Fiduciary Duty & Divestment at Unity College

In the fall of 2012, the Unity College Board of Trustees voted unanimously to divest from investments in fossil fuels, making the College the first institution of higher learning in the United States to divest. Stephen Mulkey, President of Unity College at the time of divestment, made the moral case for divestment to the college community in an open letter. “The colleges and universities of this nation have billions invested in fossil fuels. Like the funding of public campaigns to deny climate change, such investments are fundamentally unethical,” President Emeritus Mulkey wrote. “The Trustees have looked at the College’s finances in the context of our ethical obligation to our students, and they have chosen to make a stand.”

The Board of Trustees, keeping true to their fiduciary duty to the College, wanted assurances that fossil fuel divestment would bring an appropriate return to the endowment-- and so far there has been no negative impact. “Over the past five years, the portfolio has met or exceeded market benchmarks despite the shift away from fossil fuel holdings,” stated a 2013 article updating the community on the progress of fossil fuel divestment. “Our investment performance was in no way negatively impacted by this strategy.” Catching up with President Emeritus Mulkey five years later, we discussed how fiduciary duty considerations played into the initial conversations to divest.

"[While at Unity,] I came to realize that the public trust of higher education has two fiduciary duty components: one of those components is money, and boards of trustees are responsible for that money and making sure the institution stays fiscally sound. The second component is the ethical integrity of the institution. Nothing could bring those two components together more than climate change, because as anyone that runs the numbers knows, we can’t go on with this in terms of carbon emissions," Mulkey reflected. "The point is it is our ethical duty to back out of supporting an industry that is literally destroying the future for our children, and that’s what higher education is all about. It’s also fiscally sound to do that, because at some point we will stop earning returns on those investments, and when that happens there will be stranded assets."

When examining their portfolios’ exposure to climate-related risk, trustees and administrators should consider Unity College's conversations surrounding fiduciary duty and whether or not they were investing in a manner consistent with their institutional mission.