Assets: An asset is something that contains value and can be converted to cash.
Assets Classes: There are different types of assets, defined by how easy the asset is to liquidate, and how the asset is paid. Asset classes include cash, equity (stocks), and debt (bonds/fixed income). Investment portfolios typically include a balance of multiple asset classes to suit the consumer’s needs and risk-tolerance. Further subgroups within asset classes include differentiating stocks by their market capitalizations (small cap, mid cap, large cap; cap is short for ‘capitalization’) and types of ‘fixed income’ assets such as government bonds, corporate bonds, and municipal bonds. Fixed income assets are called that because they pay a ‘fixed’ amount of income over time.
Cash (High Liquidity)
Debt (Low Liquidity)
Money market instruments
Stocks (Small-cap / Large-cap)
Asset-Backed Security (ABS): A tradable financial asset whose payments are insured by a larger, more stable asset holder. Private, investor-owned, and governmental banks often provide asset-backed security to bonds and loans.
Bonds: A loan from a government or corporate entity with a guaranteed rate of return over time. Convertible bonds are bonds that, under certain conditions, can be converted to stock.
Cash: Cash is physical bank notes. In finance, cash means a money or currency that is not invested and can be accessed immediately (completely liquid). Certain levels of accessible cash can be stored within a bank, and cash can also be held by money market instruments, which is a financial broker account invested in the stock market but that is readily accessible.
Conflict of Interest: A conflict of interest is when someone with a duty to perform one action or task has an incentive to not perform that duty or action, and indeed may personally gain by not performing their duty.
Divestment: To sell off a certain asset. Divestment is often done for financial reasons, in addition to social, environmental, governmental concerns.
Pension Funds: A fund established by an employer to ensure retirement benefits for employees. Pension funds are usually large asset pools that generate stable and long term growth to provide payments to retired employees.
Equity: Having ownership in property, business, or stock. Equity can come as private investments in companies (private equity), home ownership (home equity), and stocks (equity). In the stock sense, equity has a medium level of liquidity.
Debt: An individual, corporation, or government entity that has a financial agreement to pay back money it has received. Most debt is paid back with ‘interest’, which is a fee the borrower pays for the privilege of borrowing, and to compensate the lender in case the debtor never pays back the debt. Debts include bonds and loans, and can be short or long term.
Endowment: An endowment is an investment fund that ideally keeps the total amount of money intact and uses the returns on investment for income. Universities often have large endowments (above $1 billion) that provide returns for education causes.
Environment-Social-Governance (ESG): Environment-Social-Governance factors are three areas that can be used to measure the sustainability and ethical impact of an investment decision. ESG is a commonly used term to refer to socially responsible investing and incorporating the impacts of public and environmental health in investment decisions.
Exchange-Traded Fund (ETFs): A collection of stocks in a portfolio that trades and pays returns as a single stock. ETFs can track indexes such as the S&P 500 as well as be specialized in stocks such as clean industries.
External Auditor : External auditors are third party organizations that audit large asset holdings. Most university endowment funds are audited on an at least annual basis by a third party auditing firm, very likely one of the ‘Big Four’ auditing firms that are both the largest and have good reputations: Pricewater House Cooper, KPMG, Deloitte, and Ernst & Young. Part of the reason the Enron scandal became huge news is because the auditor, Arthur Anderson, was fraudulently colluding with the company.
Finance: A broad word used to describe how money is ‘ managed ’. When people refer to the ‘financial sector’, they are referring to the group of businesses whose purpose is to make decisions about money, theirs’ and other peoples’. This includes decisions on where to put, or ‘invest’ money so it grows, and making assessments about what choices may be ‘risky’ and result in losing money. When you put money in your savings bank, pay your credit cards, take out student loans, and lend money to friends, you are also participating in finance but on a small scale.
Fixed Income: An investment that returns rates at predictable levels and time intervals. This includes bonds, which guarantee a rate of return over a given time. Fixed-income is a low risk and low-return investment. Investors often invest heavily for reliable return, and to balance out higher-risk, lucrative investments.
Freedom of Information Act Request: A request to disclose documents controlled by the U.S. government. This is supported by the Freedom of Information Act (FOIA), 5 U.S.C. § 552 , and can be used in some cases to get financial information about a given institution, endowment, or board of trustees.
Green Bond (Climate Bond): A relatively new type of bond whose use of proceeds funds development of renewable energy, energy efficiency, and climate change solutions.
Green Revolving Fund: A fund which makes loans for the purpose of developing energy efficiency projects and renewable energy installation. The savings resulting from the energy savings are then returned to the fund, to be loaned out for more energy efficiency projects. Many Universities have created green revolving funds for on campus energy retrofits.
Holdings: Holdings refer to the owned assets in a portfolio. Holdings can include stock, stock options, property, cash, bonds, physical assets such as piles of gold coins, and any other assets with value.
Hedge Funds: A fund of money managed by a professional firm that uses undisclosed strategies to get the best return for their investors. Hedge funds are often non-transparent with their investment portfolios, and are only available to sophisticated investors.
Inflation: Inflation refers to the reduction of buying power of money over time. For example, in the U.S. you could spend about $3.50 in 1900 for what $100 buys you today. Inflation is estimated at about 3% annual increase. As a result, investments have to grow at least 3% to maintain their value, or they lose 3% a year to inflation. This means that a return rate of 1% will devalue money because inflation will be higher.
Investment Managers (Fund Managers): An investment manager is a general term for a person or financial institution that manages a smaller pool of money according to the customer’s need. Pension funds and University endowments often contract outside fund managers to help them invest their assets. There are also fund managers that focus of socially responsible investing or strive for the highest return, as in a Hedge Fund.
Investment Policies: Investment policies set rules for how an institution will invest its assets. Policies can include bans on certain investments, such as tobacco or weapons, or set guidelines for investment decisions, such as developing ESG investment practices. They can also define required risk and return, or direct investment managers to take certain actions.
Investment Risk and Returns: Low risk investments have a steady rate of return, while high risk investments have an unpredictable but higher rate of return. Investment managers choose the risk and return profile to fit an investor’s needs to make money, versus their willingness to take risk—the chance that they lose money trying to make it. The idea is that investors should get paid more for taking ‘more risk’.
Liquidity: A measure of how easy an asset can be converted into cash. If it is very easy to convert something into cash, it’s liquid. If it is difficult to convert an asset into cash (such as real estate, long term bonds) it’s illiquid. Sometimes, due to contracts or market conditions, it can take years to convert assets to cash. Those assets are illiquid—not liquid.
Mutual Funds: A mutual fund is an investment entity that owns a diverse group of stocks or bonds. Investors in mutual funds do not own the assets that make up the fund, but the fund itself. Mutual funds can be ‘passively’ or ‘actively’ managed.
Portfolio: A portfolio is a grouping of assets and holdings owned by a single financial entity. Individuals, companies, and mutual funds can have portfolios of items such as their equity and debt.
Return on Investment: (a.k.a.—Return, Rate of Return) Return on investment is the amount an asset grows in a given time, compared to the initial value. Ex. $100 with a 50% return rate will be $150.
Socially Responsible Investing (SRI): A term used to describe investment decisions that incorporate consideration of the investment’s or company’s impacts to society, environment, health, and other social areas. SRI often refers to incorporating ESG factors into investment decisions. SRI funds often have slightly higher risks and potentially less return due to limitation of investment options but can outperform traditional investment portfolios by selecting businesses with employee benefits, socially and environmentally sound practices, and a focus on long term sustainability.
Stock: A unit of value in the stock market that correlates to partial ownership of a public company. Stocks are bought and sold many times within a day and their prices can fluctuate highly. ‘Stock options’ include owning part of a company that is not currently being traded on the stock market.
Volatility: The amount of predictably an asset holds in increasing or decreasing value. Highly volatile assets such as low-cap stocks can fluctuate largely, while less volatile assets such as large-cap stocks are more predictable, stable, and less risky.
The Talk-Divest Fossil Free Mentorship Project is a network of financial professionals that can provide support to your divestment campaign. These experts and professionals volunteer to work with student campaigns and can add the perspective of a deeper financial knowledge of investment management. Through this program you can request a mentor as well as sign on to become a mentor.Find a Mentor at the Talk-Divest Mentor Network
Talk-Divest professionals can provide support for your campaign in a variety of ways. This includes helping answer financial questions, assisting you in understanding technical investment concepts and practices, showing you how to analyze the structure and holdings of your campaign’s target endowment, reviewing and providing feedback on your presentations to administrators, helping you prepare for meetings with key decision-makers, helping develop methods for addressing difficult financial questions posed by administrators and many other topics. The scope of the interaction will vary depending on the need of the student group and the availability of the mentor. Overall, Talk-Divest professionals can assist your campaign in refining financial arguments and helping sway administration.
Investment professionals can support during crucial moments within divestment campaign such as:
If approaching a time where you feel it would be helpful to have assistance from an expert, make sure to use the Talk-Divest mentorship network early on to develop relationship with professionals in your area.
Please refer to the Talk-Divest Mentor Network to find financial experts in your area who have volunteered to assist divestment campaign. As a divestment campaign, also feel free to contact professionals who can provide support with understanding carbon and climate risk adjusted investment strategies.
Students are commonly asked how divestment ‘moves the needle’ and can create change in regards to addressing climate change? This paper presents a research summary of how divestment can be an effective method of creating political and economic change.
A large amount of divestment resources covering many different topic areas
Spreadsheet of general resources and campaign documents for CA fossil free campaigns
Provides resources for students, alumni and administrators / trustees.
Links to reports and article related to divestment & investment
Provides links to reports on the financial reasoning of divestment & investment
Campaign Materials from American University
Links to relevant research for Fossil Fuel Divestment