Campus Divestment Action with Teeth: A Novel and Simple Legal Strategy

In the decades-long fight against fossil fuels, activists have employed myriad approaches to spur institutional divestment from the industry. Fossil fuel investments are unethical and immoral, organizers have argued. They are politically reckless and financially irresponsible. This is all compelling and true. But recently, student organizers at some of the most prominent universities across the country have been putting a new strategy to work: a novel legal approach.

The Uniform Prudent Management of Institutional Funds Act (UPMIFA) is a state law that is in place in all states except Pennsylvania. Each one is nearly identical. UPMIFA is a law that governs how non-profit, tax-exempt institutions can handle their money and investments. It mandates that these organizations act according to what is known as the prudence standard; institutions must employ the “care, skill, and caution” necessary to minimize risks and maximize returns for the fund’s present and future beneficiaries. UPMIFA defines standards of care in terms of how endowment managers invest and manage endowment funds. In short, organizations are mandated to be extra cautious in these financial decisions. They are held to a strict degree of responsibility.

UPMIFA has become a key tool in the student-led fossil fuel divestment movement at universities, finally putting teeth into the argument about immorality and imprudence that activists have been making for years. Student organizers at schools such as Harvard, Yale, Princeton, Cornell, MIT, Stanford, and Vanderbilt have filed legal complaints with the Attorneys General in their respective states. They are asking them to use their enforcement powers under state law to open investigations into the illegality of fossil fuel investments and the poor transparency practices surrounding institutional financial decision-making. Attorneys from the Climate Defense Project assisted students in drafting these legal documents.

The complaints received broad national recognition and were featured in media outlets such as CNN, The Washington Post, and The Guardian. Board trustees at Harvard, Cornell, and Princeton made divestment or dissociation decisions in the months right after these complaints were filed. It is largely assumed that the pressure applied by the possibility of impending legal action was a catalyst in the swiftness of these actions.

The justification for the illegality of endowment fossil fuel investments under UPMIFA is pretty straightforward. In fact, most legal arguments often are. Yet legal strategy is often clouded by intentionally difficult language which works to render legal activism inaccessible to the average person.

So, simply, here’s how it works:

All public colleges and universities, and many private ones, are non-profit institutions. They enjoy special privileges that come with this status; they are, for example, exempt from taxes on the property value of their real estate in their host cities.

UPMIFA requires organizations to invest in consideration of its stated charitable purposes. At Yale, for example, that is a stated duty to “improve the world today and for future generations.” Princeton, furthermore, pledges itself “in the nation’s service and the service of humanity.” Organizers evidenced how the havoc wreaked by climate change impedes the realization of these missions. For example, at Yale, students evidenced the ways in which climate change will make the world hotter, more prone to weather disasters, disease, environmental degradation, and more unequal, than in previous generations.

There are two “duties” stated in UPMIFA, the duty of care, and the duty of loyalty. The duty of care means investing with the institution’s best interest in mind. In these complaints, students demonstrated the ways that climate change was impacting public health, environmental quality, and the economies in the areas in which their respective schools were located. The point was to show how investing in an industry that contributes to climate change is self-sabotaging, threatening the longevity and well-being of the university itself. Students at Stanford in California might, for example, talk about the health impacts of poor air quality or the risk to buildings from climate-induced wildfires. Students at Vanderbilt in Tennessee might talk about the dangerous and expensive considerations of climate-induced hurricanes and flooding for campus property and safety.

The duty of loyalty means that those who are working to make financial decisions about university endowments must not be distracted by other engagements which would cause them to make decisions that are not in the school’s best interests. At many of these schools, presidents and board members have established ties to fossil fuel companies — many sit on the boards of prominent energy companies some of which, for example, Duke Energy, have demonstrated flagrant disregard for federal environmental law such as the Clean Water Act. In the complaints, students listed the other engagements of board members, demonstrating incompatible commitments that rendered trustees unable to make sound, prudent investment decisions in a livable future.

These complaints under UPMIFA have the power and potential to make waves far beyond the single university in question. There is an exciting promise in precedent— if one of these Attorneys General opened an investigation into the legality of one school’s endowment fossil fuel investments under UPMIFA or issued some sort of statement or directive, there would be a clear imperative for other non-profits in the state to consider the legality of their own investments. And, since the law is so similar between states, other institutions would be wise to follow suit.

The utilization of UPMIFA by student activists lends an important message in the climate justice fight: the laws and regulations to enforce a better, more just world, already exist. We do not need to invent the legal wheel to fight climate change— we just need to improve legal literacy and awareness so that more people can take up these avenues of change-making for themselves.

RCC Presidential Fellow — Molly Weiner — Yale University

RCC Presidential Fellow Molly Weiner is a sophomore at Yale University majoring in American Studies with a focus on politics and the environment and is pursuing a certificate in Advanced Spanish. She is an organizer with the Yale Endowment Justice Coalition, a movement of students, faculty, alumni, and community members who oppose the financialization of higher education and believe that Yale’s endowment is an inherently political force to be used for moral ends. In February 2021, Molly helped found the Fossil Free 5 coalition of divestment organizers at Yale, Princeton, MIT, Stanford, and Vanderbilt; organizers filed legal complaints with the attorneys general in their respective states, arguing that endowment investments in the fossil fuel industry are illegal under state law. Their activism was featured in CNN, The Washington PostThe Guardian, and Grist, among others.