Swarthmore Pegs Cost of Divestment at $200 Million Over 10 Years

Editor’s note: This article was initially published in The Daily Gazette, Swarthmore’s online, daily newspaper founded in Fall 1996. As of Fall 2018, the DG has merged with The Phoenix. See the about page to read more about the DG.

At last weekend’s open meeting of Swarthmore College’s Board of Managers, Board Investment Committee Chair Chris Niemczewski ‘74 was beginning to give a presentation entitled “The Cost of Divestment,” which he had prepared with Vice President for Finance and Treasurer Suzanne Welsh, when around 100 students entered the room and halted the presentation.

The Daily Gazette obtained the following set of charts, which were to be a part of Niemczewski’ presentation, and the accompanying FAQ sheet, from Welsh. These documents do not reflect original reporting or writing by students affiliated with The Daily Gazette.

The documents lay out the College’s estimate that divestment from fossil fuels would cost a total of at least $200 million (cumulative) over the next ten years. The value of the College’s endowment was approximately $1.5 billion as of June 30, 2012.

To summarize what can be read below, the estimate proceeds from Niemczewski and Welsh’s claim that in order to divest, the Investment Committee and the Board as a whole would have to remove all funds from “commingled funds” and likely from “separate portfolios” as well, types of investments that together account for the vast majority of the endowment. The estimate has little to do with the returns of fossil fuel industry stocks and hinges on the argument that fund managers will refuse to select investments based on a particular client’s company-by-company preferences. Dropping these fund managers, the College’s endowment would have to be invested in special fossil fuel-free index funds, which are predicted to perform $200 million worse over the next ten years than the College’s current investments.

For comparison, The Daily Gazette’s back-of-a-napkin arithmetic estimates that $200 million, if borne by 1500 students annually for 10 years, would cost students an additional $13,333 per student per year. This arithmetic does not try to take into account any form of inflation or cost, enrollment, or investment changes. It is simply intended as a rough means of understanding the scale of the College’s $200 million estimate.



FAQ from Niemczewski and Welsh:

Who is responsible for the endowment?

The Investment Committee of the Board of Managers has investment responsibility for the endowment within investment guidelines and policies adopted and reviewed annually by the Board. Members of the Investment Committee are investment professionals.

What is the investment strategy of the endowment?

The objective of the endowment is to provide a sustainable level of support for Swarthmore College’s annual operating budget while preserving the purchasing power of the endowment for the future. The success of the College’s investment strategy depends on having a diversified mix of investments and hiring the best investment firms to manage specific portfolios of investments. As of June 30, 2012, over 100 firms managed the College’s $1.5 billion endowment.

Why is diversification important?

Swarthmore’s endowment is invested in many asset classes, as shown in Chart 1. An asset class is a type of investment, such as stocks of domestic companies. Diversification is important because some assets do well when others are performing poorly. Also, various assets have different risk characteristics. Diversification helps the College to achieve good returns with lower risk. Furthermore, within an asset class, the Investment Committee selects professional investment managers who employ different investment strategies, which also provides important diversification.

How do investment managers invest our funds?

There are basically three ways an investment firm can invest–through an index fund, a separately managed portfolio, or a commingled fund. The simplest way is through an index fund. These funds essentially hold all the stocks in a specific universe. For example, a domestic stock index fund might hold all the stocks in the Standard & Poor’s 500 Index. The performance of an index fund will replicate the universe and will do so for very low fees. Using index funds is called “passive” management and is a good low-cost strategy.

Institutions like Swarthmore, however, hope that they can identify and hire investment managers to put together customized portfolios that will outperform the basic index approach. This costs more so the performance must justify the higher fees. Under this “active” management, there are two approaches.

The first is for a firm to create a portfolio just for Swarthmore and to buy stocks just for Swarthmore; this is called a separately managed portfolio. The second way is for a firm to pool together all its clients’ money into one large portfolio with each institution owning a pro rata share. This is called a commingled fund. An institution can have greater control over a separately managed portfolio, but fees tend to be higher. Commingled funds, because of their economies of scale, offer lower fees. Ultimately, an endowment seeks to invest where it gets the best return net of fees. Swarthmore has a relatively high performing endowment and does not use index funds. The endowment’s assets are in a mix of separate accounts and commingled funds. Swarthmore has been able to consistently achieve returns higher than what index funds would have earned.

How much of Swarthmore’s endowment structure could potentially be affected by divestment?

As Chart 1 shows, over 60% of Swarthmore’s endowment could potentially be affected by divestment. This includes 5 domestic equity managers, 8 international equity managers, and 30 managers of alternative assets (e.g., hedge funds and other private investments). These firms currently have no divestment constraints and could possibly invest in fossil fuel companies.

What would happen if Swarthmore decided to divest?

If Swarthmore decided to divest, we would have to find replacements for all the commingled funds because an institution has no power to impose a constraint on a commingled fund. Swarthmore’s commingled funds totaled $660 million at the end of the last fiscal year. Divestment would incur a very large cost.

Chart 2 shows that Swarthmore’s domestic and international stocks have added 1.7% and 1.8% PER YEAR during the past ten years over and above index fund returns.

With divestment, an option would be to hire a firm (such as Aperio Group) to design customized index funds for the endowment. This group could put together portfolios of stocks designed to match desired indexes but without using the divested companies. The firm customizes this approach for an endowment’s specific constraints.

If Swarthmore were to follow this approach, it would forego the 1.7% to 1.8% added return per year. This would amount to lost earnings each and every year. As Chart 2 shows, the loss the first year would be $11.2 million, but by five years it would be a cumulative $73.1 million, and by ten years it would be $203.8 million. It would be even greater if all the affected portfolios of the endowment were invested in this way.

What about the cost of divesting the endowment’s separately managed funds?

It is likely that not all the endowment’s separate account managers would agree to invest with constraints. Even if they did, a recent study* indicated we might expect a .4% annual cost. This would amount to over $5 million in the first 5 years and $14 million after ten years. When Swarthmore divested from stocks of companies doing business in South Africa over 20 years ago when the endowment was much smaller, it cost the College $2.2 million.

Could the College use all separately managed social investment funds?

We know that the index approach described above is possible. We do not know of any firms that have managed portfolios with a “sordid sixteen” constraint.

Are there other considerations with divestment?

Important considerations are whether divestment would have an impact and whether it might instead have unintended consequences. If Swarthmore were to divest, it could not participate in shareholder activism efforts, many of which have resulted in tangible progress. If engaged shareholders were replaced by shareholders without conscience on these issues, it would not deprive companies of capital, but would rather make it easier for them to maintain the status quo. Foreign ownership of domestic fossil fuel companies could also raise strategic geopolitical issues.

This is all very complex. What is the general conclusion?

Managing an endowment is very complex. Because the investment firms that manage funds for Swarthmore are among the best, our endowment has generated good returns over time. While determining a specific cost is not possible, a strong argument exists that a divested Swarthmore endowment would not continue to generate our historical level of outperformance and that divestment would entail a high cost for Swarthmore College accompanied by limited impact on the targeted companies or other unintended consequences.

*Addition: after publication of this article, Welsh provided a citation for this study: Timothy Adler and Mark Kritzman, “The Cost of Socially Responsible Investing,” Journal of Portfolio Management, Fall 2008: 52-56


  1. This is utterly absurd. He assumes that if money is withdrawn from commingled funds that are invested in fossil fuels that there is no other choice but to invest equally in an index. Also, average return rates over any period of time as indication of the future of a given fund is untenable as a rule. He argues that they would exert shareholder pressure, but to my knowledge have never done so, and have made no plans to do so. (and beyond that, one might imagine it’d be easier to exert pressure on the commingled fund as a holder to reduce its holdings in fossil fules than it would be to exert pressure on the fossil fuel companies to stop existing)
    Also, no Swarthmore student could get away with claiming “a recent study” said something without a citation on a paper. Why can the chair of the investments committee?

    • Also, for clarification on why you can’t use average return rates without a more in depth citation, consider taking the average 4 year return of the Dow Jones. From New Year’s 2004-2008, you get an average of ~600 points increase per year. From New Year’s 2005-2009, you lose ~550 points per year. Same applies to any rapidly changing index. (Not that he actually bothers to mention which index he’s referring to in his statistics.)

    • As a person who knows almost nothing about investment, I’ll have to take the professionals at their words. But I do think there is still an argument to be made that Swarthmore should still divest despite the cost. But then the question becomes who will bear the cost, and is it fair for them to do so? Are there better alternatives?
      What I think Mountain Justice shouldn’t go on saying is that there is little or no cost to divestment.

      Also, I’m tempted to ask the question who’s money is it? If donors are okay with their own money that they so generously gave to the school to be invested in fossil fuel companies, then who is Mountain Justice to say no?

      • i don’t even know where to begin with a commenter who says that they will blindly accept an opinion from someone because that person is an expert.

        (this is probably one of the main problems with society at large, such a shame to see swarthmore students act in this way.)

        more to the point:
        donors give money to swat. swat (including students) then decides what to do with the money (unless the donor particularly earmarks it for something).

        maybe a pact of donors will get together and start the ‘fossil fuel fund,’ in which their donations can only be used to invest in fossil fuels…

    • I couldn’t disagree with you more Nathan. Here is why:

      The only alternative that MJ has given for an alternative way to invest has been through an index. This was suggested through the Aperio group study which is the only article that MJ has given as evidence that divesting would not decrease the investment.

      Also, while it’s true that one can’t predict the returns of the Dow Jones it’s pretty common practice to use prior time periods to see which portfolio is performing better. It’s called “backtesting”:


      Considering that recent years have been especially volatile, one could look at the information as proof that the current college’s portfolio is less risky at doomsday scenarios as well.

      To say that Swarthmore could do better than the average return of indexes is weak. Swarthmore is equally if not almost as equally likely to do worse than the average index.

      The college is saying that it’s making 1.7% more per YEAR than indexes. 1.7% is a HUGE rate of return.

    • “Also, no Swarthmore student could get away with claiming “a recent study” said something without a citation on a paper. Why can the chair of the investments committee?”



      He’s probably not citing someone else because it was his own analysis.

  2. Cripes, Swarthmore 20X is kind-of a smarmy tool, but were they also kind-of right?

    MJ must issue a specific, focused, numbers-based rebuttal of the facts above if possible. The optics of this are terrible. I wonder if it in some way accidentally advantaged the BoM to be able to issue this pearl-clutchingly-high “factoid” as a readily-spreadable anti-divestment meme rather than something subject to debate; there’s a small part of me that thinks it’s a shame that MJ didn’t get to engage in a public throwdown back-and-forth on the subject at the BoM presentation.

    • I will take this as a compliment. Given that I work in the field, I’m not shocked that I was right. Only shocked that it took so long for everyone to figure out I was.

        • I posted comments because I had an understanding and appreciation for a topic, which many students did not. My motive was to educate those whose initiatives I felt were dangerous to the well-being of the institution and the people that benefit from its greatness.

          I’m sure your knowledge of obscure, irrelevant movies is enough for you though.

  3. Re: shareholder activism. Swarthmore’s committee for investor responsibility helped to co-file a shareholder resolution against First Energy, a fossil fuel company that processes coal and runs coal-fired power plants, this semester. The resolution asked the company to reduce its water consumption and to report on its reduction efforts. (Lots of water is used in the process of “purifying” coal, and the disposal of this water is a serious environmental justice issue.) The SEC threw out the resolution, claiming it interfered with standard business operation of the company. So while shareholder resolutions might be effective in some very narrow cases, our CIR has solid evidence that they are ineffective in combating the environmental injustices perpetrated by fossil fuel companies. When shareholder resolutions are ineffective at pressuring a company to change its policies or its business model, it does not matter if the company has “engaged shareholders” or “shareholders without conscience”.

  4. It’s a tough argument to counter. Swarthmore has enjoyed consistently higher returns by using a combination of elite managers and commingled funds. This is a enviable position for any investor. The opportunity cost of divestment is substituting this secure financial position with a more volatile, historically underperforming position. The costs of divestment seem pretty clear: are the benefits worth it?

  5. And this should end the discussion. Even if the calculation overestimates the impact by 10x, I doubt 1.3k/year/student is worth making a proverbial statement that may – in the most fortunate scenario – gather a ny times blog article…

  6. I’d like to take a moment and remind us all of Mountain Justice’s proposal for divestment:

    “1. Immediately freeze all new investments in the “Sordid Sixteen.”
    2. Divest the college’s direct holdings in the “Sordid Sixteen.”
    3. Over a period of 3 years, divest and screen our
    direct holdings and co-mingled funds from the
    entire fossil fuel industry.
    4. Institutionalize a collaborative process between students, faculty, the administration, and the Board of Managers to address future divestment proposals, and to work to make sure the endowment is invested in a socially responsible manner.”[i]

    Numbers 1 and 2 are only dealing with separately managed funds and index funds. According to Niemczewski and Welsh, Swarthmore does not currently invest in any index funds. Further, they claim divesting separately managed funds from the Sordid 16 would cost the College 14 million dollars over ten years.

    This assumes, of course, that we couldn’t negotiate with those our separate account managers to produce a comparable financial product that screens out the Sordid 16. From what is written here, Niemczewski and Welsh have not actually done the research of asking and negotiating with our current separate account managers about this.

    Further, what does “cost 14 million dollars over ten years” mean? It does NOT mean that our endowment will decrease. It means that, according to their projections, the College’s endowment would grow $14 million dollars more if we were to continue as usual as compared with divesting our separately managed funds. Our endowment would still grow significantly.

    For comparison, last year Swarthmore’s endowment actually did decrease by $9.7 million: “The value declined slightly because endowment spending for the budget exceeded the investment return and new gifts to the endowment.”[ii] And you know what? IT WASN’T A BIG DEAL. We didn’t blame our fund managers for their poor performance, and in fact, combined with the remarkable 24.6% return the year before, Swarthmore’s endowment is doing well especially when compared to other large institutions’ returns. Thus the projected $14 million dollar “cost” over ten years is fairly small.

    As for the commingled funds, and for this article’s attention-grabbing title, Niemczewski and Welsh base their estimates entirely on one possible option for divesting. They assume in divesting, the College would replace ALL of its commingled funds with customized index funds from a single firm.

    As they themselves admit, this is only one possible option for implementing divestment. Another option is to use a mix of index funds and commingled funds or separately managed funds that DO screen for fossil fuels. Such funds do indeed exist, such as the Generation Investment Management Credit Fund or the SJF Ventures Fund III.[iii] I will not comment on how the returns of these funds compare to Swarthmore’s current returns – I do not have access to information on either of the returns.

    Yet another option is to work with other institutions that also want a fossil fuel free commingled fund, and push to have one created. Niemczewski and Welsh are correct in saying that a sole investor cannot impose a constraint on a commingled fund. However, multiple institutions working together can surely create such a fund, as was done during the 1980s when institutions divested from countries supporting South African Apartheid. Further, there ARE large investors, such as Brown University, that are seriously considering fossil fuel divestment.[iv]

    In any case, Niemczewski and Welsh are not painting a complete picture of what divestment would actually look like for Swarthmore. To boldly claim that divestment would cost the College a specific sum of money over ten years, and to NOT acknowledge and research the other ways that divestment might be implemented, is misleading at best and derailing at worst.

    Lastly, let’s not forget that this is not a battle of numbers, figures, and data tables. While we’d like to reduce the debate around divestment to a sanitized, apolitical one, it is not. Divestment is about PEOPLE’S LIVES. It is about JUSTICE. Swarthmore College has an obligation and a duty to do all it can to combat climate change and injustice. Right now, Swarthmore is failing to do anything other than educate itself, albeit slowly, on climate change and divestment. This is unacceptable.

    As an institution that claims to stand for social responsibility and action, Swarthmore is failing in its mission. I will keep fighting and pushing for Swarthmore to be better, to be just, to be admirable.

    -Pat Walsh, member of Mountain Justice

    [i] http://swatmountainjustice.files.wordpress.com/2013/04/fossil-fuel-divestment-101_may-2013.pdf

    [ii] http://www.swarthmore.edu/Documents/administration/finance_investment_office/FinancialReport2011-12FINAL%280%29.pdf

    [iii] https://s3.amazonaws.com/s3.350.org/images/Reivestment_Guide.pdf

    [iv] http://www.thenation.com/blog/173770/brown-university-investment-committee-recommends-divestment-coal#

    • How can you say that returns won’t go down if you don’t have any information on the rate of returns of the places you want us to invest our money?

      Also, Niemczewski didn’t even factor in that $14 million into the cost of divesting. To argue over that is a complete red herring.

      Fine $14 million might not be a lot over 10 years. But I would argue that $214 million is…

    • Just to be clear, which of the following are you/MJ claiming?

      (1) Divestment would (probably) cost less than $200 million over 10 years.
      (2) None one can make a reasonable claim as to how much divestment would cost.
      (3) Regardless of what the cost turns out to be, cost is not a compelling argument against divestment because of moral/ethical concerns.

      If you are truly trying to argue (3), then the first 9 paragraphs of your comment (which is relatively well-stated — I’m not trying to criticize that) are irrelevant. If cost is NOT a compelling concern, we shouldn’t care what the cost is. If cost IS a compelling concern, surely you must admit that there is some cost at which divestment is not worth it. I assume that if it seemed very likely that divestment would lead to a loss of the endowment’s value on the order of 50%+, MJ would concede that perhaps there are other paths of action that might be more favorable than divestment. If this is true, then the debate absolutely is one of data because the decision that must be made is data-driven: what is the likely cost of divestment, what are the consequences of paying this cost, what are the likely benefits, and do the negative consequences outweigh the positive?

    • Maybe move on? You sound bitter and your citations don't make your argument anymore persuasive says:

      I think if mountain justice is really serious they would know that their argument for divestment, while morally admirable, is economically unreasonable. If they really want to help people and do more than parade around their well manicured campus telling people what social responsibility looks like, they should consider maybe working with the school on combatting climate change in another way? Maybe ask the school to commit to carbon neutrality by a certain date? Maybe talk to chopp about getting a bunch of peer institutions demanding that all schools start moving in that direction? There have to be other ways to exact MOUNTAIN JUSTICE than just divestment.

  7. I kinda feel as if MF just got burnt like a Basrah oil well during OP Iraqi Freedom.

    Or a PA water faucet when you hold a match nearby.

    • Boy I certainly hope our tap water don’t burn when you hold a match next to it! I drink that water every day to stay hydrated, and it seems like high quality H2O. Burning it up would make me crankier than an alligator — they got all them teeth but no toothbrushes!

      • Dear “Adam Sandler in “The Waterboy”

        You are an insensitive prick. This is not a forum for stupid jokes like the one you have so kindly given us here.

        Sitting here right now, I can already tell you are a privileged, white male frat boy who has been spoon-fed his entirely life. We don’t need you’re input here. The folks at Mountain Justice have a strong message they are trying to get across and all you are doing is muddying the pure waters of the Daily Gazette.

        I mean who cares if divesting would cost the College around $200 million over 10 years. It’s not about money. It’s about morality. The world doesn’t revolve around money.


        Mountain Justice

        Note: According to Mountain Justice member Pat Walsh ’14, this comment was not posted by a member of Mountain Justice.

        • Seriously, shut up. Wu tang said it first, “C.R.E.A.M.”

          Have fun after Swat trying to save the world while you realize nothing you do matters.

        • Wow,you can tell all that from one joke? If only you could use your amazing powers for something worthwhile.

        • Mountain Justice hates frat boys. This will surprise the fraternity member who is a member of Mountain Justice. Poor kid.

        • Why is this alright to say?

          “Sitting here right now, I can already tell you are a privileged, white male frat boy who has been spoon-fed his entirely life.”

          It is hateful and makes me feel unsafe

        • “I mean who cares if divesting would cost the College around $200 million over 10 years. It’s not about money…”

          It never is when it belongs to someone else.

        • this is not a spokesperson of MJ. neither am i. but the comment is obviously satire:

          “The folks at Mountain Justice have a strong message they are trying to get across and all you are doing is muddying the pure waters of the Daily Gazette.”

          • If you can’t behave yourself in real life, in front of your college’s Board of Managers, do you really expect us to believe that you behave yourselves on the internet?

            There’s no way of knowing whether that comment was actually a member of Mountain Justice without asking every single member, and every single member being truthful. I’m betting neither happened.

  8. All those protesting the investment decisions should read this article and the corresponding publication: http://chronicle.com/article/What-Fossil-Fuel-Divestment/137941/ .

    It is widely acknowledged that divestment comes at a significant cost. Are these costs something that MJ is willing to accept? How many MJ members benefit from Swarthmore’s tuition assistance? Will you accept responsibility when students like you are denied an opportunity to study at Swarthmore because neither the individual nor the college has the finncial means to offer aid?

    Divestment would mean that resources for financial aid, infrastructural development, and tenure hiring would be significantly reduced. While I recognize the importance of using divestment as a tool for social activism, as an alum, I struggle to support a student movement that will ultimately jeopardize the financial security of the college.

    • I’m not a member of Mountain Justice, but I wanted to comment on your statement. MJ has said OVER AND OVER that they will not support a cut in financial aid. Arguing that divestment will lead to a drop in financial aid and support for students is nothing more than a fear mongering tactic.

      From an MJ op-ed: “Let’s be clear, Swarthmore Mountain Justice will not accept any plan to divest from fossil fuels that would harm financial aid under any circumstances.”

      • Fact 1: If a divestment plans that will harm financial aid, then MJ won’t support it.
        Fact 2: All divestment plans will cause huge losses to the school and will necessarily harm financial aid

        The logical conclusion should be that MJ supports no divestment plans. But given that’s not true, someone lied, and it’s not the people who came up with fact 2.

      • Any cut to the endowment will ultimately result in a cut to financial aid and other resources invaluable to Swarthmore.

  9. The reference for the study is an article “The Cost of Socially Responsible Investing” by Timothy Adler and Mark Kritzman in the Journal of Portfolio Management, Fall 2008.

  10. Maybe MJ should be cold calling/talking to the money managers who manage these commingled investments and try to convince them that divestment is beneficial instead of the college? They can request the school endowment to acknowledge that they support divestment socially but that they wouldn’t divest from current management for this reason to make a slightly better argument. It may be a little annoying for the money managers but after a few calls they may get some more facts that they can work with.

    There is always a way to continue! Keep trying to achieve your goals Swat!

  11. Alternatively, MJ kids can learn to be elite money managers and essentially impose the no fossil fuel restriction on themselves and try to achieve significantly stronger returns than indices can. #LongTermChange

  12. This might just be me, but I’m slightly more inclined to trust an investment management professional (Niemczewski) over a bunch of angry students who may or may not be taking a few economics courses (MJ). It seems to me that the ones truly paying for this whole divestment fad are the poorer students, who can’t afford higher tuition rates or smaller financial aid packages.

    • I don’t think this is about “trusting” anyone. What happened to dialogue and critical analysis? It’s clear that both parties, MJ and Niemczewski, have particular agendas regarding divestment, and that both sides have to be heard. We need to be a bit more critical of “business as usual”, and there are legitimate unaddressed issues in his analysis (i.e. shareholder activism is so-far an ineffective tactic, it examines only one extreme option for divestment, the conflict of interest using the Aperio group study, etc).

      Unfortunately, we all know by now that authority does not have a monopoly over truth. I do think undergoing a critical examination of Niemczewski’s claims is necessary before we dismiss fellow students working to achieve social justice.

      • I don’t think that Niemczewski has a ‘particular agenda’- his job is simply to maximize the college’s returns

        • This is such a short-term-focused comment: ‘maximizing returns’ is his job but he has no incentive to look for ways that divestment could come close to ‘maximizing returns’ without the kind of student advocacy that MJ does…
          The reason divestment leads to long-term maximized returns is that it would be better for the planet if adopted by many organizations, since it would, assumedly, hurt the oil industry. This is the economic goal of divestment, as I understand it.

    • Hi Jill,

      As I’ve commented above, I am not a member of Mountain Justice, but you need to be clear on Mountain Justice’s stance toward financial aid.

      On numerous occassions they have said that they will not accept any Board decision to cut financial aid.

      From an op-ed: “Let’s be clear, Swarthmore Mountain Justice will not accept any plan to divest from fossil fuels that would harm financial aid under any circumstances.”


  13. How about if you want Swarthmore to use your tuition $ for in a divested index fund you pay $13,333 more per year?


  14. If you eliminate all corporations and/or investments that have any degree of social irresponsibility in someone’s eyes, then there will be no investments and it will have to cash under a mattress, as even banks are suspect (and I bet they invest in fossil fuel products in their portfolios).

    So go back to the Earth, become self-sufficient, sew clothes from hand-woven materials, practice organic farming with free seeds, home-school, walk or bicycle everywhere, and live with a clear conscience. Seriously, people do it all of the time.

    But until there is a new world order, there are very few ways to invest in a capitalistic solciety that does not perpetuate the exploitation of either the Planet Earth or the people and other creatures who inhabit it.

  15. Thank you, Mr. Niemczewski and Ms. Welsh. So glad the Board hasn’t fully lost respect for Swarthmore students after last Saturday’s fiasco and cares enough to share this information with us. I can’t emphasize this enough – these folks are investment professionals and the reality is that they have much more credibility than MJ when it comes to the endowment.

    I think this pretty much settles it.

    • Love the condescension. It’s cute. What disrespectful, inappropriate students, taking over a board meeting to talk about getting raped and being the target of hate crimes.

  16. How about this for an idea:
    Instead of demanding full divestment, MJ can ask for partial divestment. Insist on have an allocated initial percentage of the endowment invested fossil fuel free. Let’s say 10%. That is $150 million. This amount will be run as a separate endowment, and we can determine whether it is feasible to have a fossil fuel free endowment. Many may argue that it will be harder to get a similar return on the $150 million because it is only a fraction of the endowment. I think this may be true. So, MJ can try to coordinate with other schools that want to divest and start a mutual fund that could be as big (or bigger) than Swarthmore’s full endowment, with each school having a fraction of their endowment in this fund. This would either prove that divestment can work, or it will be a very expensive learning experience in investment.

    • Better idea: let the interested students invest their own money over time, or start a fund to do this type of experimentation. Then come back in 15 years and present their data again.

      I fail to see how the endowment is theirs to invest. It should be invested in a mainstream fashion to maximize return on investment for the College.

      Please don’t give them $150 million of Swarthmore’s money to spend. Let them earn it themselves and then play around with it!

      Or if they donate $150 million to Swarthmore, they can request it then be invested in non-petroleum holdings.

  17. This just clarifies the obvious, which is that MJ’s morally superior divestment campaign is not grounded in rationality and they would love to have the school lose large amounts of money for an ideological pat on the back, regardless of how futile divestment is at actually affecting the practices of fossil fuel companies.

  18. Wow, this is about to turn acrimonious if it hasn’t already. But I think there are some things that both sides could agree on, and perhaps come to a peaceful resolution on how to move forward together:

    1. Divesting by diverting Swat’s assets into an index fund is a bad idea. That is what the analysis above shows, at least to me, relatively convincingly. While it may overstate the costs somewhat, the Aperio Group’s study likely understates them.

    2. Investing in a commingled fund that was divested from assets related to undesirable companies *might* not yield lower returns. We can speculate on this, but don’t know for sure, because such data doesn’t currently exist. My reasonably economically informed suspicion is that the degree to which it would yield lower returns would depend on exactly how restricted it was in its choice of assets. If it were not that restricted, it *might* be ok, but with greater restrictions would come correspondingly lesser returns and increased risk (the latter in particular). The degree to which it is lesser is a pretty empirical question.

    3. If MJ wants to move forward with divestment, its best move is to try and network with other college chapters to create demand for jointly going in on a commingled fund with some degree of divestment. The burden of doing this is on MJ, at least in the initial stages, rather than the Swarthmore administration, in order to show the administrations of other colleges that there is demand for such a move on their campuses. It is not clear to me that there is, but I don’t really know. If this is the case, then with a reasonable number of college on board, they might be able to achieve this.

    Finally, is anyone else a little suspicious of the Aperio group study when their job is basically to manage the funds their study encourages investing in? This seems like using a study from Blackwater or Halliburton to justify whether or not to invade Iraq…

  19. I wish the board had come out with this information earlier. Instead we had to put up with all this MJ bullshit for over a year. Oh well, I’m glad it’s over – whether or not MJ wants to admit it.

  20. Well that’s that done with then. Can we move on please? Although $10 says we see some desperate plea for attention from MJ in the next few days. “Occupy Parrish!” No. Go home.

  21. I currently don’t have an opinion on the merit of divestment from fossil fuels. I was sort of supportive of it for the last couple of the weeks because, well, I became friends with a lot of people in Mountain Justice, which is a terrible reason to support something. I’m aware of that. Now that the Board’s side of things has come out, I have retreated back to the middle.

    I don’t think it makes sense, though, to completely dismiss everything MJ has ever said on the basis of this information. I am seeing a liberal use of double standards, a distinct lack of critical thinking, and an intense desire to defer to “experts” on this comment thread. These are behaviors that seriously disturb me. Why is it that when MJ comes out with documents and research, dozens of people pounce on them, pointing out critical gaps and errors, while when Board members do, those same people just accept everything the Board says with no criticism whatsoever? (This is not a rhetorical question; if there is truly a reason for this other than “the Board members are experts!” I would like to see it.)

    • I think the answer is: The Board members are experts.
      If MJ came out with a plan that made sense, that was realistic, not idealistic, then there could be a discussion. Also, if MJ wants to hold BoM accountable for their data, then they should point out these flaws. If I agree with the Board, then I don’t see what I can criticize about them.
      The BoM and everyone else that is hesitant about divestment is that way because they are afraid for the future of Swarthmore. Divesting could really hurt the future of the college. Finances is a field where a slippery slope really does mean that. If we don’t maintain our returns, then we will be in the red, and there is no balance. If MJ can present a reasonable idea for how to keep us in the black (use fact to show that divesting won’t decrease returns, or tell us where they suggest reevaluating our operating budget so that we can maintain homeostasis under a lower return amount). MJ has to remember that the BoM are doing what they are doing because of the money, and they want to hear solutions that involve the money.

    • Because the board member is the CEO and founding member of his investing company….

      and like zero MJ members are econ majors?

    • Nobody is criticizing MJ for it’s evidence that Mountain Top removal is harmful for the environment. I think most readers would agree that they have done their homework and their is no reason to to believe their evidence is untruthful.

      We are critizicing the empirical evidence that suggests that divestment would not be damaging to the endowment’s rate of return. This is an idea that doesn’t make intuitive sense to basically anybody who knows anything about investing so it seems probably that a vast majority of econ/finance types would question MJ.

      Also, they have had 3-4 years to show empirical evidence to the contradictory and have come up with 1 article that doesn’t even come up with their case. I am much more willing to give a pass to a distinguished investment professional who literally had about 45 seconds to talk and has already given more evidence in the case against divestment.

      Also, at this point, I would take MJ’s lack of a rebuttal as proof that they have not their due diligence on this topic.

  22. to Suzanne Welsh and Chris Niemczewski and whoever else was involved for preparing this for us, being willing to share it with us, and answer the DG’s questions about it. Regardless of feelings on the issue, thank you.

  23. How about this as an idea. The entire goal of divestment is to raise awareness about various issues surrounding the fossil fuel industry. Give MJ $20 million over 10 years (10% of what divestment is estimated to cost) and I would like to assume that they can make a much larger impact with that budget than through divestment.

  24. Dear Community, I would like to share some insight on shareholder activism. The following links will direct you to the Investor Network on Climate Risk (INCR), a program of CERES. They have been actively involved in shareholder activism for 10 years and members oversee funds totaling over $10 trillion. The College, through the CIR, became a member of INCR last fall.



    Though CIR’s recent effort was not successful, I don’t feel the actions of other shareholder activists should be dismissed so easily. They work tirelessly to improve the sustainability practices of corporations. We breathe cleaner air and drink safer water because of their efforts. I think we could all benefit from learning more about their success stories instead of highlighting our recent failure. Respectfully submitted, Carmen Duffy, cduffy1@swarthmore.edu

  25. Dear Community, I would like to share some insight on shareholder activism. The following links will direct you to the Investor Network on Climate Risk, (INCR), a program of CERES. They have been actively involved in shareholder activism for 10 years and members oversee funds totaling over $10 trillion. The College, through the CIR, became a member of INCR last fall.



    Though CIR’s recent effort was not successful, I don’t feel the actions of other shareholder activists should be dismissed so easily. They work tirelessly to improve the sustainability practices of corporations. We breathe cleaner air and drink safer water because of their efforts. I think we could all benefit from learning more about their success stories instead of highlighting CIR’s recent failure. Respectfully submitted, Carmen Duffy, Investment Associate

  26. People of MJ should all take a financial economics class or manage their own investment account before they argue about endowment or divestment, just like how we are required to go to the consent workshop for a party or teach-in for pub night.

    also, the Board is too polite to say this but MJ you kids need to bugger off and study for finals. investment professional/adults have got Swarthmore’s back.

  27. What happened to enlightened activism on Swarthmore’s campus…? Having watched the video from the Board meeting, this behavior is arrogant, badly informed, and rude. Look, broadly speaking, an overwhelming majority of people at Swarthmore agree with MJ’s broader goals; climate change deniers were pretty underrepresented on Swarhtmore’s campus when I was there, and I bet they’re pretty badly underrepresented now. But the way in which this campaign seems to have been carried out was terrible.

    The fact is, Mr. Niemczewski prepared a presentation BECAUSE MJ’s concerns were taken seriously. It seems they were unhappy because the outcome of his analysis didn’t fit with their idea of what’s right. Now, let’s be perfectly clear: divestment is a terrible idea. It’s not just a terrible idea, but an ineffectual one. Swarthmore’s endowment of $1.5 billion is substantial for a school with 1500 students. As a pool of capital, relatively speaking, it’s tiny; about as big as a mid-sized hedge fund. No large oil company will notice if the $20, 30, or even $200 million (and Swarthmore sure as heck doesn’t have $200M of exposure to any company) of shares owned by Swarthmore are dumped into the market. And deliberately divesting is certainly harmful to endowment returns, which are vital for things like ensuring that all students, regardless of class, can afford to go to Swarthmore, paying the faculty competitively, and making sure that students have the best possible experience. All for results that will certainly be non-existent.

    This is not to say that the goal of combating global warming isn’t a good one; I think Swarthmore students overwhelmingly acknowledge that the environment is a pressing issue. But refusing to consider that their preferred means is ineffectual is not what a college education is for. We all came into college with particular values; people generally choose Swarthmore in part because of those particular values. It’s not those values that need to be developed; it’s an understanding of the best way to put those values into practice. The kind of arrogance on display at that board meeting has no place.

  28. this is hysterical. when you talk about investments at a liberal arts college, people use nitwit logic or scramble to find information on the internet so they can sound like they know what they’re talking about.

    • Dude, “whose” – are you serious? That alone is giving econ majors a bad reputation. Maybe you should take a class where you actually need to write a few papers next year…

      Also, economics – especially financial economics – is intellectually corrupt; Keynes probably came as close as anybody when describing the stock market as a beauty contest.

  29. There are 2 questions that need to be answered before divestment goes forward.

    The first question is: is divestment worth a $200 million cost over 10 years?

    If the answer to question 1 is yes, it does not necessarily mean that divestment should occur.

    The second question is: Is divestment the most effective way to spend $200 million over 10 years in order to combat environmental degradation?

    The answer to the first question is a value judgement, though I find it very hard to answer yes to question number two.

    Divestment is, at best, an indirect means of action. Alternatively, according to Forbes, a $100 million donation to charity ($100 million instead of $200 million used as a rough present value) would place Swarthmore as the 10th highest donator to charity in 2012.

    A donation to charity is, I admit, at best an imperfect proxy, yet I think the argument still shows that, regardless of whether or not Swarthmore should invest $200 million to combat environmental degradation, divestment is far from the most effective investment

  30. The Swarthmore community needs to prioritize its issues right now.
    Very high priority:
    sexual assault policies reform
    ic vandalism
    Low priority:
    I don’t like how these issues of different importance are being grouped together.
    MJ. seriously. i am proud that you guys are standing up for what you guys believe in. however, you have to realize that divestment won’t happen, plain and simple, because the BoM won’t support it and not all of the swarthmore student body support it.
    KNOWING THIS TRUTH, think about the other steps that MJ can take–writing letters to congress, educating the community, thinking about small eco solutions at swarthmore. The truth is is that we have reached an impasse.
    The other thing is. If we divest from fossil fuel companies why not divest from companies that employ low paid labor like apple? why not divest from big agriculture companies that use pesticides? why not divest from processed food companies, because they contribute to obesity?
    there can not be a double standard.
    as an alum, i am telling you MJ, accept that divestment won’t happen and get creative!

  31. I found this article after the I read the editorial in today’s WSJ submitted by one of your students. It made me curious about the degree of debate and the welcoming of differing ideas at your institution. I found the following in your student handbook:

    Although the College places great value on freedom of expression, it also recognizes the responsibility to protect the values and structures of an academic community. It is important, therefore, that students assume responsibility for helping to sustain an educational and social community where the rights of all are respected.

    Does this mean what it says? Or does “freedom of expression” apply only to those that represent the viewpoints of the most vocal?

  32. To put $200 million into perspective- Exxon Mobil in 2009 spent $27.5 million on lobbying. A budget of $200 million over 10 years could be served in MUCH more direct and better way than divestment as far as affecting fossil fuel companies.

  33. This money belongs to the College, right? Why not start
    instead by having current students and their parents divest from their own holdings?

  34. People of MJ should all take a financial economics class or manage their own investment account before they argue about endowment or divestment, just like how we are required to go to the consent workshop for a party or teach-in for pub night.

    also, the Board is too polite to say this but MJ you kids need to bugger off and study for finals. investment professional/adults have got Swarthmore’s back.

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