Retirement funds for Penn faculty managed by company with billions in fossil fuel investments

Penn faculty's retirement funds are potentially being invested in fossil fuel companies — and professors said they are concerned that their colleagues are not aware. 

Recent conversation has focused on the climate impact of the University's endowment. However, Penn's only service provider for faculty retirement plans has an estimated $78 billion in fossil fuel investments, according to a recent analysis from the Institute for Energy Economics and Financial Analysis. The company, Teachers Insurance and Annuity Association of America, is the primary insurance organization that offers employer-sponsored savings plans at higher education institutions in the United States. 

Penn is one of more than 15,000 institutions for which TIAA is the primary or only manager of assets. The investment options are primarily not TIAA funds and include 13 other Vanguard funds plus the Vanguard Target Retirement Funds, a College Retirement Equities Fund, and a BlackRock fund. But all Penn retirement accounts are considered to be administered by TIAA, which serves as the University's "retirement saving plans partner" and has a $1.4 trillion portfolio. 

A spokesperson for TIAA wrote that the company aims to make decisions that are in the financial interests of its customers and which provide long-term benefits to "the environment, society, and the wider economy." The spokesperson added that selling investments that generate fossil fuels to other companies on a large scale "won't reduce carbon output."

“Our view is that broad divestment from fossil fuels does not offer TIAA an optimal way to influence the policies and practices of the companies we invest in, nor is it the best means to produce long-term value for our investors and other stakeholders,” the spokesperson wrote, citing the company's efforts to tackle climate risk across its portfolios.

Penn professors that the DP spoke with said that there is a lack of awareness about the climate impact of retirement investment options for faculty, with some taking an active role in opposing TIAA's connections to the fossil fuel industry.

On Oct. 19, 299 people who hold retirement accounts with TIAA signed a complaint written by TIAA-Divest!. The complaint was sent to the Principles for Responsible Investment, an international organization that aims to promote sustainable investment. TIAA-Divest! cited how TIAA is the fourth-largest bond holder across the coal value chain and alleged that Nuveen, TIAA's investment management arm, has gaps between its claims of responsible investing and its investments in activities that are harmful to the environment. 

English professor Jim English said that he signed the complaint because of TIAA’s connection to Adani Group. Adani is a conglomerate that owns Australia's recently constructed Carmichael coal mine, which could emit 78 million tons of carbon dioxide annually. According to research by Toxic Bonds, TIAA is the second-largest holder of Adani bonds in the world.

“I think that most professors — most well-educated people, at least in a city like Philadelphia — do not want to be investing their money in companies like Adani," English said. 

PRI rejected TIAA-Divest!'s complaint in late 2022, and the TIAA spokesperson wrote to the DP that PRI found that TIAA had not violated any policies or principles. Still, English and other professors said that the University's and TIAA's retirement investment policies are confusing. Faculty are largely obligated by Penn to invest through TIAA, which makes it hard to know where their money is going, English said. 

"The lack of information is a problem," he said. 

The professors also said that alternative options to TIAA's funds have their own environmental concerns. One alternative is the brokerage option, which lets faculty build their own investment portfolios. Legal Studies and Business Ethics professor Eric Orts said that the problem with this option is that faculty have to follow "some basic principles" of portfolio investing.

For Penn faculty like Simon Richter, a Germanic Languages and Literatures professor, the pension that Penn provides is his primary retirement plan. A pension contribution is received as a percentage of the salary from the University, and faculty can either match it or add more supplemental money.

Richter said that the brokerage option is not financially wise for his particular situation. 

“I put in a lot of hours [at Penn], doing academic things, research, working with students, and so on," Richter said. "I do not have the time to spend really informing myself or keeping up to date about what's going on in the market so that I'm able to invest my money responsibly.”

Another alternative is environmental, social, and governance investing and social value funds, which people may think have no oil stocks, Orts said. However, Orts and Cornell University professor Caroline Levine said that the reality of social value funds is more complicated.

“A bunch of [TIAA’s] funds that are called social choice or low carbon or ESG have actually higher rates of fossil fuel investment than their regular annuities,” Levine, a member of TIAA-Divest!’s coordinating committee, said, citing information from Fossil Free Funds. 

Some faculty have discussed their concerns about their current retirement options through the Faculty Senate's Select Committee on the Institutional Response to the Climate Emergency. In November 2021, CIRCE passed a resolution recommending that University administrators and the University Board of Trustees “revise the investment menu of retirement funds for faculty and staff to include additional low-carbon investment fund options.” 

A graphic attached to the resolution estimated that faculty and staff retirement funds are equal to approximately 2,470,320 metric tons of carbon dioxide a year, while Penn’s endowment has an estimated 4,263,784 metric tons.

A manual to assist faculty in achieving sustainability goals, published in August 2020, said that CIRCE was working with University leaders to "negotiate the inclusion of fossil free and green mutual funds among individual investment choices" with TIAA and Vanguard. As of January 2023, a guide for Penn's retirement savings plan does not explicitly mention low-carbon or carbon-free options.

Penn professor Bill Braham, the chair of CIRCE and past chair of the Faculty Senate, said that Penn is "heavily constrained" as a fiduciary to offer investment fund options that will do well regardless of whether faculty pay attention to how their funds are spent. The manual is a part of CIRCE's Penn Faculty Climate Pledge, which focuses on using individual retirement investment portfolios to reduce greenhouse gas emissions.

“Within the University of Pennsylvania, what we would really most want is simply a clear fossil-free fund option," Richter said.

Beyond Penn, Levine said she has been trying to inform other TIAA clients who are unhappy with the company's fossil fuel investments.

"We're teachers, so we spend our days — our lives — investing in students so that [they] can live full, rich, flourishing lives," Levine said. "The idea that our earnings are going into destroying the future so that [students] cannot live those lives feels like the biggest contradiction.”