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Divestment 101 with Fossil Free UW

By: Michelle Angkasa

While the world seems to have been put on pause during the pandemic, the fight against the climate crisis continues. Here on campus, Fossil Free UW (FFUW) has been ramping up their efforts to see the University of Waterloo address the climate crisis and push for divestment. 

This summer, FFUW wrote a Carbon-Neutral Investment Policy, which offers a holistic approach to divestment that includes climate risk, and calls on the University to sell their holdings in fossil fuel companies and to transition towards a carbon-neutral investment portfolio in the next five years. This position has been supported by 25 student clubs and organizations, including the Waterloo Undergraduate Student Association and the Graduate Student Association. FFUW also collected over 1,700 student signatures in support of divestment, while  over 430 University faculty and staff signed an open letter calling on the University to: 

1) Divest the University’s endowment and pension plans completely from fossil fuels (oil, gas, and coal), and associated infrastructure; and

2) Reinvest in socially responsible, low-carbon assets that safeguard investments and—more importantly—our collective future. 

These asks were brought to President Hamdullahpur and the Board of Governors on October 27th. At the meeting, the asks were referred to the Finance and Investment committee for consideration – the same committee that refused the call for the University to divest in 2018. With the climate crisis intensifying over the last two years and returns on fossil fuel investments worsening, perhaps the committee will make a different recommendation this time. 

But what exactly is divestment, and why is it so relevant and important? Special thanks to Lesley, Petra, and Truzaar from FFUW for providing the information below, which I’ve adapted for this article. 

To learn more about FFUW and how you can get involved, check out their Instagram and their website.


  • What is divestment?
  • Why divest?
  • How much is the University of Waterloo currently invested in fossil fuel companies?
  • Isn’t now a bad time to sell fossil fuel stocks?
  • Doesn’t divestment undermine our fiduciary duty?
  • Is divestment really effective? Will this do anything?
  • What is the Carbon-Neutral Investment Policy?
  • Resources

What is divestment?

According to Wikipedia: “In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.” 

Why divest?


(Note: the remaining carbon budget is even smaller if we want to stay below 1.5 degrees of global warming.)

If we want to avert catastrophic climate change, the Intergovernmental Panel on Climate Change (IPCC) gives us until 2030 to halve our global carbon emissions and until 2050 to go completely carbon neutral in order to keep global warming under 1.5oC. This leads us to the problem of the Carbon Bubble: the amount of fossil fuels we have the environmental budget to burn is drastically less than the amount of current reserves. 

Evidently, we need to move away from burning fossil fuels for energy and transition to a green, renewable economy. But this isn’t so easy; companies whose value largely depends on the ability to further extract and burn fossil fuels without limit have been actively pushing back against this shift, like Exxon-Mobil’s almost 40-year-long campaign to cover up the existence and severity of climate change

Distancing ourselves from fossil fuels means distancing ourselves from fossil fuel companies, and divestment provides a powerful message written in the language that these companies understand- the language of investment losses and risks to profit margins- that we need a transition and we need it quickly. 

The ethical considerations are very clear, but it turns out divestment can have a financial benefit as well. Increasing policies designed to mitigate climate change cause any investors in fossil fuels to run the risk of becoming owners of stranded assets as further extraction of fossil fuels is restricted. Fossil fuels have also proven to be a risky investment on their own, with several studies showing potential losses by staying invested, while fossil-free funds either match or out-perform their carbon-tied counterparts. Further information on the financial case for divestment can be found below. 

How much is the University of Waterloo currently invested in fossil fuel companies?

In May 2017, the University of Waterloo disclosed some of its current investments in the top 200 fossil fuel companies in the world, as well as its investments specifically in companies active in the tar sands. Based on this partial disclosure, we learned that at least $68 million of the university’s investments were in the fossil fuel sector.

Investments included BP, Total, Exxon/Imperial Oil and Royal Dutch Shell – not only known heavy CO2 emitters but companies responsible for human rights violations (Dunlap & McCright, 2011), massive oil spills (Wiwa, 2015), and corrupt practices (Reed & Krauss, 2015; Goldenberg, 2015)  — while some participated in decades-long climate-denial campaigns (June, 2013).

In 2018, UW committed to using the United Nations’ Principles of Responsible Investing (UNPRI) as an investment screening criteria (, which claims that, “Climate change is the highest priority ESG issue facing investors. The PRI is working to help investors protect portfolios from risks and to expose them to opportunities in the shift to a low-carbon global economy.” This commitment included accountability measures by which the University would release a partial disclosure of investments in the Energy Sector on a quarterly basis. 

Most currently, based on a partial disclosure of information from the University of Waterloo’s Administration on June 30, 2020, we know that at least $44.8 million of the University’s equity holdings are in the energy sector, which incorporates fossil fuel companies, associated infrastructure companies, and companies that are indirectly involved in the fossil fuel sector. Approximately half of these holdings are invested in Carbon Underground 200 listed companies, including Canadian National Resources Ltd., CNOOC, and Suncor, which are not only known heavy CO2 emitters, but some of which have participated in decades-long climate-denial campaigns. Moreover, some of these companies are responsible for environmental destruction on a massive scale, human rights violations, and corrupt practices. 

This is a significant reduction in Energy Sector investments, meaning the University is moving in the right direction. Out of the total portfolio, energy exposure is measured to be only 1.81 %. Further, UW has also put in place two fund managers who hold no energy investments, amounting to a quarter of the holdings being free of energy exposure. UWaterloo is already moving in the right direction, and taking the final step has the potential for significant progress in the fight against climate change. Now is the time to divest. 

Isn’t now a bad time to sell fossil fuel stocks?

Given the COVID-19 price shock and the impact of the OPEC-Russia price war, the fossil fuel sector has been hard hit. Some might say that we should wait to divest until prices recover. However, the vast majority of Waterloo’s holdings are tied to the Alberta Oil Sands which run the risk of becoming stranded assets. We believe it would be better to divest now and put that money into growth sectors. That said, our recommendation to the University is that they divest within the next three to five years. 

Further, the University has just released its Shift:Neutral report that signals the need for “Future-proofing investment decisions against energy price fluctuations, carbon pricing, stakeholder pressure, direct compliance obligations, and other transitional risks.” Regarding Fund Assets it further states, “Building on the Responsible Investment Working Group’s recommendation to evaluate and pilot social impact investments, Waterloo’s investment funds should be explored.” The evidence is lining up.

The economic case for divestment continues to grow. There is evidence that universities have benefited from a divestment policy. Berkley, under the leadership of Jagdeep Bachher (a member of Waterloo’s Board of Governors), added $2.4 billion in value while making no new investments in fossil fuels and selling their exposure to coal and the oil sands. UBC’s sustainable futures fund outperformed its benchmark by 148 points, which led the university’s decision to expand the fund from the initial $10 million pilot to $366 million. Both universities have committed to divesting their endowment funds.

Closer to home, PhD candidate Truzaar Dordi’s analysis found that conservative estimates show that from 2011 to 2015 the University of Waterloo has realized losses of upward of 14% on fossil fuel investments made in pension, endowment and trust funds, totalling at least $20 million, by investing in fossil fuels as compared to investing in low carbon options. (Dordi, 2017). As Dordi notes, “Some may argue that the University should maintain its fossil fuel investments lest it lose out. However, the opposite concern – that keeping these investments is financially risky – may be the greater concern.” 

Our university is not alone in suffering losses by continuing to invest in fossil fuels. Corporate Knight’s decarbonizer tool finds trillions in lost opportunity, perhaps most notably the Bill and Melinda Gates Foundation, which  lost $1.9 billion between 2012 and 2015 after rejecting calls to divest from fossil fuels (Carrington, 2015). Markets have already begun to respond to the riskiness of fossil fuel investment—fossil fuels are becoming devalued. We can assume this will intensify as governments and industries make further progress in reducing emission to meet the internationally accepted two degree warming limit of the United Nations’ Paris Agreement.

Doesn’t divestment undermine our fiduciary duty? 

The University of Waterloo Responsible Investing Working Group (RIWG) report was adopted by the Board at its June 2018 meeting. While cautioning the Board to adhere to its fiduciary obligations, the RIWG concludes that: “ESG is a fundamentally useful lens for review of investments as well as for monitoring and managing current and prospective investment managers, and can be applied in support of conventional investment analysis to gauge potential rates of return and the risk of asset or capital impairment, and is not inconsistent with fiduciary obligations and most likely supports these duties”. We are already seeing academic institutions worldwide committing to divestment, and they have done so in line with their fiduciary duty to their beneficiaries. Canadian academic institutions, even here in Ontario, have also begun to follow suit, finding that divestment is in line with fiduciary duty. Indeed, fourteen Canadian universities, including the University of Waterloo, have signed on to the Responsible Investment Charter which finds that: “Prudent practice now requires institutional stewards of long-term investments to adopt processes that take into account material climate-related investment risks. Failure to do so may constitute a dereliction of fiduciary duty by investment managers, who have an obligation to serve the best long-term interests of beneficiaries.”

Pension plan managers and administrators are facing rapidly evolving legal obligations to assess, manage and disclose financial risks associated with climate change. In advance of their divestment decision, UBC received a legal opinion from Hansell LLP. The firm reported that, beyond disclosure, directors “have a clear responsibility to be informed about the risks that climate change poses for the business of the corporation they serve and to be satisfied that those risks are being appropriately managed.” The Hansell LLP report concludes that: “We have been asked whether directors of Canadian corporations are obliged to address climate change risk. The answer is clearly yes. Canadian courts have accepted climate change and the risks it presents as self-evident and uncontroversial, as has the investment community.”

Former bank governor Mark Carney has defined climate change transition risks as “financial risks which could result from the process of adjustment towards a lower-carbon economy which could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent.”  Pension plan administrators must consider these transitions risks to ensure the long term financial stability and sustainability of funds both for current and future pensioners. As the risks associated with climate change become more widely known and scientifically grounded, the legal onus is shifting to fund managers and boards to justify risks associated with their fossil fuel investments which are increasingly are volatile, underperforming and/or risk becoming worthless as stranded assets. This is of particular concern for Canadian funds which are acutely susceptible to the stranding of assets due to their oil sands exposure. Currently, 99.85% of the University’s Energy Sector holdings are in companies that work predominantly in the Alberta oil sands and have been recently hard hit by energy sector volatility and COVID-19. 

Investments in carbon-heavy holdings are proving to be a riskier investment strategy in the short term as well, which may end up breaching the fund’s fiduciary duty. Between September 30th, 2019 and June 30, 2020, the value of the University’s energy holdings dropped from $62 million to $44.8 million. We are lucky to have professors working at the University of Waterloo who are global experts in sustainable finance. Recent empirical studies led by Professor Olaf Weber have made a convincing case that “fossil fuel divestment makes sense from a financial point of view even without any ethical justification.”

Globally, $14.5 trillion and counting has been divested. Meanwhile, the fossil fuel industry has been one of the worst-performers of the S&P over the last decade, finishing dead last in 2018

with fossil free indices regularly outperforming benchmarks that contain fossil fuels.   

Is divestment really effective? Will this do anything?

Divestment has made a big impact before, especially in the struggle to end apartheid in South Africa. In an act of protest, over 155 campuses and many cities, states, and companies divested from South Africa, speeding the transition to an open democracy.

A fossil fuel divestment movement will help take away the social license of the fossil fuel industry, weakening their political power. It will also start an important discussion in the market about the long-term viability of fossil fuels and the need to transition to a clean energy economy. Finally, this campaign will help create a new generation of leaders and organizers who can help push our leaders to address the climate crisis. Divestment has already gotten international media attention and is driving conversations and debates on divestment and climate change across Canada and around the world. This is the fastest growing divestment campaign in history, and marks the beginning of the shift to a more sustainable world. 

What is the Carbon-Neutral Investment Policy?

While we are grateful to see the University exploring fossil fuel-free investment options, we recognize that it is not only fossil fuel companies, and their associated infrastructure that are at risk from climate change. Investments in industries that might be exposed to physical risks, e.g. floods, fires, droughts, resource degradation are also exposed. These include transport, utilities, agriculture, real estate, and water assets, including aquaculture. Note, this is not to say the University should divest from all these industries, rather that a holistic approach to divestment would include climate risk, associated with consideration of carbon-related stranding of assets.

Hunt and Weber are two of many voices in their field who find that investment strategies that adopt “stricter divestment approaches, excluding more fossil fuel related stocks, have higher risk-adjusted returns and a lower carbon intensity than less strict approaches”(Weber and Hunt, 2018, p. 22). As such, for ethical and financial reasons we urge the University of Waterloo to adopt a stepwise approach to achieve a carbon neutral portfolio with all possible expediency. This will reduce risk and take advantage of the reduced prices on alternative assets available at this current moment.

1. Adopt Fossil Free Indexes. (complete)

2. Prove the Case by Divesting the Endowment Funds and Creating a Best in Class ESG and Divestment Policy. (October 2022)

3. Full Divestment of Carbon Underground 200 Holdings, “Tar Sands Companies” Equity Exposure, and Fossil Fuel Associated Industries. (October 2023)

4. Incorporate Stranded Asset Risk Measures Across the Portfolio. (October 2024)

5. Transition Toward a Carbon Neutral Portfolio. (October 2025)

(For more information see:


Climate Bonds Initiative

  • The Climate Bonds Initiative is an investor-focused not-for-profit organization working to mobilize the $100 trillion global bond market to support climate change solutions. Their site provides a range of information, including a comprehensive blog on current developments in the green bond and climate bond markets internationally.

Clean Energy Canada’s Clean Energy Review

  • Provides a weekly digest of the 10 most important climate and clean energy developments.


  • Ethiquette is an independent web platform developed and managed by the Responsible Consumption Observatory (RCO) of Université De Québec À Montréal’s School of Management Sciences and Ellio. The site includes an extensive list of resources related to responsible investing, including in renewal energy and clean technology.

Field Guide to a Regenerative Economy

  • Produced by the Capital Institute, a non-partisan think-tank, this guide outlines 8 principles of a Regenerative Economy, one in which our economy and financial system can operate to promote a more just, regenerative, and thus sustainable way of living on this earth.

Fossil Free Funds

  • Supported by As You Sow, a US-based shareholder advocacy organization, this site lets you search mutual funds by name or asset manager to see their carbon footprint and status as socially responsible investments. While it focuses on US-based mutual funds, it includes several options from RBC Global Asset Management, and you may be able to include other US mutual funds in your portfolio.

FTSE Russell

  • FTSE Russell is part of London Stock Exchange Group’s (LSEG) information Services Division. It provides a range of equity and bond indices as tools to help investors and investment firms benchmark the performance of their investments. The FTSE Smart Sustainability Index Series and the FTSE Global Climate Index Series provide performance measures for funds guided by Environmental, Social, and Governance (ESG) principles and climate change considerations, respectively.

Invest Green

  • This site provides a comprehensive stock market listing of companies active in the green economy, as well as a range of mutual funds with an environmental or green economy focus.

SHARE – Shareholder Association for Research and Education

  • SHARE is a Canadian leader in responsible investment services, research and education. While its primary focus is on services for foundations, pension funds, religious investors and asset managers, the SHARE site has a wealth of information including research reports, case studies and investor briefs.

Sustainability Bond Database

  • This site is produced by the publishers of Environmental Finance and provides comprehensive information about green and sustainable bonds issued around the world. This is a subscription service, but a free trial is available.

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