Universities’ wrong-headed investment decisions harm students

For years student activists on campuses across Australia have been campaigning for universities to divest from so-called unethical fossil fuel investments.

And they have been quite successful. In September, Queensland University of Technology joined the Australian National University, La Trobe University and the University of Sydney in committing to withdrawing all investments connected to the fossil fuel industries.

The idea behind the "fossil-free" movement is that univer­sities have long been at the forefront of progress and social justice, and should not be com­plicit in supporting or profiting from an ­industry that they claim is pushing Earth towards climate catastrophe.

But while much is said about the moral duty of universities to invest responsibly for the benefit of Mother Earth, seldom mentioned is their legal obligation to manage funds in the best interests of their students.

The regulations governing QUT's $300 million external funds purse state that "investments shall be made at the most advantageous rate available" in order to support the university's strategic goals in education, ­research and community.

In other words, the fund exists to better the education of QUT's present and future students.

There are well-founded doubts about whether that end can be achieved to maximum effect while the fund shuns any investment in an ­industry worth $138 billion a year, or 8.5 per cent of our ­national economy.

On this score, QUT's last flirtation with divestment is a cautionary tale worth heeding. In 2008 the student-run QUT Guild's endowment lost almost 50 per cent of its net worth overnight when it attempted divestment from resource investments.

That spurning investment in one of our greatest sources of ­national wealth hurt the guild in the hip pocket should come as no surprise.

Mining accounts for half of Australia's export earnings. Coal - described by some as the preferred energy source of Lucifer himself - netted us a tidy $40bn in exports last year alone. On the investing side, resource companies regularly feature among the ASX's best performing stocks and count for two of our 10 wealthiest companies.

With forecasts predicting that minerals and energy export earnings will increase by 6 per cent each year to 2020, it stretches credulity that a $300m investment fund could be left no worse off after washing its hands of one of the economy's most dynamic generators of wealth.

Given that at least some of QUT's investment funds are held in trust, the decision to divest ­raises serious questions concerning the university's duty to manage the fund with undivided loyalty to its beneficiaries - namely its students.

In fact, the university divestment push bears conspicuous ­resemblance to a landmark British case where the National Union of Mineworkers sought to divest its members' pension fund from ­industries competing with coal. The British High Court found that a trustee who eschewed a particular type of investment to satisfy their own moral preferences would breach their duty to invest in the best interests of their members by securing the greatest possible return.

Applied to the QUT scenario, a wholesale revision of the univer­sity's investment strategy based on the moral misgivings of a vocal segment of the student body is a clear-cut breach of this very ­standard.

Without a closer look at the relevant trust deeds and a High Court decision on the "ethical ­investing" of trust funds, the exact legal implications of divestment are an open question. But even so, the fossil-free university movement's claim to the greater good is in question.

Australian universities happily enrol thousands of students on the promise of providing degrees that lead to jobs in the mining and ­resources sector. Indeed, QUT's own website boasts a testimonial from a student lauding his civil ­engineering degree for equipping him with the "practical foun­dations" for a career in the mining and energy sector.

This is a sector that, as this newspaper has reported, employs one in six Queenslanders.

What are these fee-paying students supposed to make of QUT vice-chancellor Peter Coaldrake's comments that he wants QUT "to influence the sector" by ­taking a public stance in favour of its demise?

The movement's claim that the fossil fuel industry is an unqualified blight on humanity and the natural world is equally suspect.

With renewable energy still an unaffordable luxury for much of the world and over a billion people living under a cloak of darkness without power, the provision of cheap and reliable energy is es­sential to advancing human welfare everywhere.

Given that Australia is well poised to help deliver this energy to the world's poor with relatively clean coal, the fossil-free narrative that divestment is a fight between good and evil is really a mealy-mouthed farce.

More accurately, it's a contestable question of public policy on which intelligent minds can reasonably disagree.

Australia's universities have a proud history of political activism. It should be encouraged. At their best, universities are testing grounds for ideas and free-flowing debate. On that front, the fossil-free movement deserves at least a modest round of applause.

But the youthful idealism of these undergraduate activists is better left for the cut and thrust of the campus quad, well away from the chancellor's boardroom dictating how a university manages its finances.