April 24, 2017

Washington University Rejects Divestment, Another Failure for the Divest Campaign

This weekend, Washington University in St. Louis, Missouri announced it would not move forward with divestment – the latest in a string of rejections for the failing divest campaign.

As University Chancellor Mark Wrighton stated on Sunday, the university’s $6.5 billion endowment’s primary role is to provide for the college and its nearly 15,000 students. Any decision to divest would place this large endowment and the faculty, students, and staff it supports at risk. From Chancellor Wrighton:

“From time to time, the board of trustees has been called upon to make endowment investment decisions related to specific issues of concern to University community members and/or to the public more broadly. The longstanding policy of the board of trustees has been that the investment policy will not be changed or used to support political, social, or other agendas. 

“The primary objective of the endowment is to help us fulfill the mission of the University. The board decides how the endowment will be invested. The board makes the decisions about the policies related to investing and they also set the policy on spending.”

Chancellor Wrighton is not wrong to be concerned about divestment’s impact on the endowment.  According to research from finance Prof. Bessembinder at the W.P. Carey School of Business, for a typical large endowment like Washington University’s, divestment would translate into a loss in value of as much as $7.4 billion over 20 years.

The rejection follows pressure from Fossil Free WashU to divest from the Carbon 200, including a February 2015 open letter to Chancellor Mark Wrighton to divest. Yet the University rejected these calls based on its fiduciary duty to focus on the performance of the endowment, not individual calls for symbolic, political investment decisions – a common theme in divestment rejections.  Earlier this month, for instance, Mount Holyoke College in Massachusetts rejected divestment due to its fiduciary duty and the significant role its endowment plays in funding vital university functions and programs. According 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.” (emphasis added)

Washington University has instead taken a path of action, rejecting calls for symbolic and costly divestment and instead focusing on efforts to engage the campus community. The student newspaper reports the college will develop an advisory committee on the endowment comprised of students, faculty and alumni that will “advise the Chancellor on how best to realize the call for transparency and socially responsible investment” of University assets. But on the question of divestment, the answer is a resounding no.