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The Harvard Management Company is set to be carbon neutral in its internal operations during fiscal year 2022 — a first among university endowment offices in the United States — according to the company report released Thursday.
The announcement comes as HMC continues to work towards net-zero greenhouse gas emissions associated with the University’s endowment by 2050, a goal it set two years ago. By making its operations carbon neutral, HMC will “develop a deeper understanding of carbon footprinting and carbon removal projects,” the report states.
The University has long faced pressure from students and faculty to divest its endowment from fossil fuels. Last September, University President Lawrence S. Bacow announced that Harvard’s remaining investments in the fossil fuel industry – in the form of “legacy investments” through private equity partnerships – were in “runoff mode.” Bacow wrote that HMC will not renew partnerships with private equity firms that have holdings in the fossil fuel industry, and that it “does not intend” to make further investments in the sector.
In its inaugural climate report last year, HMC outlined its future plans and strategies to assess and decrease the carbon footprint of the endowment’s investment portfolio through engagement with its external managers and “like-minded” investors. Thursday’s report detailed HMC’s progress in implementing these strategies.
To achieve net-zero emissions in its internal operations, HMC partnered with a third-party company called Carbon Direct to track its carbon emissions and develop methods to reduce and remove them.
“HMC will continuously seek ways to reduce emissions where we can and will purchase removals for emissions-producing activities we cannot abate,” the report reads.
The report also announced that HMC is building an investment portfolio to “support the transition to a green economy.” At the end of fiscal year 2021, almost one percent of the University’s endowment funds were invested in climate solutions while less than two percent remained tied to the fossil fuel industry.
Most of HMC’s investments in the climate solutions industry are in emerging companies and technologies. The report stated HMC is hopeful these new investments will achieve impactful climate breakthroughs and provide sustained returns over the next few decades.
“We believe these investments provide the greatest opportunity to provide catalytic capital to bridge potentially transformational technologies from early commercialization to at-scale deployment to maximize impact,” the report states. “Importantly, HMC sees these investments as capable of achieving outsized financial returns in line with other outstanding opportunities in these asset classes.”
Per the report, HMC expects the percentage of the endowment that is invested in climate solutions to “continue and accelerate going forward,” though it did not specify a timeframe or a target.
The report reiterated the challenges highlighted in last year’s report of obtaining quality data on the greenhouse gas emissions of its hedge fund and private equity partners, as well as the lack of an “industry consensus” on how to measure the carbon emissions of these investments. The report highlighted the importance of collaboration with other asset managers and external managers to “encourage better disclosure and practices to improve data availability.”
Since Harvard’s net-zero pledge, many of its peer institutions with comparably large endowments, such as Princeton University, Stanford University, and the University of Pennsylvania, have made similar commitments.
“As more asset owners and asset managers make net-zero commitments, we expect that climate-related disclosures will improve,” the report reads.
The University has also partnered with several organizations, such as Climate Action 100+ and the Ceres Investor Network, that engage with investors on environmental, social, and governance considerations.
In collaborating with “like-minded investors,” HMC said it hopes to “encourage their implementation of a strong governance framework for addressing climate change, reducing GHG emissions, and improving corporate disclosure.”
The number of shareholder proposals regarding climate change shot up to 84 during the 2021 proxy voting season, from 53 in 2020.
Over the next few years, HMC will focus on developing the methods and metrics for measuring the endowment’s carbon footprint, according to the report.
“We are studying different target-setting methodologies and intend to set targets that are science-based and best account for all factors that are needed to meet global climate goals,” the report states. “This will take extensive study, thoughtful deliberation, and cooperation with and by a wide range of parties.”
—Staff writer Eric Yan can be reached at eric.yan@thecrimson.com.
—Staff writer Dekyi T. Tsotsong can be reached at dekyi.tsotsong@thecrimson.com.
