Four Cambridge colleges have failed to join a University of Cambridge climate initiative which was launched last year and aims to stop the financing fossil fuel expansion.

The initiative – led by the Banking Engagement Forum (BEF), a committee of the collegiate University – aims to create a market for cash products which do not contribute to the financing of fossil fuel expansion.

Cash products are financial instruments which enable investors to earn a return on their savings, without taking on too much market risk or losing the ability to easily access the funds.

The 27 Cambridge colleges that have signed up to the initiative have put request for proposals (RfP) from banks and financial institutions that don’t contribute to the financing of fossil fuel expansion. This includes cash products such as deposits and money market funds.

Out of Cambridge’s 31 Colleges, only Murray Edwards, Lucy Cavendish, Trinity Hall and Homerton are not signatories.

Money market funds pool investors’ savings to buy short term debt, giving companies or governments easy access to money in exchange for interest. Deposits give financial institutions, like banks, access to money which they can use to make loans. In return, depositors are paid interest, which will be at a higher rate if they agree not to ask for their money back for a minimum period.

In total, 72 Higher Educational Institutions are signatories to the RfP which advocates exploring a switch to methods of banking “whose primary market financing and engagement activities align with the International Energy Agency’s (IEA) Net Zero Emissions (NZE) scenario”. The proposal is also in line with emissions reduction targets laid out in the Intergovernmental Panel on Climate Change (IPCC)’s Sixth Assessment Report.

The RfP also urges funding towards the construction of renewable resources to accelerate the transition away from fossil fuels – particularly in areas where finance inhibits this transition, such as low-income countries.

The institutions especially want to avoid financing companies that are making new coal- and gas-fired power plants in countries which are a part of the Organisation for Economic Co-operation and Development (OECD).

The University’s Financial Officer Anthony Odgers said: “What we and our partners are focussed on with this mandate is finding financial services products that do not contribute to the expansion of fossil fuels – in particular, new coal – and gas-fired plants which lock in demand for decades.”

Although responsible investment has become increasingly mainstream in equities investing, it is not yet widespread in debt markets. Debt markets provide a large majority of the financing for companies constructing new fossil fuel power stations or exploring new reserves.

It is due to this reason that the institutions who have signed the RfP have focussed on banks and the bond market as the primary sources of external financing for fossil fuel expansion.

The University’s Head of Group Treasury, Heather Davis, said: “The University treasurers in this group all share a common goal, which is to manage money in a way that doesn’t contribute to the financing of fossil fuel expansion and to find something that aligns with the IEA Net Zero Emissions Scenario, and that is lacking in the cash space at present.”

Providing that the University of Cambridge is able to find a suitable provider of bank deposits and/or money market funds, it would look to publicise its actions and the identity of its providers.

So far, 23 proposals have been received after the first round of RfPs and six institutions have been accepted as meeting the objectives of the RfP.

Murray Edwards College, Lucy Cavendish College, Homerton College, and Trinity Hall College were contacted for comment.

Want to share your thoughts on this article? Send us a letter to letters@varsity.co.uk or by using this form.