On April 12, the Advisory Committee on Shareholder Responsibility (ACSR) released its report titled “A Proposal for Divestment,” which ultimately did not present a consensus on whether the College should divest from the 100 companies with the largest oil and gas reserves and the 100 companies with the largest coal reserves.
The report acknowledged the dangers of climate change and the effect consuming fossil fuels has on this issue. While divesting would be part of an effort to help prevent climate change, according to the report, the College also must balance this effort with its economic needs.
“I really appreciate all the work that went into the report, especially by Anand Swamy, the chair of the committee. It was a huge undertaking. Ultimately, I don’t think the report should carry all that much weight. It was put together by a non-elected, non-representative board – essentially nine people who happened not to agree with each other about divestment. I think the voice of the community is more important – 946 students, 248 faculty and staff and 608 alumni have raised their voices urging Williams to divest,” Sarah Vukelich ’15, co-founder of Divest Williams, said.
One contingent of the ACSR supported divestment. Its main argument for divestment was that investing in fossil fuels is ethically problematic, as it means profiting off something that will increase the earth’s temperature an unsafe amount. Divesting would “[start] a constructive national dialogue about climate change,” according to the report, which is important for the College to do with its “national leadership within higher education.”
Additionally, from a financial perspective, divestment could be important to prevent loss of alumni donations. Since divestment has widespread support among the student body, and some stated they would not donate to the College unless divestment occurs, not divesting may limit alumni donations to the College. Divesting may engage the alumni donor base, said the ACSR, citing the positive effect divestment had on applications and fundraising at Sterling College, according to Tim Patterson ’04 (see “The Case for Divestment,” Jan. 21, 2015).
Other members of the ACSR opposed divestment. They noted that divestment is largely a symbolic act but challenged the notion that divestment would actually raise the awareness of the need to take action on climate change. It would also be inconsistent to call for divestment while simultaneously using the products of fossil fuel companies. Additionally, there would be significant costs associated with divestment.
As of June 30, 2.5 percent of the College’s portfolio was held in fossil fuel stocks. Of the total portfolio, 0.2 percent is directly held in fossil fuel stocks, amounting to $4.4 million, while the remaining 2.3 percent of fossil fuel stocks are part of commingled funds. The fossil fuel stocks in commingled funds cannot be separated from the non-fossil fuel stocks, so divesting from commingled funds would require reinvesting all of the money in these funds.
There are two types of costs associated with divestment. One is the cost of liquidating the current portfolio to remove fossil fuel funds and reinvesting this money in funds without fossil fuels, which would be significantly greater for commingled funds. The other cost is the lower expected return without investing in fossil fuels.
The estimated cost of liquidating the portfolio over a year is $76 million. The estimated loss per year over the past 10 years, if divestment had occurred 10 years ago, would have been $39 million.
“The ACSR report included figures citing how much money Williams would lose if we divested from fossil fuels … however, these numbers are based on a comparison of our endowment’s actual performance to what it would have been had we been invested in a simple index of stocks and bonds over the last 10 years. It would be crazy to invest the endowment in a simple index like that. Nobody wants Williams to divest in a way that would be financially crippling to the College. We would be divesting over a period of several years, in a careful and calculated manner. We should be talking about how we’re going to do this, not scaring people with numbers based on situations that would never occur,” Vukelich said.
The ACSR proposed five ways to deal with the commingled funds issue.
One consisted of solely selling the directly held stocks. Another would be determining if certain commingled funds held a large portion of fossil fuels and liquidating those, rather than liquidating all commingled funds, just as Pitzer College did.
Third, the College could collaborate with peer institutions to divest in order to pool resources. A fourth option would be to divest from companies that appear to be making negative progress to reduce their commitment to fossil fuels, such as those that have invested in tar sands. The last option included a transition to newly available fossil-fuel free investments.
“Divesting out directly held stocks would be a remarkable first step and statement of intention that would be preposterously easy for Williams to take. However, I think that to divest only the direct holdings and benefit from the media attention would be dishonest, and I don’t think Williams would do that,” Vukelich said.
While there was no consensus on divestment, ACSR supports the Campus Environmental Advisor Committee’s initiative to set a new carbon emissions reduction goal. Reducing emissions could include energy conservation, using renewable electricity, purchasing carbon reduction credits and green building. ACSR also supported green investment, which not only could be lucrative for the College but could also promote the production of renewable energy, in lieu of energy from fossil fuels.
“Divestment is not a silver bullet – I agree that there are many things Williams can and should be doing to lower its own carbon footprint and invest in renewable energy. However, these other actions should not be viewed as alternatives. We will not be satisfied with any plan that does not include divestment from fossil fuels. Only divestment has the power to effect change at the national level,” Vukelich said.