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Sydney University in the grip of groupthink

12 September 2015 One Comment

As someone involved in academia for a number of decades, I hold our universities to the highest standards. And we all should.

Universities have existed for hundreds of years representing the very best of human civilisation. They represent research. They represent learning. They represent fundamental human values.

The decision of Sydney University to divest stocks in resource companies is, at its worst attacking one of Australia’s most successful industries. At best, it is rank hypocrisy.

The Australian National University kicked this so-called “ethical divestment” of resource companies policy off last year, and Sydney University has followed suit by “reducing” investments in companies it believes contribute to global warming, including the large resources companies. More Australian universities are, sadly, “joining the mob” on the divestment bandwagon.

But how does this fit within their academic mission? The truth is, it doesn’t.

Let’s firstly go back to how universities source their funds.

Universities derive the bulk of their income from government allocations, along with student fees.

In 2014, according to the university’s own annual report, government funding for Sydney University amounted to almost $1 billion. That income is supposedly spent on building facilities, paying academic salaries, providing amenities and research grants , in other words, the operation of the university. If there is money left over, it should be invested into an endowment so that the university can provide more student services, better research departments, and a more holistic education for their students.

Some Australian universities have built up significant investment funds , both from government funding and benefactors. These funds have the goal of supporting the university to achieve their academic objectives.

Sadly, the funds of Sydney University, now representing a portfolio of around $1.4 billion, have become a plaything of the political left. The university saw that a recent hot-button issue was climate change , nothing wrong with this, that is the university’s right. But what is not their right is to compromise the return of their investment portfolio by arbitrarily not investing in resources companies that, they argue, add to Australia’s carbon footprint.

Never forget, this divestment could include great companies with significant operations (and thousands of employees) in Australia such as Santos and BHP Billiton.

Think about it this way , the university now wants to invest in a company not based on an investment case, but based on an ethical case , an ethical case that is, in many instances, based on spurious grounds. This is particularly the case given Sydney University is somehow not OK with investing in emissions intensive industries, but remarkably is okay investing in companies producing tobacco, alcohol and other drugs of addiction. How bizarre is that?

What does this mean?

It means less monetary return for the university, fewer research and scholarship grants, and reduced student facilities. Ultimately, it will compromise the functioning of the university.

When rejecting a similar proposal in 2013, the esteemed president of America’s Harvard University, Drew Faust, noted:

“Harvard is an academic institution. It exists to serve an academic mission , to carry out the best possible programs of education and research. We hold our endowment funds in trust to advance that mission, which is the university’s distinctive way of serving society….”

The estimable president Faust continued: “As such, we maintain a strong presumption against divesting investment assets for reasons unrelated to the endowment’s financial strength and its ability to advance our academic goals.”

If that answer is good enough for the president of the best university in North America, then it is good enough for me. To boot, the arguments of president Faust simply make common sense.

Let us not get carried away with the academic groupthink on this issue.

Universities are simply too important to be the plaything of either side of politics , so we should get back to basics and make sure that our universities are investing funds that will provide them with the best chance of fulfilling their academic mission, not the mission of some political apparatchik wanting to appease the environmental movement.

Ross Fitzgerald is emeritus professor of history and politics at Griffith University and author of 37 books, including his memoir ‘My name is Ross: An alcoholic’s journey’, which is available as an e-book, and a Talking Book from Vision Australia.

The Canberra Times, September 12, 2015

One Comment »

  • Sara Watts said:

    Uni takes long view

    It seems a shame when someone, who by their own admission has been involved in academia for several years, presents a series of incorrect and unchecked statements as fact. Emeritus Professor Ross Fitzgerald (“Investment fund decisions must fulfil an academic mission”, Forum, September 12, p7) has recently done just that. Last February the University of Sydney, after consultation with the university community and other stakeholders, made a public and innovative commitment to reducing the overall carbon footprint of its listed equity portfolio.

    The university did this thoughtfully and with a clear understanding of the obligation it has to preserve the return on investment even while reducing its carbon footprint. We did consider divesting from all fossil fuel producers, however divestiture is a blunt instrument and does not address the fact that some non-fossil fuel producers are actually heavy carbon emitters.

    It is true that the University’s ethical investment guidelines prohibit direct investment in tobacco and alcohol. In moving to a new emerging markets fund manager, the university has been indirectly and inadvertently exposed to a small number of those stocks through a pooled investment fund. We are addressing that indirect exposure.

    Hair-splitting? Some may think so. The fact remains that we take the commitment to reduce our carbon footprint seriously and we intend to achieve it in a manner that is neither knee-jerk nor irresponsible.

    Sara Watts, vice-principal (Operations), University of Sydney

    Ross Fitzgerald complains that Australian universities are taking sound long-term investment action based on rigorous scientific climate change research. Does Ross Fitzgerald think that they should ignore Minister Peter Dutton’s sage advice that on low-lying Pacific Islands, “Time doesn’t mean anything when you’re about to be, you know, have water lapping at your door”?

    Dr Peter Smith, Lake Illawarra, NSW

    Does Ross Fitzgerald expect market-driven vice-chancellors who support Minister Christopher Pyne’s proposals for fee deregulation to ignore the stock market’s investment advice simply because the present government and Professor Fitzgerald are not yet ready to listen to what the market has to say about investing in coal?

    Sophia Yates, Parkville, Vic

    The Canberra Times, September 16, 2015

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