Following similar referenda at Brown and Harvard universities, students at Yale will now formally consider divestment from fossil fuels.

From Nov. 17 to Nov. 20, the Yale College Council will hold a referendum to determine whether there is widespread support among students for urging the University to phase out investments in the fossil fuel industry. The referendum comes almost a year after students involved in Fossil Free Yale — a student group that aims to convince the University to stop investing its endowment assets in fossil fuel companies — first presented their research to the Advisory Committee on Investor Responsibility, an entity that considers and makes recommendations on ethical issues surrounding the University’s investments. On Monday, the student group submitted an 80-page revised version of their report to the committee that outlines how the University should responsibly invest in energy companies.

“Concerted action through divestment would raise awareness and create social stigmas against fossil fuel companies,” said Gabe Rissman ’16, a representative from Fossil Free Yale and a lead author of the recent report. “Divestment is consistent with [Yale’s] values.”

Before divesting, Yale should engage with companies in the fossil fuel industry to quantitatively assess their environmental impact and try to petition them to reduce their carbon emissions, Rissman said. Since Yale has the second largest university endowment in the world, shifts in the University’s investment practices could make an impact, he said.

After receiving a petition from Fossil Free Yale that garnered 1,374 signatures last spring, the YCC announced an upcoming referendum in a Nov. 3 email to the student body, requesting that interested students submit “pro” and “con” arguments about divestment before Nov. 8. As of Wednesday, a “pro” statement authored by Fossil Free Yale had been posted on the YCC website but there was no “con” statement. The YCC hopes to collect rebuttals from both sides of the issue by Nov. 11, and organizations will be allowed to campaign beginning on Nov. 12. Voting will start on Nov. 17.

YCC communications director Andrew Grass ‘16 said the YCC created a referendum process this year to empower student voice and activism on campus.

“YCC does not have a position on divestment since it is a political issue, but we are facilitating an opportunity for students to voice their opinion on the matter,” Grass said. Though Daniel Shen ’14, a student representative on the ACIR, said students have handled the issue of fossil fuel divestment well thus far, he said the referendum could potentially have an adverse effect on the relationship between undergraduates and administrators.

Yale is not the first Ivy League school to conduct a referendum on this issue.

Though 72 percent of Harvard undergraduates who voted on a similar referendum last fall voted “yes” to divestment, the divestment movement at the university failed to convince the Harvard administration. Last month, Harvard President Drew Faust wrote a letter to the Harvard community explaining that the university would not divest from the fossil fuel industry. The purpose of the endowment is to support Harvard as an educational institution rather than to make statements, she wrote.

Divestment efforts at Brown University have also hit a dead end. On Oct. 27, Brown President Christina Paxson said that “our consideration of divestiture is over.” Even if the university had divested from fossil fuels, that action would have had little direct effect on the companies in question, she said.

While Provost Benjamin Polak said he supports the environmental message of the divestment movement, he said he does not think Yale should divest from coal at this time.

“To the extent to which this stimulates serious discussion about global warming and its consequences, I’m very happy,” Polak said.

The Yale Investments Office is not required to disclose specifics about the proportion of the endowment that is invested in the fossil fuel industry. Still, the entire Yale endowment is valued at only $20.8 billion — a small number compared to the combined value of the publicly traded U.S. energy companies in the S&P 500 index, which was $1.4 trillion as of the end of 2011.

Though divestment efforts at other top universities have failed to achieve their ultimate goal, Rissman noted that student efforts have not been futile. Harvard added the position of vice-president of sustainable investing shortly after the referendum.

Yale’s approach to responsible investing is articulated in the 1972 book, The Ethical Investor. Following those guidelines, the ACIR focuses on the concept of “grave social injury” as defined in The Ethical Investor when evaluating investments, according to Jonathan Macey, a professor at Yale Law School who serves as chair of the ACIR. Divestment is only considered as a last resort and only if the committee determines that divestment would have a positive impact.

In the 40-year history of the ACIR, Yale has only divested twice: from companies related to South African apartheid in the 1970s, and from Sudanese government bonds and seven oil companies operating in Sudan in 2006.

More than 250 U.S. colleges currently have student-led fossil fuel divestment campaigns.

  • meep15

    One of the first things I was taught about managing money (both investments and personal finances) is that you NEVER make financial decisions based on emotion.

    For example, I would hardly give up almost 400% return on shares of Apple just because I read in the WSJ that they use children to manufacture their devices. If I truly felt that this was problematic, I would use the (admittedly small amount of) voting power granted by these shares to try to change this.

    Frankly, I’d rather Yale kept its investments, and used the returns in more productive ways (e.g. science/medical funding) to actually do something worthwhile and directly useful than trying for some fanciful dream of “no fossil fuels” (hint: not going to happen until its financially prohibitive to use said fuels)

    P.S. I’m not sure if y’all realise, but a decent amount of our power comes from burning natural gas.


    • Daniel Leibovic

      You raise important criticisms, and I want to assure you that FFY has not pursued its objectives absent-mindedly.

      First, emotional decisions are not equivalent to ethical ones; ethics, in the sense of “The Ethical Investor” authored by Yale’s own investor superstars, evaluates social injury objectively. Institutions of higher learning (from various National Academies of Sciences, to Supra-national evaluative committees (UN’s IPCC), to universities like Yale) have determined unequivocally that fossil fuel companies perpetuate and intensify climate change. They have further determined that its effects will devastate economic and social structures at a magnitude and scope much broader than the issues that caused Yale to divest from apartheid and Sudan.

      You’re right that it wouldn’t be rational to divest from Apple due to its controversial manufacturing processes: Apple does not embody child-labor exploitation, nor is it critical to its continuance (Exxon, BP, etc DO embody anthropogenic climate change and are critical to it); there is no unified institutional *movement* to divest from companies like Apple (over 250 college campuses are pushing divestment from fossil fuels and are networking together to multiply their impact).

      The 80 page report published by FFY shows objectively that Yale’s endowment returns will not be significantly negatively impacted by divestment from fossil fuels (*edited* references to academic studies, and a finding that divestment would have resulted in net losses of <0.3% if applied over the past 15 years for Yale's endowment). So, this "fanciful dream" (which has had real success in the past, and would be consisten with the rationalist principles put forth in "The Ethical Investor") wouldn't inhibit our ability to combat climate change through other avenues.

      • tei1

        Just to note, the divestment impact on endowment number is not a predictive number, it is comparing annual returns of a fossil free portfolio to a non-divested portfolio over the past 15 years, saying that there wouldn’t have been much financial impact and evidence points to a negligible financial impact, but of course nothing can predict the future. Find the report that provides this analysis here:

    • MRB

      “…a decent amount of our power comes from burning natural gas.”

      My response makes the assumption that your comment means , “Isn’t this campaign hypocritical because we are reliant on fossil fuels on a day to day basis?”

      This is a logical fallacy. Two wrongs don’t make a right, and because we rely on fossil fuels for day to day life doesn’t make the divestment argument invalid. We need to wean ourselves off of fossil fuels individually and systemically. Divestment is a tactic for systemic change on a national level. It is only inconsistent for Yale not to divest, considering we have a comprehensive sustainability plan that ignores our investing practices.

    • hnesser

      I get the importance of having high returns for an institution like Yale which puts its money to good use. But, I think that claiming that (1) high returns aren’t possible without certain investments, and (2) high returns justify any investment, is dangerous both in general and in the specific instance of fossil fuel divestment.

      On the first point, there is no reason that a successful endowment must be invested in any fossil fuels. While they may produce high returns, they aren’t the only way to do so. Moreover, Fossil Free Yale isn’t asking for complete divestment. The suggested proposal would give companies a chance to improve, and then would only divest from the companies with the worst emissions intensity. By supporting a stable transition away from fossil fuels, and by working with the companies, there is no reason to believe that divestment would harm our endowment. Together with the guidance of Swensen, I’m sure there is an equally successful endowment without the worst fossil fuel companies.

      On the first point, as an internationally acclaimed institution with a 21 billion dollar endowment and one of the most respected and modeled investment offices in the country, Yale’s investment choices have great implications, and we have an obligation to consider the way in which investments in fossil fuels condones an industry which is devastating the world.

    • tei1

      This is an extremely valid concern at first look, but does not have empirical evidence to back it up. I invite you to do some research (I will include links to reports at the bottom), but even though according to the research divestment will not hurt returns, it doesn’t even matter.

      If you read Fossil Free Yale’s report
      and take a look at what it is actually proposing here:

      (I found both of these links on the Fossil Free Yale website, you will see that any divestment that would harm the Yale endowment is not part of Yale’s moral obligation. The financial effect of divestment will be evaluated by Yale, and the ultimate financial feasibility of the scale of divestment is determined by Yale.

      Here are the links I promised:

      All of these say divestment won’t have much effect on risk and returns

      All of these say fossil fuels themselves are bad investments


      The only actual study/report I could find that said fossil fuel divestment will have negative financial effects was written by The American Petroleum Institute.

      If anyone else finds other anti-divestment research, please add it to the discussion

    • MRB

      In regards to the divesting Apple example:

      Applying this example to FYY’s proposal, Yale would not be obligated to divest from Apple. Apple has put forth guidelines that it follows in regards to labor laws, it has begun conducting reviews and inspections of/for labor violations, and is beginning to move it’s production away from Foxconn, the manufacturer responsible for many of the labor violations.

      FYY’s proposal targets the worst fossil fuel companies that disregard the social harm they cause. The fossil fuel companies that the report targets are those that continue to engage in practices that they already know are harmful.

      Apple is consistently working to make itself a more environmentally responsible corporation. BP, Exxon, and Chevron are not in the same category.

  • yoni landau

    I’m an MBA at Yale. Yale’s endowment has defined investment strategy in endowments for the whole sector so I think this issue is really important.

    Some things that may be easy to miss: they are only talking about publicly traded stocks, Yale only holds about 13% of it’s money in public stocks (perhaps as much as 15% of that is in fossil fuel companies) and so this action is unlikely to have a real impact on the endowment returns.

    From my perspective this statement will have an impact on the market – but not directly. The market will react by sensing that regulation will continue to increase on fossil fuels and carbon more generally and companies will begin to adjust to address that. It’s not like this will somehow stop fossil fuels from being important to our economy, but it will be a statement about the urgency with which we need to begin moving away from fossil fuels.

    If Yale does this, other universities will do it and climate change will probably be in the press pretty seriously over the next year. It will also make the Yale trustees take the issues seriously. It may not solve the problem directly, but that’s pretty useful in my opinion if you’re worried about climate change.

  • hnesser

    Divestment is not an attempt to bankrupt fossil fuel companies–rather, it is an attempt to challenge the social capital which they have. There is significant historical precedent: the national divestment movement in the 1970s against apartheid precipitated political action that was key to ending the oppression. If our only concern was increasing the returns of our endowment, there is a chance that that divestment movement would have failed, and history would be different. I’d rather not find out what happens if we don’t fight against climate change now, before we pass a point of no return. Divestment is a low risk, high reward action.

    Besides, I’m confident that David Swensen and the Yale Investment Office is capable of finding a portfolio that is stable, strong, and profitable but does not contain the fossil fuel companies with the worst emissions per energy produced ratios (a standard proposed by Fossil Free Yale.

    • Goldie ’08

      “I’m confident that David Swensen and the Yale Investment Office is capable of finding a portfolio that is stable, strong, and profitable but does not contain the fossil fuel companies with the worst emissions per energy produced ratios…”

      It’s harder than you think. Additionally, as long as Yale continues to use fossil fuels, we need to hedge against fossil fuel prices

      • hnesser

        Something being hard doesn’t mean we shouldn’t do it, especially when there are so many positive implications of divesting. Also, Yale’s commitment to sustainability despite fossil fuel usage demonstrates a willingness to support a transition to a sustainable future–which is exactly what divestment according to the proposal would do. The proposal would only divest from those fossil fuel companies which fail to reduce their emissions intensity, demonstrating a failure to move toward a more sustainable future. There will still be investments in the fossil fuel companies which are flexible and willing to work toward that future, just as Yale is doing every day with its sustainability initiatives.

      • MRB

        But if Yale is already committed to being more sustainable over time, (one method will be using less fossil fuels over time) does it not make sense for Yale to divest from fossil fuels over time as well?

        Furthermore, considering that fossil fuels almost certainly don’t make up more than a small percentage of the endowment, I find it hard to believe the investment office that defined what the modern endowment looks like can’t replace those investments with cleaner, more ethically responsible investments. Publications like Forbes have reported that investing in clean energy has been just as profitable as investing in the fossil fuel industry in the past years.

        Yale gains very little by keeping these investments and risks the future of the very students they are educating. If Yale is so concerned with educating us to be world leaders, they should be just as concerned with ensuring that there is a world to lead in the future.

        • Goldie ’08

          “…fossil fuels almost certainly don’t make up more than a small percentage of the endowment…”

          How do you know? I venture that their weighting in the endowment fund is proportionate to their global market cap weighting.

          • Guest

            Yale’s holdings in publicly traded companies constitute 13.6% of the portfolio. These are the companies we are interested in and able to divest from. Of those, given the proposal (link below), 10% would be a very high estimate of how many of those stocks would be eligible for divestment. The proposal only divests from the companies with the worst emissions intensities.


  • basho

    Energy companies cause global warming the same way McDonalds makes you fat – a serious attempt at solving climate change involves reducing DEMAND for fossil fuels in the same way losing weight involves reducing demand for fries. Neither McDonalds nor Exxon mobil are forcing anyone to buy their products – aren’t the consumers who ultimately burn fossil fuels responsible for any “grave social injury”?

    For this reason, the fastest way for Yale to shrink its carbon footprint would be withhold paychecks and financial aid from anyone who uses electric lighting, heating, or gets to campus for the semester on anything more advanced than a bicycle.

    • yoni landau

      Basho, global warming is a commons problem, not an individual problem like obesity. Commons problems need collective agreements to be solved.