April 17, 2017

Mount Holyoke Trustees Reject Divestment in Unanimous Decision

Trustees at Mount Holyoke College in Massachusetts voted unanimously this week to reject fossil fuel divestment, noting such a decision “would sacrifice the strength and stability of our endowment.”

The Board’s rejection cited its fiduciary duty and highlighted the significant role its endowment plays in funding vital university functions and programs, including nearly every facet of university spending, from the school’s art museum to its athletics programs.  Additionally, nearly 80 percent of Mount Holyoke students receive scholarship assistance—funding made available by the endowment.  More from the announcement:

“After careful consideration and lengthy deliberations, we have voted unanimously as a Board against divesting publicly traded fossil fuel holdings from our endowment. Ultimately, we came back to our responsibilities as Trustees: to preserve and protect our endowment, which represents the cumulative generosity of many donors to support our academic mission in the many ways they have identified as being of shared importance. Funding 26 percent of our annual operating budget, our endowment is the cornerstone that enables us to provide an intellectually rigorous education for students of all backgrounds while strengthening our legacy of leadership.”

Mount Holyoke, like many peer institutions, utilizes comingled funds in its investment strategy.  In fact, the endowment does not have any direct investments, making any form of divestment extremely costly.  Of its co-mingled investments, the school estimates that $7 million is invested in fossil fuel companies, but to actually divest these securities the college would have to sell nearly half of its portfolio to eliminate its exposure to fossil fuels.   According to the Board:

“Although only one percent of our total endowment, or approximately $7 million, is invested in publicly traded fossil fuel companies, a decision to divest would require the College to sell over one-third of its current endowment. The College also invests a portion of the endowment in private partnerships. Fossil fuel holdings in this sector represent less than five percent of the endowment. Divesting both the public and private funds in our endowment with exposure to fossil fuel companies would require the College to sell approximately $337 million, or approximately one-half of the endowment.”  (emphasis added)

Given the financial realities of such a transaction, not to mention the ineffectiveness of divestment to begin with, Mount Holyoke ultimately found divestment to be a detriment to the college. From the announcement:

“Given the College’s limited financial exposure to fossil fuels, divestment would sacrifice the strength and stability of our endowment without, we believe, having the desired impact on the fossil fuel industry. The move also would likely reduce the investment returns on the endowment and therefore distributions to the College.” (emphasis added)

Mount Holyoke is just the latest Massachusetts-area school to say no to the empty gesture of divestment, joining the ranks of Harvard, MIT, Tufts and Northeastern which have all rejected in recent years.  Luckily for students of the college, rejecting divestment will save their endowment millions – in turn preserving support for scholarships, academic programs, athletics and more.