It’s almost symbolic that an institution that has been around for 800 years has decided it doesn’t want its money to be tied to the industries that have powered the last two hundred years. The fact that Cambridge University said it would stop investing in fossil fuels altogether by 2030 is seen by some as a moral move. But when you look more closely, it seems more like a structural shift—the kind that is hard to undo.
By December 2020, the university plans to pull its money out of public equity managers that focus on conventional energy. By 2025, it wants to hold a lot more renewable energy, and by 2030, it wants to have no meaningful exposure to fossil fuels. It has a £3.5 billion endowment, which is a lot of money. And the choice to put that weight on cleaner institutions is already having effects far beyond Cambridge’s stone courtyards.
Barclays and HSBC are two of the first banks to notice. It has already moved £135 million from big high street banks to smaller building societies and greener lenders, such as Svenska Handelsbanken and Amundi’s fossil fuel-free money market fund. It is said that more transfers are on the way. The exact amount that will be paid in the end is still unknown, but the direction of travel seems clear.
When you’re talking about money, it’s easy to forget about how this pressure began. A group of students called the Cambridge Zero Carbon Campaign worked for five years to get to this point. In 2018, they held a sit-in that got a lot of attention. Their response to the news was telling: they first called it “a historic victory,” but then they said it was “five years too late.” It seems like the students who actually went through this campaign felt both happy and angry at the same time.
Vice-Chancellor Professor Stephen Toope said that the choice was morally necessary because of the “environmental and moral need for action.” Tilly Franklin, chief investment officer, used more direct language to talk about risk. She said that climate change and environmental damage are “an urgent existential threat.” It’s important to note that these two frames—the moral and the financial—are coming together more and more in the way institutions make decisions. That’s what makes Cambridge’s move more than just a press release.
The bigger effort goes beyond just Cambridge’s balance sheet. The university is actively trying to get more than 80 other universities in the UK to join it. Together, they want banks to offer greener financial products or lose billions of pounds in deposits. Twenty universities have already talked to Handelsbanken, which is one of the preferred alternative schools. The bank’s head of sustainability, Richard Winder, said in a low voice that it is possible to run a big bank responsibly and still make money. That’s not so much a brag as a response to the common claim that green finance needs businesses to give up something.
The math doesn’t look bad for Barclays and HSBC yet, but it’s something they should keep an eye on. This year alone, Barclays helped fossil fuel companies get loans and bonds worth about $7.4 billion. HSBC came in second with about $5.3 billion. Both banks have promised that by 2050, their lending activities will have net-zero emissions. They also have long-term goals for sustainable finance that run into the trillions of dollars. It remains to be seen if these promises are enough to satisfy places like Cambridge. “We look at what they do,” said Katharina Lindmeier of Nest Corp., a pension fund that works with a third of individuals in the UK. “And we don’t see fossil-fuel financing going in the right direction.”
In addition to its decision, Cambridge has made a big promise to itself: any future research funding or donations must show that they will help the university meet its goals for reducing emissions in order to be accepted. That’s a more strict line than most organizations have used. It seems like this isn’t just about how the portfolio looks; it’s a statement of values built into the way the institution works.
Other big universities will have to follow suit, whether they do so quickly or slowly. The example has been set. It’s important for Cambridge to make moves like this because net-zero alliances are breaking up in the US and the term “ESG” is now being argued over. It’s not a big deal. It’s real, though, and it’s moving money.
