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U of T joins coalition to engage with companies on reducing climate-related investment risks

Experts, campus groups question university’s leverage, denounce shareholder activism
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U of T students at the Global Climate Strike in Toronto. DINA DONG/THE VARSITY
U of T students at the Global Climate Strike in Toronto. DINA DONG/THE VARSITY

U of T and several other universities, including McGill University and McMaster University, have formed the University Network for Investor Engagement (UNIE), a coalition aiming to engage with companies and reduce climate-related investment risks. The initiative will be coordinated by the Shareholder Association for Research & Education (SHARE), a not-for-profit organization that offers responsible investment services.

U of T’s participation in the coalition is part of its broader “responsible investing strategy,” which integrates environmental, social, and governance (ESG) factors into investment analysis and decision making. However, experts and campus groups, such as Leap UofT, continue to question the effectiveness of U of T’s shareholder activism and urge the university to divest.

Coalition strategy

UNIE’s largest member is the University of Toronto Asset Management Corporation (UTAM), which manages U of T’s pension, endowment, and short-term working capital portfolios, collectively worth approximately $13 billion. 

Ultimately, the coalition’s goal is to reduce the university’s impact on the climate crisis by mitigating the effects of its investments on the environment. Participating universities have formed an advisory council to direct the program.

SHARE will coordinate the initiative, focusing its advocacy efforts on finance, transport, energy, and manufacturing. The company will create an annual engagement plan that will outline the initiative’s approach and focus companies. 

While the UTAM will occasionally engage with companies directly, SHARE will facilitate most of the communication and report back to the coalition. 

In an email to The Varsity, Daren Smith, President and Chief Investment Officer of UTAM, wrote that advocating with a group of other institutions which have more than $70 billion in assets between them will help them exert more influence on companies to comply with targets.

Smith added that the university is confident that it can achieve several goals. These include getting companies to set targets to meet the the Paris commitments, increasing oversight for emissions reduction, decreasing anti-climate lobbying, and promoting investment in clean energy.

“Serious engagement can take time,” Smith wrote. “But we also expect measurable results and milestones along the way to demonstrate meaningful progress.” 

The university will regularly review the initiative to make sure it is meeting its “ambitious objectives.”

UNIE joins other initiatives like Climate Action 100+ that fit into its overall strategy of encouraging companies to engage with the climate crisis.

The efficacy of shareholder activism

Although U of T presents its strategy as an effective way to push companies toward a greener future, experts and groups that The Varsity has reached out to were less optimistic about the leverage the university would have.

Douglas MacDonald, a senior lecturer emeritus at the School of the Environment, wrote in an email that the university does not have much say in a company’s decisions, which are primarily made by a company’s chief executive officer and Board of Directors. 

He added that institutions like U of T probably have more power to enforce ESG guidelines before investing than they do once they become shareholders. MacDonald noted that while U of T — like most other universities — rejected divestment a few years ago, it seems to have reached a halfway point in its climate activism.

“U of T and the other universities should be congratulated on taking this step, even though their influence is limited,” MacDonald wrote.

Matthew Hoffmann, a professor at the Department of Political Science, elaborated that the university’s investments were in diverse funds, and consequently, the university’s influence on any specific company would be diluted even in the coalition. 

Moreover, he wrote that shareholder activism typically focuses on increasing transparency, which is still “not as good as” decarbonization. According to him, the efforts — while well-intentioned — would not be effective.

Leap UofT, a climate justice student activist group, seconded this sentiment. In an email to The Varsity, the organization wrote that shareholder activism relies on the assumption that companies will change their behaviour when pressured by investors and that this strategy doesn’t work.

The group also questioned whether SHARE would be an effective coordinator, given that Leap UofT found very little data or descriptions of its previous achievements. 

“U of T doesn’t have a strategy for reducing climate risk, they have a greenwashing strategy to look good for donors and rankings,” Leap UofT wrote. “Even [as part of UNIE] they don’t have leverage in ‘engaging’ with companies, especially when compared to the social leverage they would have through divestment.”