Words by Christine Li 

It’s the first day of April, and members of student-led activist group Fossil Free Melbourne University (Fossil Free MU) are gathered outside the Raymond Priestley building. They’re dressed up like professors in ill-fitting blazers and spectacles, and are here to give Vice-Chancellor Glyn Davis a ‘schooling’. In their hands is a mock letter from a tutor, explaining to Davis that his most recent assignment was not worthy of a passing grade. It may sound like fun and games, but this is no April Fool’s prank. 

Four days earlier, Davis announced—via an internal staff email—that the University of Melbourne would continue to invest shares in fossil fuel companies. Davis’ 1200 word statement, which appeared the next day in The Australian, was a response to seven months worth of campaign efforts from Fossil Free MU. Alongside university academics, the group has been pressuring the university to both disclose and divest its financial investment in assets that cause environmentally damaging carbon emissions. Although security staff prevented the group from confronting Davis directly on 1 April, their actions have raised important questions about institutions like the University of Melbourne, and how environmentally sustainable they truly are.

The sheer size of the University of Melbourne’s endowment fund is formidable. According to the 2012 Investment Report, its combined 830 charitable trusts are worth more than $440 million. How this money is invested comes down to third parties; the University’s Investment Management Committee handles decisions made on investment strategy, while operations are decided by an external funds manager, the Victorian Funds Management Corporation (VFMC). The VFMC spreads the money across a pool of domestic and international assets, although this is somewhat constrained by the university’s stated preference to invest in Australian equities. In turn, the generated wealth helps fund scholarships, student prizes and bursaries, staff fellowships, research, equipment, and infrastructure.

A Freedom of Information enquiry launched by Fossil Free MU confirmed to the group what they had suspected all along—that some of this money is being invested in businesses that burn fossil fuels. The university’s finance department has prevented the exact figures from being released, but Fossil Free MU coordinator and 350.org National Campus Divestment Coordinator Vicky Fysh believes this confirmation alone is enough to warrant action. For Fossil Free MU—and the 1400-plus students and academics who have signed their petition—the critical question now is not so much how much is being invested, but why.

In his email defending the university’s investments, Davis claimed that divesting would be financially irresponsible. He said that excluding all companies with an interest in fossil fuels from the university’s investment portfolio would likely result in higher management costs and lower returns. He added that this could increase costs for future students, and could create trust issues with past benefactors. Davis made some room for contingencies, stating that the university would establish a “separate specific investment fund” for potential donors who specified ethical and environmental conditions for management of their donations. However, Davis warned that returns from these investments would be subject to greater volatility in the market and hence the risk of lower return.

Fossil Free MU has since denounced Davis’ statement, criticising his inability to recognise the links between financial decisions and environmental consequences. “We think it is extremely problematic to frame divestment in a way that pitches ‘financial responsibility’ against social and environmental responsibility, as though these outcomes can be disentangled,” their response reads.

“A living lab”

Yet the university is tackling climate change in other areas. Davis argues that the university’s principal role in sustainability efforts is as an educator and research pioneer at its Melbourne Energy and Sustainable Society Institutes. Assistant Vice-Chancellor and co-Chair of the Sustainability Forum Tom Kvan points to the university’s targets to reduce carbon emissions by 50 per cent from 2006 levels by 2015, and the significant progress made since 2011. Projects to reduce energy consumption between 2008 and 2013, such as a shallow geothermal pilot at Parkville, have contributed an estimated 32,000 tonnes of ongoing annual carbon savings. Meanwhile, an urban horticulture subject lets students pitch designs for green spaces at two campuses.

“We see the campus as a ‘living lab’ for exercising sustainability and connect to it the expertise of all faculties and university governance. The primary impact that we can have is through education, and we have strived to embed sustainability principles in our curricula,” Kvan explains.

Another relevant interest for the University of Melbourne may be the need to preserve relationships with companies such as BHP Billiton, which has an office in the Department of Mathematics and Statistics, co-delivers competitions, and provides funding for an annual research scholarship. Other companies absorb hundreds of graduates with the help of the university.

Fysh acknowledges that the university is tiny in the investment landscape compared to the superannuation and fossil fuel industries, meaning that it would be difficult to call the shots. She suggests that an ideal long-term strategy will be to engage another big supporter of the university, one large enough to face up to the fossil fuel industry.

UniSuper joins in

They appear to have some help in UniSuper, the mandatory superannuation fund for all tertiary sector employees. Up until the end of March, UniSuper offered only one investment option totally free from fossil fuels companies. Their Global Environmental Opportunities (GEO) fund, however, is not diversified among different assets and thus exposes environmentally concerned super contributors to a high level of risk.

Diversification decreases risk by adding to the number of investments in a portfolio. It is possible to diversify a niche portfolio in this way, as UniSuper has done with its other “socially responsible” offerings.

On 28 March, the fund announced that two of its ‘socially responsible’ funds, previously 50 per cent composed of investments in mining companies, would be cleaned up. The funds will be divested of fossil fuel related shares, along with gaming and weapons stocks. Instead, they will include Australian listed property, which are by definition carbon-neutral.

National Tertiary Education Union (NTEU) General Secretary and UniSuper Board director Grahame McCulloch explains that attitudes within universities have had an impact on the change. “The representation of strong views about fossil fuel investments among the university employment structure—people who make contributions to the funds—is probably three to four times the national average,” he explains.

McCulloch considers shifts such as this to be decisive in the investment landscape. “Australian superannuation funds are the single biggest source of national savings. Much of our social and economic infrastructure is based on investment decisions. UniSuper is a modest player by global standards, but it has some $35 billion of funds under management. There will, I think, be an impact on other players.”

Stranded down under?

While financial investment by nature involves weighing up risk and returns, Fossil Free MU argues the university’s financial advisers are assessing the wrong risk. “Companies have pegged a certain amount of fossil fuels in their reserves to sell and burn them, but there’s a high risk they’ll end up being stranded and left in the ground,” Fysh explains. “What this means for the fossil fuel industry is that their assets are overvalued and we are sitting on a speculative carbon bubble unless we start to account for these risks in our financial system and act accordingly.”

Fysh is talking here about stranded assets, which refers to property owned by companies that has been unexpectedly or prematurely written down or devalued. A recent example of this is the oil lost by British Petroleum (BP) in the Gulf of Mexico in 2010. Looking at the resources sector into the future, there is a real risk that a catastrophic climate event or the rise of competitive renewables could affect the value of existing investments. If this is indeed true, then there is a certain irony in the university investing their donors’ funds with ‘financially safe’ fossil fuel companies.

Visiting economist Ben Caldecott is Director of the Stranded Assets Programme at Oxford University’s Smith School of Enterprise and the Environment. Speaking to a small group at the university, he warns that the primary concern for Australia is the slow-down of China’s demand for coal.

At present, China is our biggest coal export destination and its domestic coal trade dwarfs the international market by three times, but Caldecott claims that a confluence of environmental and economic risks are coming together to squeeze that demand in both the short and long term. In fact, he estimates that demand could peak as early as 2016. This would cast the future benefits of 89 planned coal projects here in doubt.

Among these risks is the rise of carbon pricing, changes in regulation, shifting social norms and disruptive innovation in the renewables sector (the discovery of abundant shale gas almost fits this category) – all of which contribute the decline of the fossil fuel industry.

In seven locations throughout China, including a few major cities such as Shanghai and industrial powerhouse Hubei, cap-and-trade policies are already being piloted with hopes for a national emissions trading scheme. March has seen the prices of solar and wind energy reaching price parity with traditional energy in Europe.

So why aren’t financial institutions that lend to mining companies, and the suppliers of their funds, like you and I, more concerned?

Firstly, fossil fuel companies have always been the investment of choice, and for good economic reason. Coal and gas, the two cheapest global energy sources, have had a crucial part to play in the development of countries and improved living standards in the last millennium. Before we see investment funds even thinking about divesting from fossil fuels, alternatives must be sufficiently developed to provide for world consumption, and it must make financial sense to invest in these projects.

And secondly, coordination is required between governments, financiers and business to get from here to a fossil-free future. This would ensure a gradual transition, rather than the ‘bursting’ of a ‘carbon bubble’.

Caldecott warns against taking up the battle cry of ‘carbon bubble’. “This is not very motivating to policy makers. Rather, we need to be talking about diversifying the economy.”

Where is the university in all this? It would be easy to say its investment board is just following the counsel of risk-averse financial advisers, but this ignores the forecasted danger of assets being stranded down under. It’s hard to know whether Fossil Free MU’s protest letter from 1 April ever reached Glyn Davis’ desk, but on it their demands are clear. “You have until June 30,” the letter reads. “Resubmit or fail.”

Secret documents obtained by Farrago reveal that administrators of The University of Melbourne and the Royal Melbourne Institute of Technology (RMIT) have agreed to an official merger.

The backroom deal is believed to have taken place in early March 2014, and will see the two Melbourne-based universities combine to become The Melbourne City University by the start of 2016. This agreement was supposed to remain secret until 1 July 2014, but was leaked to Farrago by an anonymous source .

“Both the University of Melbourne and the RMIT have strong academic reputations. Rather than competing with one another for students and research, it makes practical sense for these two institutions to become united,” the executive summary of the report reveals.

“With our powers combined, the Melbourne City University will be one of the world’s most prestigious tertiary education bodies,” the report continues.

“Comparisons to Monash will no longer be relevant,” one of the footnotes reads.

Glyn Davis, Vice-Chancellor of the University of Melbourne, and his wife Margaret Gardner, Vice-Chancellor of RMIT, declined to comment to Farrago. It is believed that discussions pertaining to the future of these two universities have been going on behind closed doors for years.

The Parkville campus of the University of Melbourne and the city campus of RMIT have been encroaching on each other for the past few years, with Melbourne shifting south and RMIT shifting north. It is believed that planning disputes between the two academic bodies was a key reasons behind the merger decision.

More to come…

Words by Matthew Lesh
Infographic by Kevin Hawkins

Young and innocent, we enter Australia’s number one university as fools who are easily manipulated by Big Tobacco to begin smoking, only to die soon afterwards of cancer. Luckily, part-time Vice-Chancellor and part-time nanny Glyn Davis is out to save us from big tobacco—and ourselves—by banning smoking on campus this year.

This ban, supported by the ever-watchful and growing army of public health ‘experts’, reflects a whole new world of manipulation and control over individuals.

Rob Moodie, a so-called public health expert, explains in the official press release announcing the ban that “the university’s younger students are also most susceptible to developing potentially harmful smoking habits”.

Well, yes, smoking is harmful. However, plenty of habits are potentially harmful—alcohol, partying, or even walking in the street. But is potential harm to oneself enough to ban these activities for all? Of course not.

Every smoker makes their own decision to purchase cigarettes, based on the high monetary expense, the well-known health impact, and their personal benefit. In a liberal society, smokers’ decision to light up and potentially harm themselves is their choice—not yours, or mine, or Glyn Davis’ or Rob Moodie’s.

In the case of tobacco, a popular rebuttal to this principle is the claimed grievous harm of second-hand smoke. This argument is preposterously weak considering the already limited places one could smoke on campus—only outside and at least six metres away from buildings—and the simple ability to walk away from the few who do smoke. In practice, one would have to actively aim to inhale tobacco smoke for hours every day for second-hand smoke to be dangerous. Just because something is mildly uncomfortable for some does not mean it should be banned for others.

Moreover, this ban reflects the attempts of so-called public health experts to be faux demi-gods of good and evil behaviour.

Wearing shiny suits and spurred by countless Today Tonight and A Current Affair appearances, the experts tell us we must make alcohol more expensive because young people are drinking too much. They tell us we must put taxes and plain packaging on fast food and soft drinks because people are getting fat. They tell us we must ban solariums because some people misuse them.

The experts, driven by the misguided idea that they know best, seek to dictate our lives. The Bolshevist-era apparatchiks could only dream of such a socially acceptable level of control over individual behaviour, and yet we have allowed these people to sweep into the mainstream dialogue.

Central to the arguments put forward by these experts is the authoritarian idea that individuals are not trustworthy or intelligent enough to be free—that preposterous idea that we don’t understand the harm we are causing ourselves when drinking, eating fast food or lying in a solarium.

I have never had a cigarette in my life, I dislike fast food and, despite my pasty, white skin, I have not been to a solarium.

But I fight against proposed policy changes because I want to live in a society where individuals are free to maximise their own happiness without being restricted and controlled. I do not want to live in a society where it is acceptable to manipulate individual behaviour because it is “potentially harmful”.