invests millions of dollars in the energy companies operating there. The UT investment management company (UTIMCO) is modeled after companies organized by Harvard, Stanford and Duke. But there’s a crucial difference: Those universities have adopted socially responsible investing policies, while UT hasn’t.

UTIMCO, an independent corporation, manages the Permanent University Fund, which generates income that supports schools in the UT and Texas A&M systems. UTIMCO’s mission is to generate as much income for the schools as possible. It does so without taking social or political concerns into account. Take a look at UTIMCO’s stocks and you’ll find holdings in a slew of companies identified by human-rights groups as fueling conflict and propping up repressive regimes in Sudan and Myanmar. But don’t take those lefty human-rights groups’ word for it. Ask the state of Texas.

In accordance with Texas’ Sudan Divestment Act of 2008—to which the university system is not subject—the Texas Comptroller keeps a running tally of the so-called “scrutinized companies,” doing business in Sudan. These aren’t just any companies working there, but the “worst of the worst”: companies like DongFeng Motor Co., that has sold military equipment to the Sudanese militia, and PetroChina, a firm that has bought millions of barrels of Sudanese oil to help power the world’s fastest growing oil consumer. The UT system is invested in several of them, including PetroChina, DongFeng Motor Co., China Petroleum & Chemical Corp., Petronas Gas and Sinopec Shanghai Petrochemical Co. (Read more about oil companies fueling Burma’s junta.)

A student group called Longhorns for Investing Responsibly sees a contradiction between UTIMCO’s investing practices and UT’s values. The UT system calls for its institutions “to cultivate in students the ethical and moral values that are the basis of a humane social order” and to “render service to the public that produces social benefits,” the students’ proposal to the Board of Regents notes. “However, current UTIMCO policy explicitly requires social concerns to be disregarded when making investment decisions.” The student group is calling on UT not only to divest from Sudan, but to adopt socially responsible investing as its official policy.

Bruce Zimmerman, the Chief Executive Officer of UTIMCO, says UT’s investment company has its priorities in order. “We don’t take social or political concerns into account,” he says. “That’s not our mission. Our mission is to provide resources for the UT system to promote learning and teaching.”

Zimmerman says the term “socially responsible” is open to so much interpretation that such a policy would put UTIMCO on a “slippery slope.” For example, he brings up United Technologies, a company students chastised at the Board of Regents meeting. This company has not come under much scrutiny compared to, say, PetroChina. “They aren’t even on the [Comptroller’s] list,” Zimmerman says. Plus, they are a major contractor with the U.S. government, he adds. If such a company were blacklisted, Zimmerman seems to fear a lot of other lucrative, mainstream companies would be blacklisted too. Where would it stop?

Ben Snyder, the founder of Longhorns for Investing Responsibly, says it is possible to draw a line where it stops. He says that the term “socially responsible” needs to be defined clearly, but “it’s possible to come up with a parameter. Other public and private universities have done it.” Five state systems and 13 private universities have implemented responsible investing as an official policy. “What we’re asking is not radical. It’s actually quite normal,” he says. In 2008, another UT student group called the White Rose Society pressured UTIMCO to remove its investments in the Sudan, but the company opposed the measure.

Zimmerman contends that such a change of policy would damage the bottom line. “What you’ll learn in Econ 101 is any externality has an economic cost,” he says. “That’s not a presumption. It’s an economic reality.” The CEO also suggests that, as far as the Sudan investments are concerned, a big fuss is being made over nothing since the holdings add up to a tiny percentage of UT’s total assets. The Observer found that as of August 2010, UTIMCO held approximately $5 million in stocks in companies from “the list.” 

“We have a $25 billion pool of assets,” Zimmerman says. “You do the math.”

For Snyder, the fact that these investments make up a small portion of the university’s total assets is all the more reason to divest from them. “It would be easier,” he says. What’s the benefit of keeping them, compared to being complicit in genocide? And remember, Snyder says, that $5 million figure doesn’t include companies implicated in other human rights violations outside of Sudan, or companies responsible for egregious environmental degradation. 

Anyway, it’s not just about “getting rid of the bad ones and keeping the good ones,” he adds. “It’s about starting a conversation: that we do care about what we invest in. Otherwise, you open yourself up to invest in anything,” he says. “There are international organizations that monitor human-rights abuses, that monitor environmental degradation. We have more and more access to this information. Why wouldn’t we use this huge investment portfolio to effect positive change?”

Snyder isn’t exaggerating when he calls the UT portfolio “huge”: The system’s endowment is the fifth largest in the country. It’s worth noting that Harvard University, which has the largest endowment in the country of any university, was the first to divest from PetroChina in 2005 after the Harvard Corporation’s Committee on Shareholder Responsibility directed the Harvard Management Company (HMC) to divest itself of the stock.

Both the Graduate Student Assembly and the UT-Austin Student Government have overwhelmingly supported the student group’s request that UTIMCO adopt responsible investing as its policy. “We are planning on exhausting all official avenues to make a change,” Snyder said two days after the group made its case to the university’s Board of Regents. But if those official avenues fail, he says he is open to other tactics. In 1985, before the formation of UTIMCO, UT students called on the regents to divest from Apartheid South Africa.

Thousands protested and police arrested more than 180 demonstrators. The university eventually divested in 1986. Snyder’s hoping for similar results. “You can’t just turn a blind eye to the effects of what you’re doing.”