UNC investment in alternative energy are positive

UNC-system efforts to invest in alternative energy have steadily grown — and the $4.6 billion endowment is thriving.

The fund, which saw a 9.3 percent rate of return on investment, ranked among the top five percent of Cambridge Associates’ universe of college and university endowment funds. The Chapel Hill Investment Fund’s $2.9 billion endowment specifically increased by $243.9 million.

“The driver was exceptional investment manager performance,” said Jonathon King, president and CEO of the UNC Management Company — the body that invests the university system’s endowment. “We just had a number of managers this year that had unbelievably good years.”

Interest in expanding investments in alternative energy began in September 2014 when the UNC Board of Trustees passed a non-binding clean energy resolution sponsored by the Sierra Student Coalition.

And in a follow-up presentation to the board Thursday, King said alternative energy currently represents $17.6 million of the entire system’s $4.6 billion endowment. This figure is up $12.6 million since 2005 and is $1.3 million greater than the average alternative energy investment of peer institutions.

“The fact of the matter is that our process is one of deliberation and getting to know things, so it’s a time consuming process,” King said.

He said the company will be as discerning for investments into alternative energy as it is in its other investment sectors.

Liz Kazal, field director of Environment North Carolina, said the management company’s progress is encouraging, and investing in alternative energy is a self-fulfilling prophecy.

“As soon as we can get the turbines spinning off our coast and solar panels on every single viable roof, the sooner we can start laying the groundwork for a clean energy future in North Carolina,” Kazal said.

North Carolina ranks fourth in the nation in terms of solar power capacity added in the last two years, she said. King noted investments in solar energy with three alternative energy companies as being successful in his presentation.

But Rob Zawada, a UNC junior and chief investment officer of the Portfolio Management Team, said the alternative energy industry is facing several significant challenges. These include expiring technology subsidies, unmet performance expectations and the booming natural gas market.

“From a financial standpoint, renewable energy pure play companies are not very attractive right now,” he said.

Pure play companies, he said, are solely involved with renewable energy. But renewable energy sectors built into traditional energy companies might be a more viable investment.

Stephen Arbogast, a finance professor at Kenan-Flagler Business School, also said traditional energy companies present a safer opportunity for investors. An example of risk associated with alternative energy is Kior, a biofuel company that made gasoline and diesel from wood chips. Bill Gates was an investor in Kior, but after the company lost $600 million dollars, it filed for bankruptcy.

“Expecting endowments to simply turn their backs on those companies is probably misguided,” Arbogast said. “Their job is fundamentally to produce reasonable returns.”

He said investment managers taking climate change into account is a necessary and welcome practice, and solar power and energy storage are promising areas of the alternative energy industry.

“I sometimes think the sweet spot answer is more clear than we acknowledge,” he said. “It would be nice to see those two things favored and encouraged as opposed to people staking out maximum positions.”

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