Walking the Talk? An Examination of the Investments of Jesuit Universities in Fossil Fuel Firms

This article investigates perspectives that have been proposed as reasons both for and against fossil fuel divestment (FFD), paying special attention to the decisions that universities make concerning investments in their endowment portfolios. Arguments that have been advanced against FFD include its supposedly lower financial returns, lack of direct control over investments, reliance on financial advisors, high transaction costs, the need for market index funds that include the stocks of fossil fuel firms, and the institution’s fiduciary duty to increase returns. Arguments that have been advanced in favor of FFD include satisfactory returns from fossil fuel-free portfolios, risk reduction, the over-pricing of fossil fuel firms, improved portfolio diversification, and the need to align investing behavior with the institution’s values, mission, and role in society. The study challenges the alleged financial reasons for maintaining investments in fossil fuel firms by presenting evidence that divestment does not impair portfolio performance on a risk-adjusted basis, nor does it increase long-term transaction costs. Fossil fuel firms are overvalued given that they will eventually suffer from the increasing demand for clean energy substitutes and face inevitable regulatory actions as the effects of climate change worsen. Divestment, therefore, might well provide higher risk-adjusted returns over the long-term

WALKING THE TALK?: Jesuit Universities and Fossil Fuel Investments

The student-led fossil fuel divestment (FFD) movement urges universities to remove investments in fossil fuel firms from their endowment portfolios to inspire reductions in carbon emissions  and help control climate change. This article explores the movement in U.S.-based Jesuit universities by documenting their endowment size, current divestment status, and rationale for or against divesting. These institutions held a total of US$13.8 billion in their endowments as of 2019, making their investment decisions relevant and material. The article in general examines the alignment of divestment actions with the commitments of Jesuit universities to environmental stewardship and social justice as expressed in their mission statements and Pope Francis’s encyclical Laudato Si’. Two out of the 27 Jesuit universities in  the U.S., namely, Georgetown and Seattle University, were already committed to FFD by April 2020; after accounting for branch campuses, this represents a commitment of 13.3% among all U.S.-based Jesuit universities. This is appreciably higher than the 4.12% divestment rate among all private 4-year universities in the United States. Each of the 27 U.S.-based Jesuit universities was contacted to verify their endowment size, divestment status, and position on FFD. The 13 who responded stated their commitment to environmental protection and sustainability, and some reported their rationale for or against divesting. Results suggest that the investment strategies of Jesuit universities are a “work in progress,” and are likely to evolve as they align with their common Roman Catholic and Jesuit identity and mission. The reasons stated for deciding not to divest, moreover, are consistent with previous literature. A second article in this issue of the Journal of Management for Global Sustainability explores those reasons in detail and broadens the theme of divesting to encompass any organization

WALKING THE TALK?: An Examination of the Investments of Jesuit Universities in Fossil Fuel Firms

This article investigates perspectives that have been proposed as reasons both for and against fossil fuel divestment (FFD), paying special attention to the decisions that universities make concerning investments in their endowment portfolios. Arguments that have been advanced against FFD include its supposedly lower financial returns, lack of direct control over investments, reliance on financial advisors, high transaction costs, the need for market index funds that include the stocks of fossil fuel firms, and the institution’s fiduciary duty to increase returns. Arguments that have been advanced in favor of FFD include satisfactory returns from fossil fuel-free portfolios, risk reduction, the over-pricing of fossil fuel firms, improved portfolio diversification, and the need to align investing behavior with the institution’s values, mission, and role in society. The study challenges the alleged financial reasons for maintaining investments in fossil fuel  firms by presenting evidence that divestment does not impair portfolio performance on a riskadjusted basis, nor does it increase long-term transaction costs. Fossil fuel firms are overvalued given that they will eventually suffer from the increasing demand for clean energy substitutes and face inevitable regulatory actions as the effects of climate change worsen. Divestment, therefore, might well provide higher risk-adjusted returns over the long-term

Walking the Talk? Jesuit Universities and Fossil Fuel Investments

The student-led fossil fuel divestment (FFD) movement urges universities to remove investments in fossil fuel firms from their endowment portfolios to inspire reductions in carbon emissions and help control climate change. This article explores the movement in U.S.-based Jesuit universities by documenting their endowment size, current divestment status, and rationale for or against divesting. These institutions held a total of US$13.8 billion in their endowments as of 2019, making their investment decisions relevant and material. The article in general examines the alignment of divestment actions with the commitments of Jesuit universities to environmental stewardship and social justice as expressed in their mission statements and Pope Francis’s encyclical Laudato Si’. Two out of the 27 Jesuit universities in the U.S., namely, Georgetown and Seattle University, were already committed to FFD by April 2020; after accounting for branch campuses, this represents a commitment of 13.3% among all U.S.-based Jesuit universities. This is appreciably higher than the 4.12% divestment rate among all private 4-year universities in the United States. Each of the 27 U.S.-based Jesuit universities was contacted to verify their endowment size, divestment status, and position on FFD. The 13 who responded stated their commitment to environmental protection and sustainability, and some reported their rationale for or against divesting. Results suggest that the investment strategies of Jesuit universities are a “work in progress,” and are likely to evolve as they align with their common Roman Catholic and Jesuit identity and mission. The reasons stated for deciding not to divest, moreover, are consistent with previous literature. A second article in this issue of the Journal of Management for Global Sustainability explores those reasons in detail and broadens the theme of divesting to encompass any organization

The role of corporate governance in meeting or beating analysts' forecast

Meeting or beating analysts' forecasts is a topic of considerable interest in the academic and business communities. Some studies indicate a favorable market response when firms meet or beat analysts' earnings forecasts, but others suggest managers opportunistically manage earnings to achieve earnings targets. We investigate the relation between corporate governance mechanisms and meeting or exceeding analysts' expectations and find that attributes of corporate governance are related to the likelihood of consistently meeting or exceeding consensus forecasts. We extend current literature by showing that some attributes of strong corporate governance mechanisms lower agency costs associated with consistently meeting or beating analysts' expectations. We also find that compensation committees reward managers for consistently meeting or beating analysts' forecasts.