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May 4, 2018

Grinnell College Rejects Divestment, Says Move Does Not Impact Climate Change

In another defeat for the ailing divestment movement, Grinnell College’s student newspaper reports the school’s Divestment Task Force is recommending the Board of Trustees reject costly fossil fuel divestment, saying the move will lead to “a very substantial level of investment and return risk that could have serious long-term consequences that adversely affect the mission of the College in the years ahead.”

The Grinnell Task Force was formulated in April 2017, following an occupation by Divest Grinnell protesters of the President’s office, and has been analyzing the issue for the past year. The Task Force was aided by an Advisory Committee which was composed of faculty, Divest Grinnell representatives, alumni and other staff.  Rightly so, the Task Force came to the following conclusion:

“The College should not divest from fossil fuel holdings.  The Task Force has concluded that divestment would introduce significant investment risk in the endowment while having little, if any, direct impact on climate change.”

The report points out that Grinnell’s endowment provides for more than half (54 percent) of the College’s yearly operating budget, far higher than the average of peer institutions.  That means the College is reliant on the endowment’s continued positive performance, which has “produced outsized returns” in recent years, in order to maintain funding levels for the College and preserve Grinnell’s generous “need-blind admissions policy.”

Grinnell estimates that about 2.4 percent of its $2 billion endowment is invested in fossil fuels, at least half of which is tied up for the long term.  To carry out full divestment, however, the College would have to sell off a quarter of its overall endowment due to investment strategies by its trusted and longtime financial managers. From the report:

“… imposing a requirement to divest fossil fuel holdings would very likely result in the College having to replace these managers.  This would then result in the need to liquidate and reinvest approximately $500 million of the endowment with a new set of managers.  The Task Force believes that having to reinvest such a significant portion of the endowment would introduce a very substantial level of investment and return risk that could have serious long-term consequences that adversely affect the mission of the College in the years ahead.  The Task Force further believes that taking actions that could diminish the endowment distributions that support the College’s mission would be inconsistent with the Board’s fiduciary responsibilities.” (emphasis added)

The payoff for such a dramatic move? Not much, according to the Task Force:

“The Task Force believes that fossil fuel divestment campaigns have been successful in raising public awareness, but it has not found any compelling evidence that the action of divesting fossil fuel stocks has an impact on climate change, particularly as a result of financial pressures.  Nor has the Task Force found any clear evidence that divestment actions have changed the policies or behavior of fossil fuel companies.” (emphasis added)

Instead of the empty gesture that is divestment, the Grinnell Task Force made more meaningful and concrete suggestions to support the environment, like lowering the College’s carbon footprint, adopting additional renewable energy sources for electricity and creating a standing Sustainability Committee.

Of course, all of those options are more effective than divestment, a costly move that does little more than generate headlines.

It is now up to Grinnell’s board to make the final decision, but for colleges that are serious about their academic mission and well being of their endowment, rejecting divestment is the only sensible answer.