No, Wash U Shouldn’t Divest From Fossil Fuels — Yet
Environmentally conscious Wash U students are calling on the administration to sell off any investments in fossil fuel from the university’s $5.3 billion endowment.
The “divestment” movement — spreading from campus to campus over the last month — draws its inspiration from environmental activist Bill McKibben, who spoke to a full Graham Chapel in November. From StudLife:
“We weren’t going to solve climate change one pipeline at a time or one coal mine at a time…if we’re going to do it, it is going to be systemic structural reform,” McKibben said. “We are going to do it by going after the industry that [is causing it].”
McKibben communicated his plan to get schools and other institutions to divest from fossil fuel and coal.
It’s an interesting strategy, the prevailing wisdom being that divestment from banks and corporations active in apartheid-era South Africa helped bring down that regime (although there’s evidence that the campaign had no real effect on public market valuations).
I agree with McKibben about the importance of structural reform, but with regards to the endowment, the university has a fiduciary responsibility to its current and future beneficiaries (i.e., invest well). Unfortunately right now, there is no price on carbon, meaning that Exxon can pretty much emit what it wants, reap gross profits, and let the rest of us foot the bill for climate change’s wrath.
That definitely sucks, but it makes for a good investment in Exxon. Good investments make for good student financial aid packages, a degree of “this actually helps me” introspection chronically absent from most Wash U movements-of-the-day.
So, thinking about this less from a liberal arts, “my anthropology class says capitalism is bad” viewpoint, and more from a financial viewpoint (we are talking about investments here), the key would be to make fossil fuels not as profitable. This way, institutional investment funds, such as Wash U’s, won’t have the fiduciary necessity to invest in a profitable thing that is decidedly bad for humanity.
One “structural reform” way to do that would be the government introduction of a carbon tax, thereby leveling the playing field for green initiatives to thrive.
Since that’s not exactly under Chancellor Wrighton’s purview, what can our school do right now to positively impact the environment? We could ban bottled water and plastic bags. That’s a start, but kind of small potatoes in terms of global outreach, right?
What if we had some place where scores of leading scientists could research and innovate to help combat climate change?
What if we had, I don’t know, the aptly named Green Hall, an 80,000 square-foot building equipped with 17 laboratories that work on “smart-grid efficiency and energy storage” and “carbon-cycle feedbacks to understand global climate change?” We do? Oh, cool.
The university has a diverse investment portfolio to make this place better for us and future students. Then it spends a ton of money on resources to bolster both our scientific reputation and the environment itself.
And some students want us to “divest” from profitable enterprises so that we have less money for scholarships and fledgling green research? No thanks.
When you look at it that way, Wash U looks less like Rich Uncle Pennybags and more like a pragmatic, and still altruistic, research university. Leaving Wash U’s investment mandate up to the students is a great way to finally see a good WILD act, but a terrible way to grow the university.
I’m not exactly a climate change apologist here either (you can check out my byline at Climate Progress for proof), but I’m kind of tired of the feigned outrage students show at the slightest hint of university impropriety.
You want it to make financial sense for Wash U to invest in sustainable resources? Allow the university to continue to be a hub for new green research. Our endowment here doesn’t exist to make you feel warm and fuzzy. It exists to allow us to make places like Green Hall and hire professors who will do research so that, one day, Wash U can actually make a profit by investing in solar-thermal power plants instead of fossil fuels.
For the time being, profit margins on green technology are razor thin. Pumping money into a rural Oregon algae factory — instead of Chevron — would be a great way to see financial aid packages slashed. But by all means, sign your petition, just don’t tell Mom and Dad.
It’s all to be expected. This brand of faux resentment over the university’s investment portfolio is the very stuff of Wash U students’ insular liberalism: hysteria over a perceived injustice without any meditation on cost, the outside world, or our own privilege and role.
In 2005, the issue de jour was the university’s failure to provide employees with a “living wage.” Students camped inside the admissions office and went on a hunger strike to show they meant business. I’m not sure how many students back then were willing to give up their scholarship dollars so that Wash U could be more generous to its staff. And I’m not sure how many students would be willing to do the same today so we can invest in Dutch wind turbines instead of Shell.
History repeats.
Look, you don’t need to agree with every company in Wash U’s investment portfolio — but you benefit from it every day when you walk into literally any building on the Danforth campus, gab with a highly-paid renowned professor after class, or work in a cutting-edge lab to boost your med school credentials.
If you really don’t like the way Wash U invests, vote with your tuition dollars and go to school elsewhere. That’s called activism through capitalism.
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Glad I read this before I went to BD. It just took four names off their petition.
Whoa, dude, this article assumes that fossil fuels are literally the only profitable stocks in existence. You’ve got to be joking if you think that investing in Exxon is the only way anyone ever makes money from investments. Because it isn’t. And thus disinvesting in fossil fuels is not going to have the immediate effect of killing Wash U’s scholarship budget, as you suggest. Which makes this whole article make very little sense and seem like a big excuse to try to pit working class students against workers all over the world who will be negatively affected by climate change. Stopping climate change is in everybody’s interests, as are living wages for everyone and scholarships for anyone who needs them. Students and workers have the same interests, as the students who helped campaign for one on campus realized. You, with your “activism through capitalism”, might as well be working for Exxon.
Your article would be more convincing if you didn’t, seemingly intentionally, misrepresent your opponents. I understand that it’s easier to strike them down if you reduce them to insular liberals, but as soon as people realise that those aren’t actually your opponents, your argument fails. There are, no doubt, students who react to any given “perceived injustice without any meditation on cost, the outside world, or our own privilege and role,” but that is not who you should be focusing on. The organizers behind the petition have given this great thought—in fact, most of them are pursuing this kind of thing as a career choice. They have given it great thought, have weighed the options, and see “divestment” as worth the potential financial loss (what a crazy idea, caring about something so much, like our planet, that monetary concerns seem trivial!). Implying otherwise is nothing short of disrespectful and a sign of insecurity in your own stance.
No Beth, this article assumes that Wash U’s financial advisers are not bad at their jobs, or else we would already be investing in more profitable things. Of course there are other profitable things! But it’s naive to say that if we divest from fossil fuels, we won’t lose any money. If that were the case, we’d already have done it. This is how markets work! Of course stopping climate change is in everyone’s interest, re-read the part where I say activists should be advocating for a carbon tax. That way, Exxon (a company I do not work for by the way, as you so eloquently put it) wouldn’t be as profitable.
It’s one thing to care about divestment, and say we should do it, no matter the cost. I respect that, even if I disagree. It’s quite another to argue it won’t cost anything.
Who was arguing that it wouldn’t cost anything?
I think Steven also needs to show some numbers to support his claim that paying staff a living wage was funded out of the scholarship budget.
Well, as it stands, Fossil Free Wash U is arguing that it wouldn’t cost anything. And the point isn’t that Mark Wrighton writes checks to employees from the endowment account. The point is that it’s all interconnected. Money comes in to the university, and money goes out. So if you want to spend more on something, you spend less on something else (we are a non-profit). It’s easy to mount a sit-in for worker’s rights in the admissions office, but it’s harder to be introspective about what YOU might have to sacrifice if the university started to pay landscaping employees $20/hour. If you say, well fine it’s worth it, that’s one thing. But don’t pretend like there would be no cost to the school. Financial aid is an example I’m using to show this lack of introspection. But Beth is trying to play an accounting game that I’m not really willing to play.
If you go to gofossilfree.org, you’ll see that Steven has taken up #7 of a ten common objections list. Here’s what the former president of Oberlin, Reed, and Franklin and Marshall has to say on the subject:
7. “Selling stock in fossil fuel companies will lower investment return and cause the college to have to make significant budget cuts.” This is the same argument that some colleges made when faced with the issue of divesting over Apartheid, yet many went ahead and found little financial effect. One academic study from 1986 found that “Historical returns since 1959 indicate that the South Africa-free portfolio, diluted with Treasury bills to bring its risk in line with the NYSE, would have outperformed the NYSE by 0.187 per cent annually. ” (Financial Implications of South African Divestment, Blake R. Grossman and William F. Sharpe, Financial Analysts Journal, Vol. 42, No. 4 (Jul. – Aug., 1986), pp. 15-29.) When a college sells stock it has the exact same amount of cash as the market value of the stock at the time of sale, minus transaction costs (estimated at 0.4% in the study of South African divestment), and can reinvest that money. The immediate financial consequences are small and phasing in divestment over several years would ameliorate the long term consequences.
2 years later…
http://daily.swarthmore.edu/2015/03/05/the-financial-advantages-of-divestment/