Divestment: It’s More Complex Than One Might Think

mountain justice

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.

The following is a letter submitted by Gregory Brown, Swarthmore’s Vice President for Finance and Administration.

Mountain Justice’s proposal on divestment, published in last Friday’s Daily Gazette, oversimplifies the complex issues pertaining to the management of the College’s endowment. The proposal ignores the potential negative consequences on the College’s operating budget that would result from a significant change in the structure and long-term relationship that the College has built with its external investment managers.

As noted in their proposal, and consistent with the Board of Managers’ desire to work with Mountain Justice and the rest of the campus community regarding climate change, students from Mountain Justice have met twice recently with the College’s Chief Investments Officer, Mark Amstutz, and with me to discuss their upcoming conversation with members of the Board.

As part of our conversations with the Mountain Justice students, we emphasized the need to focus not on divestment from the producers of fossil fuels but on the consumers of such fuels.  Since the Board’s 2013 decision on divestment and its subsequent actions, the College has been steadily moving forward with initiatives to actively improve our carbon footprint in order to accelerate our commitment to reach carbon neutrality by 2035, and tangibly reduce the effects of climate change.

The Board’s commitment of an additional $12 million to make the new Biology, Engineering, and Psychology building a model of a sustainable science facility, and Interim President Hungerford’s call to the campus to move us forward with both large and small ideas that will lead to real change, point to our strong commitment to make an meaningful difference when it comes to helping stem climate change. The upcoming campus-wide sustainability charrette (Feb. 11-12) should further guide us in these efforts.  As members of the campus community, each of us also has a personal obligation to do what we can to reduce our own carbon footprint, be it through the use of mass transit, turning off lights, composting, or recycling.

During our conversations with Mountain Justice, we also discussed the complexities of the College’s diverse portfolio and the wide array of investment managers that strive to attain strong performance that can support the College’s current and future budgetary needs. Such managers are hired due to their investment expertise and acumen and solid performance track records. These managers are not prohibited from investing in certain sectors of the economy.

The College’s Board of Managers is responsible for both the short- and long-term financial health of the College. As such, they do not believe the endowment should be used to make social statements, no matter how compelling the cause. Through the historic strong performance of our endowment, the College has been able to continue to expand its loan-free financial aid policies, improve its facilities, and support the work of its distinguished faculty.

We also discussed with Mountain Justice the role of consultants relative to the College’s endowment, and in particular, Cambridge Associates’ willingness to advise clients regarding fossil-fuel free investment portfolios.  As was clearly stated in Cambridge Associates’ original white paper on the subject last June, which has been shared with members of Mountain Justice, divestment from fossil fuels comes with a cost in both the short and long term.  At the conclusion of its white paper, Cambridge Associates framed the conversation in a way that highlights both the complexities and risks of divestment:

“Whether an institution chooses divestment is highly dependent on its mission and policies, its comfort in using the investment portfolio to express these values, and its ability to forge a view on the longer-term risks of fossil fuel assets. We believe institutions should engage multiple stakeholders to deliberate the topic, and use the process as an opportunity to either affirm or revise existing policies. It is possible to construct a fossil-free portfolio, but divestment from all fossil fuels has meaningful implications for a portfolio’s structure and risk profile. If deciding to act, investors should do so in a manner that best aligns with their distinct objectives and circumstances.”

There are few investment managers with proven track records with fossil-fuel free portfolios.  It would be irresponsible, as stewards of the College’s finances, to invest with managers that have not yet been able to prove their ability to deliver acceptable performance over the long term.  By way of clarification, Cambridge Associates is one of many resources that the Investment Office and Investment Committee use in the oversight of Swarthmore’s endowment – they are not our primary consultant nor do they have discretion to make investment decisions for the College.

We look forward to continued dialogue on climate change and will continue to take meaningful steps that will make Swarthmore a leader in this field while not risking the health of the College’s finances, allowing the College to provide resources for many generations to come.


  1. Mr. Brown ignores that the College is complicit in the fossil fuel industry’s ongoing campaign to delay and prevent any meaningful public policy response to climate change through its financial support of climate change denying politicians, its funding of bogus science designed to confuse and deny climate change, its lobbying to undue current environmental protections, and its lobbying to block policies such as a carbon tax. Making money for the College by such support is fundamentally opposed to the College’s educational and beneficial missions and violates the intent and letter of the laws which enable the College to remain tax exempt.

  2. VP Brown’s column on Feb 2 warrants some response on a number of grounds other than the moral (which I, as an economist, cannot offer with a straight face).

    1. Any change involves costs. The decision to modify building plans to reduce energy use arguably consumes proceeds from endowment investments that could have been left in the endowment pool to accumulate further — and thus constitute a reduction in the funds available for scholarships, salaries, and the rest.

    2. The fact that building more efficient buildings is likely to reduce the lifetime operating costs of the buildings and thus improve the College’s financial position does not eliminate the reality of a short-term cost. The exact same condition applies to the current endowment investments in the fossil fuel sector. There are short term adjustment costs, but the longer term payback is reduced exposure to the decline in asset values when the reality of the necessary limits on use of fossil fuels is accepted globally. (No amount of effort by the College to reduce its consumption and that of the members of the college community will change that reality.)

    3. There cannot be a large number of asset managers with extensive experience in building fossil fuel portfolios simply because they have not been asked to do so. Their absence is no excuse for not considering divestment. The limited experience of managers simply argues in favor of a high degree of diversification in advisers and managers to spread the risk of major errors as people climb a necessary learning curve. (The curve was climbed for South African divestment, and for the entire rapidly-growing subset of the financial market known as “social responsible investment.”

    4. While reducing future energy use is an important contributor to climate action, the accomplishments of the innovators and leaders in such efforts are less likely to influence others to take similar actions because of the financial power of the “carbon club” that does its best to obscure the evidence on the economic returns to investment in energy efficiency (and alternative energy).

    5. That power, to influence regulations and legislation, as well as to shape public opinion and spread the myths claiming uncertainty about global climate change, is enhanced by their ability to project themselves as responsible corporate citizens.

    6. That is why divestment is so important: not because it will change the financial condition of the firms in question, but because it can serve to undermine their legitimacy as parties to climate policy decision-making.

    7. Divestment, then, may be described as an act in defense of science. That observation allows us to ask, “Why won’t Swarthmore defend science?”

    • I love your last point, “Why won’t Swarthmore defend science?”

      I find it strange that Swarthmore, of all places, would not support divestment from fossil fuel companies, a reasonable and effective response to the knowledge and science that fossil fuel company practices are “fueling” global warming.

      I liken Swarthmore’s response to that of parents who refuse to vaccinate their children on the premise that vaccines cause autism. The scientific consensus is that vaccines are safe, effective, and DO NOT cause autism, but parents refuse to acknowledge sound scientific knowledge at the expense of public health.

      If we are a school of intellect and progressive thinking, let us be so.

  3. When reading Vice-President Brown’s statement on divestment, I was shocked to see his assertion that the Swarthmore Board of Managers does “not believe that the endowment should be used to make social statements, no matter how compelling the cause.” This does not square with my own vision of Swarthmore, or with my memories from the years I spent there. Let me tell you a story.

    When I arrived at Swarthmore in the fall of 1956, there was a lot of talk of the College’s recent stand on financial support for students. It seems that the federal government had recently instituted a new scholarship program that would be offered through participating colleges, and would provide very substantial help to needy students. However, it came with a condition: the students would have to sign a loyalty oath (remember, this was the era of McCarthyism and the Red Scare). Swarthmore had a very strong Quaker heritage, and Quakers had traditionally opposed taking any oath – they would affirm, but they would not swear. So, the Board of Managers was caught in a dilemma – either provide much needed scholarships for students and abandon Quaker tradition, or stick to tradition but disadvantage its students. However, the Board proved to be very wise, honorable, creative, and generous. They refused the government’s money, AND they supported their students. How? By going out and themselves raising private funds to replace the money the government would have provided had Swarthmore agreed to require a loyalty oath from its scholarship recipients.

    To me, this has always been a shining example of what a great Board of Managers, especially at Swarthmore, can do. The Board emphatically DID make a social statement, and a very powerful one. This statement DID have financial consequences. And the Board DID NOT let the financial consequences deter it from seeking, finding, and implementing an honorable solution.

    I believe that today’s Swarthmore Board of Managers can follow the example of their long-ago predecessors and once again seek, find, and implement a policy that takes the moral high ground without jeopardizing the College’s future financial health.

  4. I remember, also, the quandry which faced some of our classmates, e.g., Davida Young (Teller) when some sort of federal funding was offered for doctoral study in the sciences. Was it NSF $? Anyhow, it, too, required that the student-recipient take a loyalty oath.

    Did you, or Yvonne, or Dave D. , Getta, or any other sciene majors recall that?


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