As Divestment Facts has highlighted, Barnard’s Committee on Investments is expected to endorse a partial divestment measure to the Board of Trustees this weekend, calling on the college to sell shares in coal and oil sands as well as putting forth a “good faith effort” to divest from companies that “deny climate science.” The Trustees will then take a final vote on the matter before reporting out to the full college community, also likely this weekend.
So what do students think about this upcoming decision? What will it mean for the university? Here are the top 5 questions you need to be asking.
1) How would divestment actually be put in place at the college? Barnard has yet to explain how it can divest funds from its incredibly complicated investment structure. As the school’s report on the issue notes, “there remain serious questions about how such an approach could be put into practice. Defining climate-denying behaviors and continually monitoring the industry are key challenges.”
That’s because Barnard does not manage its endowment. Instead, the school’s near 900 separate funds are co-mingled and pooled together with endowments from 13 other universities and invested as one portfolio. Barnard acknowledges that divestment could take years and would require liquidating $18 million in private equity partnerships that have exposure to the fossil fuel industry. This may explain why several of the schools that Barnard’s endowment is pooled with have already rejected divestment, including Middlebury and Dickinson College. Differing investment preferences and requests will make it almost impossible for Investure to continue to manage these endowments in the same manner as they do now.
2) Does Barnard even have these types of companies in its endowment? We don’t know how Barnard’s funds are allocated. The report acknowledges that Barnard’s exposure to fossil fuels is about seven percent, but we don’t know what the breakdown is between coal, oil sands and climate deniers. It is very likely that Barnard doesn’t even have these investments to begin with, which would make this decision the quintessential fake divestment empty gesture that we’ve seen before.
3) If Barnard did move forward with partial divestment (and does actually have holdings to begin with), what will it cost students? Barnard has acknowledged that divestment will end up being costly. The college actually cited Prof. Brad Cornell’s study in their own divestment report and reiterated his findings about divestment costing .23 percent over 50 years. Barnard calculated divestment would impose an annual loss of $690,000 in income – a sizable loss for an endowment that provides seven percent of the school’s annual operating budget.
In addition to financial losses, given Barnard’s complicated investment structure, divestment will pile on fees and extra costs. Immediately selling partnerships with exposure to fossil fuels would mostly likely be done at a loss. Therefore, divestment would take years and “would not necessarily be fully realized until we liquidate our private partnership obligations.” In addition, the Task Force mentions that monitoring climate deniers will be an “on-going exercise, requiring constant review and probably additional management expense.”
As we know from Prof. Bessembinder’s recent study, active management of an endowment could mean millions in transaction fees for universities. These frictional costs could rob endowment funds of as much as 12 percent of their total value over a 20-year time frame.
4) What do students think about this divestment decision? Students on campus have noted that a decision to move forward with this partial divestment effort would be limited at best. The leader of Barnard’s divestment movement said the proposal “prompts many unanswered questions” and shows their work is “far from over” in a recent op-ed.
Students across the country have expressed similar frustrations when their schools choose the path of fake divestment. Responding to student pressure, Boston University decided to put forth an effort to “avoid investments in companies that extract” coal and oil sands. This half-hearted commitment wasn’t embraced by the Divest BU group on campus, who responded with a statement reading in part, “BU remains invested in the fossil fuel industry.”
Stanford made headlines in 2014 when it agreed to sell direct holdings in coal companies, despite a refusal to touch their oil and gas investments or co-mingled funds. This action has not quelled the campus group’s pursuit of full divestment. Just recently the student Senate discussed a joint bill with Fossil Free Stanford that would “seek comment” on fossil fuel divestment from various stakeholders, continuing the process toward forcing the Board’s hand yet again on full divestment.
And earlier this month, Columbia Divest for Climate Justice spoke out against plans for the University to divest from coal, deeming it insufficient.
5) Is divestment really worth it? Ahead of Saturday’s vote, Barnard should realize that the empty gesture of partial divestment is a pointless exercise. It may cost the university and will not satisfy students. The Board should think twice before adopting this recommendation.