Climate Change Requires an Exception to No-Divestment Policies

To the Editor:

A recent commentary by Brian Rosenberg, president of Macalester College, made the point that use of institutional endowment as a means of pushing for collective social or political action is fraught with complexity (“For College Endowments, Ethical Stands Can Be Complicated,The Chronicle, March 18). Indeed, divestment of a targeted industry is challenging when portfolios typically include funds that are a complex mix of socially acceptable investments along with those that are deemed questionable. This is one of a host of rationales indicating that colleges should avoid the use of divestment as a tool for social change.

On first consideration, some of these arguments seem reasonable. It is arguable that divestment from fossil-fuel companies is a largely symbolic act. I find these rationales to be an easy way out of doing the admittedly hard work of building a compelling case and taking action when it is clearly warranted. With respect to divestment from fossil-fuel companies, I believe that the ethical imperative of addressing climate change overpowers such rationales to abstain.

President Rosenberg starts by focusing on the mission of higher education. I agree. We must stay focused on our mission and generally not allow the endowment to be used for the agendas of the varied social movements on campus. President Rosenberg points out that the mission held in common by all institutions is some mix of “the creation and dissemination of knowledge.” Note, however, that this operational mission is drawn from unstated assumptions about the value of knowledge. The larger context for the mission of higher education is simply the continuance and renewal of civilization.

Climate change is an environmental issue that is arguably unique because carbon emissions accumulate in the atmosphere and their impact will last a millennium or longer. Climate change is effectively irreversible on any relevant human time scale. The oceans are acidifying at a rate faster than at any time in the previous 300 million years, and the carbon-dioxide concentration of the atmosphere is now higher than in 15 million years. The rate of carbon-dioxideincrease in the atmosphere is faster than in the previous 65 million years. There is no reasonable doubt that this pollution has resulted from unrestrained burning of fossil fuels. The fossil-fuel industry operates on a business model that assumes that known, accessible reserves of coal, oil, and gas, will be extracted and burned. It is no surprise that the publicly traded stock of these companies has market value based, in large part, on their extractable reserves.

The science of climate change consistently shows that even at plausibly low atmospheric sensitivities, burning a significant fraction of these reserves will result in a degree of climate disruption that is inconsistent with the continuance of civilization.  Accordingly, this issue supersedes all other social and political agendas. If we don’t get this right, all other causes are moot.

Once framed as part of the sustainability imperative facing current and future generations of college students, action is ethically mandated and divestment is arguably necessary. Colleges and universities often claim to be the leading edge of societal innovation, yet action on climate has lagged despite the compelling evidence that the threat of climate disruption is dire and the window of opportunity for mitigation is rapidly closing. Divestment should be one of the first actions that an institution takes to send a strong signal to its constituents about its commitment to the future.

Once the commitment has been made to divest, the action itself requires sophisticated intervention, but it is far from impossible. The typical divestment strategy requires an institution to minimize its exposure to the top 200 fossil-fuel companies over a period of a few years. This requires investment managers to progressively bias their selection of funds to eliminate these companies to the greatest extent possible. Absolute-zero exposure over time is probably not feasible for many portfolios. Regardless, the movement of the vast majority of financial resources away from these destructive investments sends a powerful signal. It helps to delegitimize the business model employed by the fossil-fuel industry, and may serve as an incentive for them to make more than a token effort to develop renewable energy. We must take away their social license to continue business as usual.

Perhaps the most important concern expressed by college governing boards is that the institution’s portfolio will drop in value if fossil-fuel investments are removed. To be sure, fossil fuels represent a large share of the market capitalization of the New York Stock Exchange. In practice, however, this fear is not supported by direct evidence from those institutions that have divested, or by the academic literature on investment. Since we have begun the process, the Unity College portfolio has consistently performed better than market indices. The reality is that whether or not a socially screened portfolio loses or gains value is functionally related to the investment choices made after screening. Portfolio funds are managed almost on a daily basis, and adding screening to the portfolio simply changes the management choices. Good choices result in higher returns, and this is generally unrelated to divestment.

President Rosenberg states that his most important concern is that endowments be managed as an “act of trust with past donors and with current and future generations of students.” This apparently means that conservative management of the portfolio is required to honor the expectations of these stakeholders. While it is likely that all donors will not agree on what constitutes appropriate social or political activism, it is hard to imagine a donor who, once fully informed of the consequences of climate change, will not accept divestment as at least consistent with prudent and conservative stewardship of resources. Moreover, the market value of these companies is destined to decline once there is widespread commitment to reduce emissions, and it is obvious that extractable reserves cannot be mined and burned. Given the likely impact of climate change on their lives, I am certain that divestment honors the trust with current and future generations of students.

I agree with President Rosenberg that leadership must recognize that the decision to speak or remain silent will affect the ability of the institution to carry out its mission. I would find it wholly unacceptable for my institution to remain silent on an issue of such paramount material and ethical consequence. Failure to take an institutional stand on climate change is not merely a choice to abstain; it is an abandonment of the institutional mission. Given the gravity of this issue, the silence of many college and university leaders has been deafening.

Stephen Mulkey
Unity College
Unity, Me.





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