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Institutions’ Misplaced Fear of Fossil-Fuel Divestment

The campus divestment movement is losing. The wealthiest, most prestigious colleges and universities are declining to divest. News reports indicate that Harvard actually increased substantially its holdings in oil and gas companies in the fall of 2014. The message is clear. Market logic rules. Profits come first, even for not-for-profit institutions.

Well-publicized estimates of endowment-income losses at Swarthmore, Wellesley, and Pomona, coupled with threats to financial-aid and compensation budgets, have effectively undermined support for divestment. While the colleges declining to divest talk about the vast destruction climate change will bring, they assert that a potential decline in endowment income is too serious a risk given the uncertain impact of divestment on the capital structure of the oil industry. In this regard, most of the colleges do not explicitly reject a moral duty to act in the face of climate change; instead, they rely on an investment perspective to conclude divestment won’t work.

Before saying no to divestment, university administrators make sure no one can accuse them of being climate-change deniers. Tulane, for example, begins its kiss off to students with “Although we agree with you on the goal,” but then that statement and other similar ones follow with a rhetorical “yeah, but” asserting divestment won’t work and will force undesirable cuts in financial aid or compensation. The statements read, in the words of the feminist cultural critic bell hooks, as “motivated representation,” designed to maintain the status quo.

What justifies such a deep faith in “expert” predictions of market behavior? In the last 20 years the stock market has crashed twice. Investment professionals have warned for years that historically low interest rates would cause inflation and the loss of capital in the bond markets. That hasn’t happened. No one called the recent collapse of oil prices. Warren Buffett is seven years into a well-publicized million-dollar bet that a market index will beat the hedge funds so many endowments love. He is winning by a wide margin. The Wall Street Journal, surveying six years of poor hedge-fund performance, asks, “How do they keep winning clients?”

My question: Why do colleges and universities ignore evidence that socially responsible investing is competitive and prudent? Like going to church despite there being evil in the world, financial predictions offer comfort and reassurance, not a guarantee. In short, endowment managers have faith in economic theology and they trust investment experts, in part because they both worship in the same church.

It is dispiriting because the problems with capitalism are not a secret. The market is not perfect. Self-interest and competition motivate innovation and production. They produce great wealth. But these mechanisms are rarely altruistic or concerned with the common good. Markets are not always efficient. Human behavior isn’t always rational. Bad things happen. Philanthropy blunts inequalities, eases disparities, and mitigates the degradation that is the result of unrestrained economic growth. When colleges embrace an economic rationale, ignore higher aspirations, deny a moral vision, and turn away from socially responsible investment, they undermine the countervailing power and the ultimate purpose of philanthropy. They defeat the purpose of the well-endowed civil sector.

Colleges, universities, libraries, and essay writing service foundations have a responsibility to lead, not follow. Maximizing return is the logic of the market, not the DNA of the civil sector. If institutions of higher education insist on venerating the bottom line, they are barely differentiated from profit-seeking corporations. When that happens, we all lose.

When Milton Friedman wrote that “few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible,” he gave voice to a free-market fundamentalism fully animated by the “spirit of capitalism.” The explicit rejection of social responsibility is so common now that some think it is self-evident, common sense hardly worth debate.

However, it was not so long ago that business leaders such as Frank Abrams, the former chairman of Standard Oil, conducted the “affairs of the enterprise in such a way as to maintain an equitable and working balance among the claims of the various directly interested groups — stockholders, employees, customers, and the public at large.”

It is a quaint, anomalous view now, and apparently it is an unwelcome perspective in the business of managing university and college endowments.

Advocates and critics often assess the benefits of divestment in light of the anti-apartheid boycott movement. Opponents employ a version of market logic in arguing the boycott had little effect, while supporters credit the stigma and moral pressure with hastening the end of the South African regime. The debate is not productive. A better question concerns the future. Why would developing nations, large corporations, or the U.S. government take action if the wealthiest, best-informed not-for-profit organizations in the world cannot tolerate the tradeoffs and risks inherent in slowing climate change?

Although most college and university mission statements make broad claims about promoting the public welfare, the institutions generally express those commitments through teaching and research, not the allocation of capital. Robert Stavins at Harvard represents this view well by arguing that “my institution’s greatest opportunity — indeed, its greatest responsibility — with regard to addressing global climate change is and will be through its research, teaching, and outreach to the policy community.” Fair enough, but what do students learn when their college chooses to venerate maximizing endowment return despite the deleterious effects it may be having on climate change? What kind of history will contemporary students make if they learn to say, “yeah, but,” to minimize social and environmental harm, avoid controversy, and wait for others to lead?

The sociologist Robert K. Merton described how beliefs became self-fulfilling prophecies, shaping understanding, motivating and organizing action, and thereby reshaping the material world. When people act on ideas, even uncertain ideas, and take on big projects with long odds, they can make those ideas true. That is the lesson colleges should teach students. When colleges and universities insist on investing in carbon, they frustrate noble, serious aspirations. When they teach students that profit matters more than anything, including their own ideals, that the smart move is to avoid risks, they fail at their most essential mission.

Thomas P. Oles is an associate professor of social work at Skidmore College and serves on a campus committee considering divestment.

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