The Divestment Issue: An Overview
Many of you have probably seen the signs and tables talking about the divestment issue on campus. In an effort to increase awareness for the cause, Jonah Allen ’16 has written an overview of the the petition, and addresses any possible issues below.
Our divestment campaign got off to a phenomenal start this week, with our Peirce petition drive garnering nearly 600 signatures, ensuring that divestment would gain traction as a campus-wide issue.
For those still confused about what exactly divestment is, we are hoping to convince the Board of Trustees – and in particular, the Investment Committee, which specifically handles our endowment investments – that investments in fossil fuels are both ethically and economically indefensible. If the case we make is strong enough, we hope that the Board will commit to freezing any new investments in the fossil fuel industry and gradually phasing their existing investments out over a course of five years.
Several objections to our cause were brought to our attention during the Peirce petition drive. Some were answered more adequately than others, but we believe such concerns are necessary both to the larger student body’s understanding and even to our own. Here are some we found particularly important:
1) Even if all colleges divest (highly unlikely), we still won’t make a dent in these fossil fuel companies’ profits. Why don’t we push for something that has a more direct influence, like a carbon tax?
Nobody, not even the staunchest supporters of divestment, will argue that colleges and universities have any capability of bringing the fossil fuel industry down by divesting. Companies like Exxon, Shell, and Chevron are rich because they sell a lucrative product, and that product is oil.
But we can’t discount divestment’s ability to galvanize governmental action. Already there has been significant publicity around the movement, sending this message to President Obama and the federal government: the tide of public opinion is swiftly changing. The fossil fuel lobbyists cannot continue its chokehold on Washington. This generation of college students simply won’t tolerate it.
2) Fossil fuels are a relatively stable investment for the foreseeable future. It makes no sense to pull our money out if it’s doing exactly what the Investment Committee wants it to do.
Our current national infrastructure has been based around fossil fuels, from the fuel in our cars to the heat in our buildings. This is untenable, not only because of the finite reserves of oil in the ground, but because we are racing against the most dire effects of climate change itself. Thomas Lovejoy has predicted that in order to mitigate damage to vital ecosystems, “global emissions [of CO2 ] have to peak in 2016.” (link: http://www.nytimes.com/2013/01/22/opinion/global/the-climate-change-endgame.html)
Essentially, the world has a choice: continue our reckless emissions at the expense of the planet’s (and our) future, or declare much of the existing reserves of coal, oil, and natural gas – nearly 80% – “unburnable” as the Carbon Tracker Initiative has proposed – a no-brainer. (link: http://www.carbontracker.org/wp-content/uploads/downloads/2012/08/Unburnable-Carbon-Full1.pdf) But since some of these reserves are considered assets of the fossil fuel industry, an enforcement of “unburnable carbon” in governmental policy would drive demand for fossil fuels down. When demand goes down, share prices get hit.
In asking Kenyon to divest from fossil fuels, we are forewarning the Investment Committee about the potential loss to investment income from fossil fuels.
3) What gets lost in this picture? If investment income incurs losses to the endowment, something has to get cut – like financial aid.
Nobody involved in the campaign is looking to slash financial aid. Moreover, we don’t even believe that’s a real risk. Kenyon is unique in that its endowment doesn’t factor heavily into the annual operating budget of the college – it’s been hovering around 7% of the total operating budget in recent years. In fact, it’s mostly tuition money that goes towards financial aid. And that’s not even to say that the 7% comprised by the endowment goes entirely towards financial aid – likelihood is, it doesn’t. There’s also a large portion of the endowment floating outside the operating budget, financing other projects.
If there are investment losses – and it’s not certain there will be – we will have to look towards other places where we can afford to cut back.
Our meetings are every Wednesday, 6 P.M. in Ramser Dining Hall in Lower Peirce unless otherwise specified. We hope to bring you periodic updates on the state of our campaign via The Thrill, as well as create a forum for meaningful debate online.
Go Jonah! And go to the meetings, guys–this is a BIG, exciting movement.
Perhaps fossil fuels will eventually no longer be needed in the US and other prosperous countries (note, I say needed, not used), and yes, the fossil fuel industry would be negatively impacted in those areas; however, fossil fuels are a necessity in poorer, less advanced countries (eg, African nations). Not only are fossil fuels a relatively cheap way to support daily life, but they are the basis for many economy boosting developments. To think that fossil fuels will be less important in the future is a folly. Furthermore, ‘alternative’ sources of energy such as wind and solar are expensive to switch to and develop. There is a reason that government subsidies in such areas are not enormously successful and that developments in the fossil fuels industry overtake the sum of those in its counterpart.
While I support the idea of divestment on an ethical and moral basis, it is not the job of the Investment Committee to be guided by ethics (and I do not see the situation as ‘economically indefensible’). The Investment Committee should only be concerned about investments: what is going to be both sound, stable, and bring in the most profit. The point about what the money goes to–financial aid or otherwise–is not the issue. A college cannot be academically competent without a sound financial support, and part of this comes from the Investment Committee. As long as their methods are legal, it is not our job to judge them.
The issue of divestment, whether for or against, should not be a question of ethics and morals, of liberal vs conservative, but of what is best for the financial basis of Kenyon College. At this point in time, I do not believe that divestment, while a viable option, is not a good one, is not the right choice to make. I wish I had your youthful idealism.
Ding Ding Ding we have a winner!
A couple thoughts, because you do bring up some good points. I would direct you towards this article: http://www.forbes.com/sites/mindylubber/2012/03/20/investors-are-making-money-on-renewable-energy/.
Wind, solar, and other renewables are on the upswing, faster than people think. 260 billion dollars was invested in them last year globally, and that number only promises to increase.
Also, how is the allocation of investment returns “not an issue” to you? The judicious process of choosing how to use that money is the true strength of an institution. For example, Kenyon’s endowment is about a third of Denison’s – we have about 180 million versus their 530 million. But somehow, we are more often than not considered the better school.
Let us not forget what an endowment is, either. Its purpose is to ensure intergenerational equity to current and future alumni. So basically, investing in fossil fuels violates the core principles of an endowment.
Of the 260 billion dollars invested in 2011 (“Global investment in clean enrgy hit a record $260 billion in 2011″–not 2012, mind you, your source is out of date), most of the money was being spent in places like Germany and Canada (per your article), prosperous and relatively stable nations on the economic stage. Yes, the number may increase, but an increase in renewable energy does not mean a decrease in investment in fossil fuels.
As for the allocation of investment returns, I said it is “not and issue” because I was debating in terms of why divestment would or would not be viable. Pursuing divestment should not depend on the allocation of the funds, only the amount of the funds. Choosing where to invest does not impact where the returns are allocated to.
Choosing to respond about if choosing how to use the money is determines the strength of an institution in terms of “the better school” is not a debate I wish to go into at the moment, as that is more philosophical in nature.
I do not see how investing in fossil fuels “violates the core principles of an endowment”. Yes, the idea of intergenerational equity is the core of an endowment, but the definition of the phrase not only lies in the integrous and ethical side of responsibility, but also the cautious and sustainable side of responsibility.
I would say ramping up renewable energy would certainly decrease fossil fuel consumption, and therefore share prices. As renewables become price-competitive with fossil fuels, we’re definitely going to see many consumers make the switch, which will inevitably drive fossil fuel demand down.
But you said, explicitly in your original comment, “divestment, while a viable option…” Moreover, a question of what gets lost other than overall endowment value in a divestment scenario is entirely necessary to its consideration. Not that any cuts are good, but some are more preferable than others if necessary.
As to your point about the bifurcation of intergenerational equity, I completely agree. But “cautious and sustainable” considerations of responsibility must recognize the grave danger that climate change poses to future generations. There is no equity in future alumni forced to suffer at the expense of the college’s current prosperity.
Sitting up in our ivory tower, we can say that in theory this makes sense, but the reality is much, much different:
http://www.realclearmarkets.com/articles/2013/02/12/obama_must_drop_green_for_real_energy_100141.html
It should be noted that even The Economist, even as a liberal magazine, has not prophesied the downfall of fossil fuels, only the slow but steady rise of alternative energy. I think it to be a much higher regarded source than a New York Times article.
HOW COULD KENYON TRY TO DIVEST FROM ISRAEL? THEY ARE OUR CLOSEST ALLY IN THE REGION AND THEY KEEP TERRORISTS AWAY FROM US
Good for Kenyon students for getting on this bandwagon. Like a lot of posters, I think the economic argument is, at best, very far in the future. It just seems more logical that scarcity and developing-world demand will increase the price (and greed will increase the profits) of petrochemical company stock for a good while.
So we’re left with the ethical issue. Should Kenyon College be investing in companies which are damaging the future of our students? I say no. We are in the business of making a better future; to pay for our work with global warming makes no sense. I think every person has to confront the question of what we would and won’t do for money. We could make better money with insider trading, or cocaine – presumably we don’t do those things for moral reasons, not just the legal ones. It’s reasonable to say that there are also legal businesses which we don’t want to be part of.
This creates a slippery slope issue – how closely do we look at each and every company? (See the Sodexo discussions about racism and sexism and think about how long we stay mad at a company for its history. 5 years? 10? 25? 80?) I don’t want the Investment Committee to turn into the Ethics Committee; broad cuts based on entire suspect industries are fine for me. The tradition of the liberal arts says we can live in the tension of “staying alive” and “living right.”
I’m also highly confident that the Investment committee and the staff who manage the College portfolio can find other sectors of the economy which will provide similar returns. I wouldn’t specify where that money should go instead; leave that to the experts.