February 23, 2017

Déjà Vu: Swarthmore Rejects Divestment…Again.

For the third time in just as many years, Swarthmore College – the birthplace of the divestment movement – has  has rejected this flawed, costly campaign. 

In the hopes of compelling the Board to take action on the issue during its upcoming February meeting, Swarthmore College’s Mountain Justice divestment group hastily organized a non-binding student referendum earlier this week to push the Board to divest.  The referendum had no bearing on the Board’s meeting agenda, yet college leadership once again took the opportunity to make clear their opposition to divestment.

From President Valerie Smith and Board of Managers Chair Tom Spock in a student-wide email:

“We appreciate the time and effort that went into developing this referendum. However, following three years of thoughtful and detailed study and analysis from 2013 to 2015, the Board stated in its Sustainability and Investment Policy that it had reached the decision ‘not to divest from fossil fuels, either on a full or partial basis.’”

The irony of this outcome is that the modern fossil fuel divestment movement actually began on Swarthmore’s campus in 2011.  After student protests pressured the Board to issue a decision, the school officially rejected divestment in September 2013.

As a part of Swarthmore’s analysis, the Board found that divestment would cost the school $200 million over ten years.  Because Swarthmore relies on comingled funds for its investment strategy, over 60 percent of the endowment would be impacted by divestment, imposing substantial fees and transaction costs.  But what’s the trade-off for these steep costs?

In their rejection, the Board noted its skepticism that divestment would be an effective means of initiating change or helping the environment. From the report:

“Divestment’s potential success as a moral response is limited-if not completely negated-so long as its advocates continue to turn on the lights, drive cars, and purchase manufactured goods, for it is these activities that constitute the true drivers of fossil fuel companies’ economic viability-their profits.” (Emphasis added)

Nevertheless, students continued to push for divestment, again forcing the Board to issue a new statement in 2015.  The school again rejected the effort, citing financial concerns:

“It would be difficult, if not impossible, to replace our current investment managers with ones of similar quality, if we were only to invest in funds that were fossil fuel free. By having access to the best investment managers, the College has achieved excellent returns in a shifting landscape. If we were not able to work with these investment managers, it would cost the college between $10 and $20 million annually based on the past performance of our current managers. Our endowment is large but it is still finite. If returns were lower we would be facing difficult budget choices.” (Emphasis added)

Unsurprisingly, the Board’s view on divestment has not changed over the past year.  The endowment plays a critical part in supporting the college, contributing about 50 percent of the College’s annual expenses and an average of $40,000 per student per year to over half of its students, who receive aid.  Divestment would put this funding at risk, while accomplishing nothing from an environmental standpoint.

Hopefully for Swarthmore, third time’s the charm when it comes to divestment.