Cambridge invested millions in fossil fuels

Noella Chye 8 November 2017

The Guardian and 95 other media organisations revealed as part of their Paradise Papers investigation that the University of Cambridge and University of Oxford, as well as almost half of their constituent colleges, have been investing tens of millions of pounds into offshore funds, one of which is a joint venture to develop oil exploration and deep-sea drilling.

The Paradise Papers is a series of articles about the findings from a special investigation into a leak of 13.4m files from two offshore service providers and 19 tax havens' company registries.

Leaked papers revealed that both universities' central funding bodies first invest significant funds in multi-billion-dollar private equity partnerships based in the Cayman Islands, which then channel the money to "blocker" corporations, a type of corporation in the United States which is taxed separately from its owners, and is used by foreign investors or tax exempt individuals when participating in private equity or with hedge funds.

The procedure allows the universities to avoid a US tax on hedge fund investments, thus receiving dividends tax-free.

One such private equity partnership exists between the universities and Guernsey-based private equity firm, Coller International. Oxford invested £2.6m in two separate funds made up of cash from the university itself and from individual colleges. Cambridge invested £1.3m in the same scheme.

The fund then routes the money to various investments, the biggest of which was worth £762,500,000 in Royal Dutch Shell, an British-Dutch oil and gas company more commonly known as Shell. This then created a joint venture, named the Shell Technology Ventures Fund, to invest in "production and exploration" technologies, such as that of the firm Xtreme Coil. The firm specialises in "innovative and efficient drilling rigs" able to "reach hydrocarbons in deeper horizons", the Guardian reports.

The findings come a day before the University of Cambridge's second divestment meeting of Michaelmas term, which will take place on Thursday, November 9th. The town hall-style meetings are led by the University's Divestment Working Group, and are open to all University staff and students.

The Cambridge colleges which have invested in fossil fuels include according to the investigation: Clare, Downing, Gonville & Caius, Jesus, Murray Edwards (formerly known as New Hall), Newnham, Pembroke, St Catharine’s, St John’s, Trinity and Trinity Hall. Those at Oxford are All Souls, Christ Church, Corpus Christi, Exeter, Lincoln, Magdalen, Merton, Nuffield, Somerville, St Antony’s, St Catherine’s, Queen’s, Trinity, University, Wolfson and Worcester. Somerville have denied the claim.

The Paradise Papers files which revealed these investments were marked “trade secret and confidential”.

A spokesperson for the Cambridge University Zero Carbon Society told The Cambridge Student, “These revelations are absolutely scandalous. That the University has been investing tens of millions of pounds in offshore funds to dodge tax is bad enough. That in doing so it has been investing huge quantities in Shell’s deep-sea oil exploits is outrageous. Time and again Zero Carbon have been told that the University has minimal investments in fossil fuel companies. Yet now the truth is clear.

"This revelation makes a mockery of the 2016 Working Group report, which insisted that Cambridge’s investments would reflect ‘the interests and values of the University’. It makes a mockery of the University’s professed openness and willing to engage on investment issues. It makes a mockery of the University’s pathetic responsible investment policy. And it makes a mockery of the University’s professed strategy to engage with its fund managers on ethical issues. It exposes the University’s unwillingness to divest for what it really is: profit over values.

"The new Vice-Chancellor has said he wants Cambridge to be “a social leader”. We urge him to lead now, if this is not to be yet more empty rhetoric hiding moral crimes."

A spokesperson said on behalf of the Cambridge colleges and University: "The Colleges and the University are charities and therefore their holdings in investments are tax-exempt in the UK, US and many other countries. This means there is normally no tax to pay.

"The fund arrangement, through which the University and Colleges invest, is standard for collective investments of this type. The fund is managed by a highly reputable investment advisor and, as is normal, the adviser makes the decisions about specific investments to be made by the fund.

"A divestment working group was set up by University council in May 2016 to consider the question of divestment from businesses involved in fossil fuel industries. The university is currently seeking views from a wide range of organisations and individuals. In addition to written submissions we are holding Town Hall meetings open to staff and students from across the University."

The comment adds, "The University's investment approach was reviewed last year. Following the review the University then rejected full divestment in favour of a policy of 'active engagement' with fund managers. The resulting report made clear that the University had no directly held exposure to the most pollutive industries, such as thermal coal and tar sands, and no expectation of having any such exposure in the future. In relation to investments managed externally, there were only negligible holdings in these more polluting fossil fuel industries."