In April of last year, CareNotCops rallied outside Levi Hall, demanding that the University release its budget and information about funds allocated to the University of Chicago Police Department. In February, IfNotNow called for information about the endowment’s investments. For years, Fair Budget UChicago has pressed for the budget to be made public. These demonstrations are part of the rising tide of student demands that the University increase its financial transparency.
Based on filings with the Securities and Exchange Commission (SEC) from 2018-20 and documents compiled by Preqin, an independent database for research on financial markets, The Maroon found that the University’s finances have exposure to fossil fuels, deforestation, and weapons’ manufacturers through its investments in hedge-funds, exchange-traded funds (ETFs), and private equities.
ETFs are funds traded on the stock market which themselves hold a range of assets, allowing investors access to certain industries without directly holding assets in them. This is known as holding “indirect equities.”
The University has more than $33 million invested in three exchange-traded funds (ETFs) managed by BlackRock, an investment management firm, the University’s February 2020 SEC filings show. In the past, the University had invested more in the funds: altogether, it had $355 million in them in April 2018.
The University invests in three BlackRock funds: iShares Core S&P 500, iShares Core MSCI EAFE, and iShares Core MSCI EMKT. These funds primarily hold investments in the 500 largest companies listed on stock exchanges in the US, in European and Asian companies, and in companies in developing countries, respectively.
At least 29 percent of the portfolio of Core S&P 500, 26 percent of Core MSCI EAFE, and 14 percent of Core MSCI EMKT has exposure to deforestation, fossil fuels, and weapons manufacturers, according to reports sponsored by As You Sow, a non-profit promoting corporate accountability.
“The University’s investment goal is to supply a steady source of income to help support University programs over the long term, to safeguard the future of the University. University investments are diversified to offer the potential for gains while mitigating investment risks,” Gerald McSwiggan, assistant director for public affairs at UChicago, told The Maroon in an emailed statement.
The University has no long-term plans for divestment from these industries, he added, stating that it has decided against taking social or political stances on issues outside its core mission, referring to the 1967 Kalven Report.
“Doing this [taking political stances] through investments or other means would only diminish the University’s distinctive contribution — providing a home for faculty and students to espouse and challenge the widest range of social practices and beliefs,” he wrote.
Exchange Traded Funds
The three ETFs the University invests in have over $40 billion invested in companies involved in deforestation, including food processors and retailers, according to the group Deforestation Free Funds, a platform that grades mutual funds and ETFs based on their investments in companies and industries that drive deforestation.
The ETFs have investments in companies involved with cattle ranching and soy cultivation, which are sectors responsible for 80 percent of the deforestation in the Amazon, according to a study by the Yale School of Forestry.
Two Brazilian food processing companies—JBS and Marfrig—accounted for the deforestation of over 34,000 hectares, an area equivalent to 80 Hyde Parks, in 2017, according to a 2019 investigation by Trase, a supply-chain transparency organization.
Core MSCI EMKT, in which the University invests $3.9 million, has holdings worth over $35 million in JBS and more than $7 million in Marfrig, as of April 2020.
Core S&P 500, in which the university invests more than $18 million, has $1.3 billion in Walmart stock as of April 2020. According to Chain Reaction Risk, Walmart conducted business worth $1.86 billion with JBS in 2018.
Core S&P 500 also has $157 million worth of holdings in the Chicago-based Archer Daniels Midland (ADM) as of April 2020, which sources soy from deforested areas in South American countries as Brazil and Argentina, Mongabay, a US-based environmental news outlet reported in August 2018.
Private sector companies like retailers or fast food producers also enable deforestation by purchasing goods produced via deforestation, hence providing a market for the same, according to Amazon Watch, a US-based environmental non-profit.
Core MSCI EAFE, in which the University invests more than $11 million, has holdings worth $1.4 billion in Nestle, the largest food company in the world, which sources material from Cargill for its pet food subsidiary, Nestle Purina Petcare. Cargill is an American firm that has obtained soy from deforested land in Brazil, according to Mighty Earth, an environmental nonprofit based in Washington DC.
Core S&P 500 invests in McDonald’s Corporation, Coca-Cola, and Pepsico—firms with supply chains that include products from deforested areas according to Greenpeace, an international environmental NGO headquartered in Amsterdam.
The three ETFs also have over $12 billion invested in banks which finance companies involved in deforestation, according to Deforestation Free Funds. These include American and European banks such as JP Morgan Chase, Bank of America, and BNP Paribas.
The three ETFs the University invests in also have over $20 billion in total invested in fossil fuel companies, according to the group Fossil Free Funds, a project of As You Sow.
Core S&P 500 had more than $12 billion invested in fossil fuel companies as of April 2020, including investments in Exxon Mobil, Chevron, and ConocoPhillips.
It invests $2.8 billion in Berkshire Hathaway, for example, the multinational conglomerate which owns Berkshire Hathaway Energy (BHE), a holding company that owns several utilities that operate on fossil fuels, including MidAmerican Energy, which operates 13,420 miles of natural gas pipelines.
Core MSCI EAFE invests $5 billion in fossil fuel companies as of January 2020, including Royal Dutch Shell, British Petroleum (BP), and Total SA, a French petroleum refining company.
Core MSCI EMKT invests in fossil fuel firms including Vale, a Brazilian mining company that has coal mines in Mozambique and China; PTT, a Thai state-owned oil and gas company; and China Petroleum.
The ETFs that the University invests in have $6 billion invested in the manufactures of both conventional and nuclear weapons, according to the group Weapons Free Funds, another As You Sow project.
Core S&P 500 holds $4.9 billion in American manufacturers of conventional weapons, including Boeing, Lockheed Martin, General Dynamics, and Raytheon, according to its website.
Core S&P 500 also invests in companies that manufacture components of nuclear weapons, including Honeywell International, an American conglomerate that is a leading manufacturer of nuclear weapons. Among other operations, it manufactures plutonium pits, which are explosives that trigger the detonation of thermonuclear weapons.
Core MSCI EAFE has over $880 million invested in weapons manufacturers, including Airbus and Safran SA, a French defense company.
Core MSCI EMKT invests $78 million in weapons companies outside the US, including Korea Aerospace and Hanwha Aerospace, both South Korean companies, and Embraer SA, a Brazilian weapons manufacturer.
Private Equities and Hedge Funds:
The University also invests in private equity funds (PEs) and hedge-funds which hold assets in fossil fuels.
While the exact amount the University invests in each hedge fund and PE remains undisclosed, Preqin estimates that the University invests nearly $2.6 billion in hedge funds and about $1.2 billion in PEs in total.
All in all, at least 15 out of 62 total PE funds the University contributes to have had investments in fossil fuels, according to Preqin.
The University has also invested in at least one fund of the Boston-based hedge-fund Baupost for over five years, according to Preqin. Baupost’s SEC filings indicate that its holdings in fossil fuels accounted for around 10 percent of all its equity holdings as of February 2020.
Baupost invests $619 million in Cheniere Energy, an exporter of natural gas based in Texas. It also currently invests at least $48 million in Vista Oil & Gas—the fifth largest oil producer in Argentina, which produced 24,500 barrels of oil per day through 2018—according to its February 2020 SEC filing.
When asked whether the University’s investments in other hedge-funds have exposure to fossil fuels, deforestation, or weapons manufacturers, McSwiggan did not respond.
The University also invests in Fund V of Baring Vostok Capital Partners, Russia’s biggest private equity, which paid $36.2 million to acquire a dominant stake in Tigers Realm Coal in 2014.
Other funds the University invests in include Fund V of Baring Private Equity Asia, one of Asia’s largest private equity firms, which held a 25 percent stake in AAG Energy, a coal and gas exploration company based in China, as of July 2018.
The University further invests in a fund of Centerbridge Partners, which acquired a majority of Seitel Holdings in 2018, a company that provides the largest database of onshore seismic data for the oil and gas industry in North America.
A fund of TDR Capital, a British PE the University invests in, invested in Euro Garages in October 2015 in a deal worth 1.3 billion pounds, and acquired the Netherlands-based European Forecourt Retail Group in October 2016. Both Euro Garages and Forecourt Retail Group are primarily engaged in the marketing and distribution of petroleum products.