Refusal to divest may not have been entirely financial

During the most recent meeting of the Board of Managers’ Committee on Social Responsibility on Friday, September 18, the Board revisited its May decision to not divest from fossil fuels in order to clarify which arguments drove their spring deliberations. Despite the Board’s early communications regarding their consensus, which emphasized a desire to reaffirm “investment guidelines” and a responsibility to grow the endowment without regard to social concerns, last Friday’s meeting appeared to indicate that other considerations played a larger role than originally advertised.

While the Board’s May meeting was confidential, the Committee on Social Responsibility’s meeting was not. Nathan Graf ’16, the sole student member of the Committee on Social Responsibility, was present at the meeting.

Graf explained that Susan Levine, Board Member and Chair of the Committee on Social Responsibility, had prepared time during the September meeting to make comments regarding the Board’s moral and ideological rationales for not divesting at the May meeting, and to clarify that there was division within the Board about what sorts of divestment decisions might hurt the college’s potential to “yield the best long term financial results.” Levine — who stepped down from the Board shortly after the meeting — could not be contacted directly for comment.

Last spring, the Board’s decision not to divest was the culmination of a Mountain Justice campaign, which resulted in a month-long student sit-in, a faculty vote in favor of partial divestment, and presentations and endorsements from several prominent environmentalists such as Bill McKibben and Christina Figueres.

“The sense of the meeting was to reaffirm its investment guidelines, which since 1991 have stated that the ‘Investment Committee manages the endowment to yield the best long term financial results, rather than to pursue other social objectives,’” read a May email from the Board to the student body about its decision to remain invested in fossil fuels.

According to Graf, however, Levine said specifically that some Board Members supported strategic divestment at the May 2015 Board Meeting, and that these Board Members believed that divestment would incur little to no cost to the endowment. He also said that Levine explained that there were larger concerns that divestment from fossil fuels would lead to a “slippery slope” effect and that the Board would feel pressure to divest from additional controversial investments like prisons and Israel.

“I think it’s extremely disappointing that the Board of Managers in May continued to cite in their statement, and did not portray accurately, the factors leading to the Board’s decision on divestment,” said Mountain Justice member Stephen O’Hanlon ’17, who became privy to the statements shared at the Committee meeting. Speaking on behalf of MJ, O’Hanlon added, “We are glad that the Committee on Social Responsibility shed more light on the factors surrounding the Board’s decision in May, but we see no reason why the full Board — including Board Chair Tom Spock ’78 — cannot themselves provide this information to the campus community in a clear and forthright way.”

Spock disagreed with O’Hanlon, maintaining that the Board tried its best to articulate the full scope of its reasons — both financial and moral — for deciding against divestment.

“We agreed it was very important to share this decision with our community, and issued an in-depth statement of the Board’s Sustainability and Investment Policy directly following the meeting. … It remains our very best articulation of the board’s consensus,” said Spock.

The Board’s Sustainability and Investment Policy, which was updated and shared with the student body after the May Board Meeting, has a section outlining its “Fiduciary Responsibilities.” Such responsibilities, the Policy states, include maintaining the endowment to support financial aid, faculty compensation, academics, extracurriculars and facilities in perpetuity.

The Board and MJ disagree about the Board’s transparency with regard to the Board’s concerns concerns about the monetary cost of divestment. The Sustainability and Investment Policy mentions potential financial stress placed on the endowment as a result of divestment, but accounts from the September 18th Committee meeting say that some Board members did not perceive that divestment would come at a financial cost.

Spock, however, retains that the Board came to consensus, saying, “Many opinions were expressed in both meetings that explored all sides of the issue, as is often the case… When the discussions were concluded, it was the clear sense of the meeting that the managers were not in favor of either full or partial divestment.” “Sense” is the standard to which the Board holds itself for consensus.

What remains in question for MJ members after the September Committee Meeting is the extent to which the Board’s financial concerns outweigh its ideological concerns.

These ideological concerns are encapsulated, say Graf, O’Hanlon and Levine, in the Board’s 2015 recommitment to its 1991 investment guidelines, and in objections articulated with regard to the “slippery slope” of divestments that the Board fears it might have to pursue if it had partially divested from fossil fuels last May.

The Board created anew its investment guidelines in 1991 following the Board’s divestment from apartheid in South Africa. At the September Committee Meeting, Graf shared, it was revealed that the process of apartheid divestment was “scarring” for some Board members. A 2009 article written by the Harvard Business School details the difficulties of one such apartheid-related meeting for Emeritus Board Member Samuel Hayes ’57.

“Hayes related an experience as a member of a Swarthmore College investment committee, which was responsible for some $500 million in investment,” the article says. It continues, “But when protestors in the 1980s challenged the board to end investments in companies operating in South Africa during apartheid, Hayes said he was against such a move. Those who provided money for the endowment, Hayes reasoned, did so to fund education, not for use as a political weapon.”

Hayes and others who were against divestment from apartheid cited fears very similar to those cited in the reaffirmation of the 1991 guidelines in May of 2015. The fears focus on the moral responsibility of the college to keep its money away from politics, and the potential for further pushes for divestment from various industries and countries.

“The sense of the meeting was to reaffirm its investment guidelines, which since 1991 have stated that the ‘Investment Committee manages the endowment to yield the best long term financial results, rather than to pursue other social objectives,’” read an email from the Board to the student body last year in early May.

According to O’Hanlon, arguments about avoiding the slippery slope and potential emotional hardship for Board Members appear to be more important to the Board than the financial costs which the Board associates with the pursuit of social objectives with the endowment.

“Since MJ developed a proposal for cost-free divestment over 5 years and faculty proposed a second proposal that was passed by the faculty body, the Board has not responded to either of those proposals or claimed that they would incur cost for the college. The Board’s arguments around cost are outdated and the information coming out of the Committee on Social Responsibility meeting makes it clear that the Board’s primary objection to both of these proposals is not financial but rather a moral objection,” he said.

The Committee’s meeting concluded with members of the Board deciding to turn away from the topic of partial fossil fuel divestment for the foreseeable future.
“The board expressed that they thought they had spent too much time on the issue of divestment, and said they did not intend to revisit the topic for some time, as they felt had other issues they needed to focus on,” said Graf.

Spock explained that the Board’s efforts would turn toward other sustainability efforts, including the establishment of a new Sustainability Framework, which mandates that all new buildings be significantly sustainability, and investment in geothermals.

“We have now turned very seriously to how we can live our sustainability goals, by making the campus carbon neutral by 2035,” said Spock in an email.

Such efforts to turn the conversation elsewhere, however, may actually help the fossil fuel divestment movement, argued Graf and O’Hanlon.

Graf explained, “It’s probably a good sign for the campaign that the Board is sick of discussing divestment. I’m sure they’ve realized, or will soon realize, that the only way they’re going to get to stop discussing divestment is to actually divest.”