Following the UC Board of Regents’ decision to conditionally sell a portion of its coal and oil-sands related investments, Chief Investment Officer Jagdeep Bachher was quick to clarify for the third time in less than two weeks that the move was not an act of divestment. According to Bachher in the Santa Barbara Independent, “Climate policy needs to be more than a divestment-or-nothing reflex. Blanket divestment from fossil fuels grabs headlines but doesn’t actively address climate change.”
Bachher joins a large and growing group of officials associated with prestigious U.S. colleges and universities who have been vocal in their stance against divestment, calling it an ineffective strategy that diverts time, attention and resources away from meaningful solutions on climate change. Just yesterday, president of Harvard University Drew Faust spoke frankly about the goal of the school’s endowment and why she sees divestment as a “dangerous” strategy with “little effective outcome” to be achieved. To wit:
“I don’t think hat divestment is an appropriate tool, because I don’t think the endowment should be used for exerting political pressure. It is meant to fund the wide range of activities that the University undertakes. As we said before, 35 percent of our operating budget comes from the endowment. That is why people gave their funds to create the endowment. It should not be used as a weapon to exert pressure on one group or another.”
Faust’s concerns – which she has noted in the past — are far from unfounded. Caltech professor, economist and self-declared “wild-eyed” environmentalist Dr. Bradford Cornell recently published a report that quantifies the substantial costs that the endowments of Harvard, Yale, MIT, Columbia and NYU should expect to bear were they to pursue divestment. With a collective loss of $195 million among the five schools for each year they remained divested, Dr. Cornell concluded that, “a reduction in endowment fund returns as a consequence of divestment would have material impacts on an endowment’s ability to fund a university’s key institutional goal.”
But this position has been echoed far beyond California and the ranks of presidents, trustees and board members. Even if the sit-ins and protests manage to pressure institutions into pulling out their billion dollar investments in fossil fuels, economists and investment experts across the nation agree that divestment would have zero impact on climate change, or existing regulations, or the companies being targeted under a divestment scenario.
From a purely economic standpoint, scholars such as Ivo Welch, professor of finance and economics at UCLA, have found that, “Individual divestments, either as economic or symbolic pressure, have never succeeded in getting companies or countries to change” and that, “Even if Stanford divested itself fully of all its stocks, both fossil and nonfossil, it would probably take the market less than an hour to absorb the shares. It would not lead the executives of the affected companies to engage in soul-searching, much less in changes in operations.”
In an article earlier this summer, Nature Magazine also featured scientists and climate experts who proposed lots of different ways to address climate change that would prove far more useful and effective than divestment. William Nordhaus, an economist at Yale, suggested that, “If you want to do something about climate change …You are not going to solve the problem by beating up on companies.”
Scientists, economists and leaders of academic institutions have all acknowledged student activists’ concerns and applauded their enthusiasm with respect to this critical issue. But what they’ve also made resoundingly clear is that every minute they’re spending on divestment is a minute they’re not investing in something that actually matters from a climate standpoint.