Students at over 100 campuses nationwide are calling for universities to stop investing in the fossil fuel industry — and the movement has arrived at Yale.
A group of roughly 30 Yale students — mostly composed of members of the Yale Student Environmental Coalition, or YSEC, and the Yale chapter of the Roosevelt Institute, a national, progressive undergraduate think tank — are compiling a report to encourage the University to divest from fossil fuels. Students involved in the divestment campaign said they hope to collaborate with the Yale administration to determine the best way forward, but economists and finance experts interviewed said they are skeptical that divesting from fossil fuels would be a wise move.
Inspired by a divestment campaign popularized by environmentalist Bill McKibben, the small group of Yale students, temporarily referred to on the YSEC website as the Divestment Working Group, are consulting with the Advisory Committee on Investor Responsibility, or ACIR, which is responsible for ensuring Yale’s endowment assets are invested ethically.
“We want to work with the Yale administration and Investments Office to freeze all new investments in fossil fuels and to phase out existing ones over the next five years,” said Ariana Shapiro ’16, referring to the recommended campus campaign goals on McKibben’s website, 350.org. “We want an endowment that represents our values and the values of the institution.”
The students involved in the divestment campaign are meeting with Daniel Shen ’14, one of two student members of the ACIR, this week, and intend to meet with the full committee in January to get feedback on the draft of their report. If the ACIR is convinced, it will write a report for the Yale Corporation Committee on Investor Responsibility, which is composed of Yale Corporation fellows, Shen said. Darcy Frisch ’92, a member of the ACIR, said the Corporation has the authority to determine policies for the Investments Office.
Chief Investment Officer David Swensen declined to comment for this story.
Patrick Reed ’15, president of YSEC, said the divestment group wants to approach the administration first and articulate its concerns before taking any accusatorial stance, which he said would be counterproductive to the cause.
Students involved said they hope to start a campus movement for divestment next semester, and cited Unity College in Maine and Hampshire College in Massachusetts — whose endowments were most recently valued at $13 million and $33 million, respectively — as examples of schools that have already agreed to pull investments from the fossil fuel industry. If the administration is not supportive of divestment, the student group will turn to activism and get the word out to the community to show “that we have a broad base of support,” Shapiro said.
In writing the report, Alice Buckley ’15 and Abigail Carney ’15, co-heads of the Center for Energy and Environmental Policy for Yale’s chapter of the Roosevelt Institute, said they have consulted the Ethical Investor, a 1972 volume that set the guidelines on divestment for the Yale Corporation. Buckley said their report aims to demonstrate that fossil fuels present a “grave social injury” — the phrase used in the Ethical Investor as the standard for divestment.
Campaigning for divestment from fossil fuels is the central strategy of a national movement against climate change, popularized by McKibben. In his “Do the Math” speaking tour of 21 cities this fall, McKibben argued that divesting from the fossil fuel industry is the first step toward causing stock prices to drop and pressuring fossil fuel firms into agreeing not to burn their reserves.
“If it’s wrong to wreck the climate, then it’s wrong to profit from that wreckage,” McKibben said on tour at Boston’s Orpheum Theater in early November, arguing that students are obligated to oppose investments in fossil fuels on moral grounds. McKibben noted that a “green” portfolio is just as necessary as an energy-efficient campus.
But two experts interviewed said divesting from fossil fuels is unlikely to have any effect on the industry.
Publicly traded U.S. energy companies in the S&P 500 index had a combined value of $1.4 trillion as of the end of 2011, while the endowments of all colleges and universities in the country combined currently amount to $400 billion — only a fraction of which is invested in fossil fuels. Unlike Yale, most universities have endowments under $1 billion and cannot afford to be as illiquid in their investment strategy, and therefore invest much less in alternative assets and fossil fuels than Yale does.
The combined divestment of every university would not “make a dent” in the industry, Boston College economics professor Eyal Dvir said. Timothy Considine, director of the University of Wyoming’s Center for Energy Economics and Public Policy, said other investors would buy fossil fuel stocks if universities like Yale sold them.
Dvir said most economists are skeptical that campaigns such as McKibben’s affect how firms behave, and added that McKibben’s stated goal of getting the energy companies to commit to not using their reserves will not succeed because it does not align with the long-term interests of those firms. Dvir added that investing more in firms like Shell and Exxon will allow universities to have a stronger voice on the boards of those companies — a voice universities could use to push firms into more sustainable practices.
In response, students stressed the importance of drawing attention to climate change.
“I don’t think the economic impact of Yale divesting will really hurt [the fossil fuel industry] that much, which is why the advocacy is really important,” Carney said. “It’s more of a symbolic thing.” Reed said he hopes a large student movement and statements from major universities will send a strong message to national policy makers.
Experts added that fossil fuel divestment could negatively impact the schools involved.
Dvir said divesting from fossil fuels would likely generate a lower return for the Yale endowment, which would negatively affect the University’s ability to provide financial aid and other resources for its students. Considine said energy firms have yielded strong returns in recent years.
After losing nearly a quarter of its value following the onset of the nationwide economic recession in 2008, Yale’s endowment has yet to return to its high-water mark of roughly $22.9 billion. During the fiscal year that ended June 30, Yale ‘s endowment posted a 4.7 percent return on its investments but dropped in value because spending distributions outpaced growth by $100 million.
A recent publicly disclosed University divestment on ethical grounds involved seven gas and oil companies in Sudan and Darfur in 2006.