The City University of New York (CUNY) Monday joined the chorus of colleges and universities across the country rejecting fossil fuel divestment, including Harvard, Cornell and the University of California.
In response to a small rally by CUNY Divest Monday afternoon, college spokesman Mike Arena told POLITICO (sub req’d) that the University was concerned divestment would result in “lower expected returns, and result in higher transaction costs.” Arena noted that the “majority of spending derived from the University’s investment pool is utilized for student scholarships,” and therefore divestment could cut the funding available for students.
CUNY’s concern is supported by a recent study from Professor Daniel Fischel, a former Dean of the University of Chicago Law School, that found divested portfolios performed worse than non-divested portfolios. In fact, for CUNY’s 2013 endowment of over $215 million, the reduction in endowment size from divestment would equal over $1.5 million annually.
Nearby Columbia University’s Advisory Committee on Socially Responsible Investing (ACSRI) also recommended rejecting a divestment proposal earlier this year, writing that they were unsure “that Columbia’s divestment would send a signal more powerful than engagement. It seems unlikely to us that divestment from fossil fuel would ‘revoke a social license’ when we continue to use fossil fuels day after day in every aspect of our lives.”
An NYU working group formed to look into divestment for the university has also expressed concern over the cost of divestment, noting recently that divestment was not “financially prudent” because “in order to eliminate the $139 million in fossil fuel investments, NYU would have to liquidate relationships with 39 funds that together account for 38% of the endowment, or $1.3 billion.”
Ivy league member Cornell University has also noted the difficulty of divesting from fossil fuels, highlighting the key role of energy in a balanced portfolio. According to Cornell President David Skorton in 2013:
“Because of the endowment income’s importance to our operating budget, we invest in asset classes that we believe will earn returns robust enough to keep up with both our annual withdrawals and with inflation. Energy is expected to be one of the highest returning asset classes going forward.” (Emphasis added.)
From the heart of New York City to the west coast, universities across the country continue to speak out against divestment – choosing economic facts over empty political movements. As Columbia and NYU consider divestment, the statement from CUNY adds weight to the growing argument against this ineffective investment tactic.