December 21, 2016

Things are Looking Grim for Fossil-Fuel Divestment Activists in Colorado

From Colorado College to the University of Denver, 350.org’s fossil-fuel divestment campaign has had a tough month in the Centennial State.

Colorado College’s divestment group has waved the white flag “due to lack of participation,” according to a Dec. 10 story in student newspaper The Catalyst.  Faced with multiple rejections from university leaders over the years, the students have essentially given up. From the paper:

“’Throughout the years there have been a number of proposals to the Board of Trustees, and they have basically been shut down every time,’ said Scott Broadbent, a senior graduating in December. ‘And so I think a lot of kids grew tired… Basically it all fizzled out.’”

Throughout their campaign, outside activists attempted to use different arguments to sway the Board—their latest based on alleged financial benefits as opposed to the moral imperative for divesting.  That argument has been debunked over and over again, however.

In fact, Colorado College President Jill Tiefenthaler expressed a polar opposite view on the financial argument for divesting.  In a recent interview, President Tiefenthaler highlighted the importance of maximizing the endowment’s returns due to the vital role it plays in supporting the school’s operating budget, which accounts for 17 percent of annual spending. From the interview:

“…You need to earn about eight percent, and that’s about what the endowment has done over the last decades. Many of our board members are concerned that by limiting the options of investment or screening our managers will lead to a less diversified portfolio or one that does not generate as much return as others.”

President Tiefenthaler also expressed the Board’s concern that divesting from fossil fuels could open the door to future campaigns down the line, and reiterated the Board’s focus on maximizing the endowment’s performance to ensure proper support for the university.

“They worry that it may be fossil fuels now, it could be some other area later and then what are you left with in terms of divesting. I think they also wonder what real impact it has on the issue…[The endowment] not only provides a scholarship today but it’s invested so it can provide a scholarship for every student now through 100 years from now. That means that you have to do pretty good investment-wise to be able to raise that value.”

And despite research showing a possible 23 percent loss for a portfolio over 50 years, groups like 350.org continue to push for divestment.

Divesting Colorado College’s endowment would be especially complicated because of its structure.  About ten years ago, the Board of Trustees opted for a diversified investment strategy and now the fund currently has 20 managers who invest in 40 different funds.  The strategy has served them well, but makes divesting 40 funds from an entire industry extremely complex and, in turn, expensive, due to the costs associated with actively managing dozens of accounts. Prof. Hendrik Bessembinder calculated these transaction and management fees and found they could rob an endowment of an astonishing 12 percent of its value over 20 years.  For a school like Colorado College, which is so dependent on the endowment for its yearly budget, these costs would significantly hamper operations.

Colorado College isn’t the only university in the state facing pressure to divest.  The University of Denver has experienced a 350.org-backed push to drop any investments that touch fossil fuels, but that campaign has met hard resistance.  At a Divestment Facts-hosted event last week, several leaders from Colorado’s higher education and energy sectors made a public stand against DU’s divestment.  Dr. Chris Fiore, Senior Economist at Compass Lexecon, presented his findings which calculated a possible $250 million price tag over 20 years if DU were to divest.

The Denver Post also published an editorial calling divestment “unrealistic and unwise” for DU. From the piece:

“One DU student involved in the 350.org effort said at a recent forum that the students’ goal isn’t to stigmatize fellow students who go on to fossil-fuel careers, but to persuade energy companies to switch to green energy. That sounds really great, but it’s completely unrealistic to think that our state, our nation or other others can immediately stop depending on the plentiful fossil fuels available to provide the power we need to live the lives to which we are accustomed. It would be cruel to poor and hardworking people in our country and impoverished nations beyond our borders to do so.” (emphasis added)

Unfortunately, and despite their recent claims to the contrary, stigmatizing energy companies and the people who go work for them is exactly the point of 350.org’s campaign. Just ask the 350.org activist who wrote this newspaper column: “Divestment is about stigmatizing fossil fuel companies.” Or ask The Seattle Times newspaper reporter who wrote about the early days of fossil-fuel divestment campaign: “[350.org] kicked off a national campaign … that seeks to demonize the oil and coal industries.”

Also speaking at the event was University of Colorado Regent-elect, Heidi Ganahl.  In another blow to anti-fossil fuel activists, Ganahl was elected following a high-profile and hard-fought campaign where divestment became a front and center issue.  Ganahl, who campaigned on an anti-divestment platform, will no doubt help put the brewing divestment battle to rest for the University of Colorado, a school that has already rejected selling off fossil fuels once before.

Though activists have made a concerted effort to target universities throughout the state of Colorado, they have not had any luck in achieving any sort of divestment at three of the state’s top schools. In fact, the only Colorado school to divest was Naropa University in Boulder, a tiny liberal arts college with less than 1,000 students, back in 2013.  Colorado is not a unique case, as we’ve seen similar outcomes in New York and Massachusetts.  It’s clear that universities nationwide are rejecting the empty gesture that is fossil fuel divestment.