This year, the Yale College Council almost included a student-wide referendum on its election ballot for the first time since 2005. This move would have allowed the student body much needed access to Yale’s political process. Whether Yale should divest its endowment from the fossil fuel industry would have appeared on the ballot, but the referendum was postponed because of a perceived lack of campus-wide knowledge of the details of divestment. As a result, it is now even more important for us to educate ourselves about divestment.
We can all agree that climate change has dire consequences for life on earth. Climate change contributes to 300,000 deaths annually — from increased malnutrition, reduced water availability, greater incidence of vector-borne diseases, etc.
Even worse, the nature of climate change is such that if we wait too long, the problem will grow out of control. Mitigation efforts now will save us monumental future costs associated with inaction.
Whether Yale should divest is not a question of taking a political stand or a pie-eyed plea to help polar bears. It is a question of Yale meeting its own binding guidelines for responsible investment outlined in “The Ethical Investor.” Because the following three conditions are met, Yale has a structural obligation to divest.
First, Yale is in close proximity to the problem. Proximity is a function of awareness; the more Yale notices a problem, the greater its responsibility to act. Yale touts its position at the forefront of sustainability and environmental research. It seems ideologically inconsistent for Yale to advocate sustainability policies and projects while investing its endowment in fossil fuel companies that counteract the very goals behind Yale’s green initiatives.
Second, Yale has capability to make a considerable impact on climate change without inflicting self-harm. The effectiveness of Yale’s proposed divestment is enhanced when added to coordinated efforts of other universities within the national movement of over 300 universities. Due to the size of Yale’s endowment, our divestment would lead to increased national attention and a greater possibility of divestment nationwide.
Empirically, nationwide university divestiture has led to tangible policy action. During the ’70s and ’80s, universities divested from companies in South Africa in response to apartheid. Their efforts helped influence U.S. action when Congress passed the Comprehensive Anti-Apartheid Act of 1986. By acting in accordance with a nationwide effort, Yale has greater capability to make an impact on climate change, and thus a greater ethical obligation to do so.
Would divestment hurt financial aid and other parts of Yale’s operational budget? A growing body of financial literature negates this claim. For example, a white paper released by Aperio Group, LLC reports that even a full divestment from fossil fuel companies poses a low relative risk to universities’ endowments. Additionally, if Yale were to divest, the investments office would be able to independently determine the maximum amount of divestment it can afford while still preserving Yale’s operating budget.
Third, Yale has considered the reasonable alternatives. University President Richard Levin mentioned that divestment from a company is an option worthy of consideration only if all attempts at using Yale’s shareholder voice to effect company change would fail.
But could Yale simply leverage its investments to pass a resolution that would commit fossil fuel companies to the higher environmental standards necessary to reduce social injury? Well even if Yale were to successfully file or vote on such a resolution, it would likely not pass. It would be difficult to get significant support for said resolution from other shareholders when they may not share Yale’s binding commitment to ethical investing.
For example, in May 2008, 73 of 78 descendants of Exxon Mobil founder John D. Rockefeller, Sr., filed a resolution suggesting Exxon pursue cleaner energy alternatives. Their resolution failed 89.6 percent to 10.4 percent. In 2010, the California Public Employees’ Retirement System — with an endowment almost nine times that of Yale — filed a resolution only asking BP to draft reports on the risks of its oil sands projects. It failed 85 percent to 15 percent. These cases are not isolated incidents.
Thus, it becomes abundantly clear that shareholders’ voices are largely impotent in an industry without an existing incentive structure to reward environmental action. And when faced with the futility of our voice, according to Levin, “exit in the form of divestment is the final step.”
Divestment is a concern best dealt with behind closed doors of a Yale Corporation boardroom. But for the issue to even make it there, the Corporation needs to know that the student body believes it is an issue worth discussing. Divesting from fossil fuel companies is not an issue for just the environmentalist, but for all students at Yale.
Alex Nguyen is a sophomore in Jonathan Edwards College and Gabe Rissman is a freshman in Ezra Stiles College. Contact them at email@example.com and firstname.lastname@example.org .
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