Divestment and leadership

September 23, 2015 by Karen Merrill and Anand Swamy

The College, like many peer institutions, is heading toward a bitter impasse on the issue of divestment. Advocates of divestment are outraged by the College’s unwillingness to make a clear moral statement against firms that are engaging in destructive behavior. Opponents of divestment argue that it is potentially costly and its benefits are uncertain. As faculty members on the Advisory Committee on Social Responsibility (ACSR) who worked on this issue last spring, we would like to suggest a way forward that may bridge this divide.

Broad consensus exists throughout the College community that we have a moral responsibility to combat climate change, not simply because of its profound effects on the global environment but also because climate change especially harms the poor of the world. Consensus seems also to exist that the College should invest in green technology on and off campus; we are pleased to see the College increase its commitment to this. Likewise, we are delighted that the Board of Trustees has decided to make climate change a focus of the 2016-17 academic year.

But even as researchers at the College and elsewhere study climate change, others, including some leading firms in the fossil fuel industry, are working to spread disinformation regarding the determinants of climate change. (See, for instance, the report of the Union of Concerned Scientists titled “The Climate Deception Dossiers.”) We are confident that within the community at the College – committed as it is to excellence in teaching, research and learning – nobody approves of the behavior of fossil-fuel firms that are either directly or indirectly (via trade organizations or politicians) discrediting peer-reviewed climate science through disinformation campaigns. We would all prefer to distance ourselves from them as a matter of moral principle.

A particularly eloquent exploration of the ethical problem disinformation campaigns present for institutions of higher education can be found in the recently released report by MIT’s Climate Change Conversation Committee, appointed by MIT’s Vice-President for Research, and especially in the section titled “Standing Up for Science and Truth.” While three-fourths of the Committee supported “targeted divestment from companies whose operations are heavily focused on the exploration for and/or extraction of the fossil fuels that are least compatible with mitigating climate change, for example, coal and tar sands,” the entire committee endorsed “disinformation-based divestment.”

This unanimity doesn’t surprise us. Disinformation campaigns violate our fundamental values as an academic community and are antithetical to everything we stand for. For MIT’s Climate Change Conversation Committee, combating them are elements of what should be “a prominent, visible part” that the Institute should take “in the actions and solutions needed to confront the climate challenge.” Indeed, the report reminds us, given the scale of climate change, “even exceptional measures should not be eschewed.”

We believe our first task as an institution, by no means trivial, is to identify firms that warrant “disinformation-based divestment.” After this, there will remain difficult issues of logistics, because institutional investors like the College do not invest on their own but with other institutions in commingled funds. To put it simply, if the College has $30 million in a $1 billion fund, it is not easy to tell the fund manager what to do.

But only a fraction of the funds in which the College is invested will have significant holdings of the firms from which we want to divest. The College will need to talk to the managers of only those funds and we might decide, for instance, that our first goal should be to reduce our investments simply in a handful of firms most involved in organized-disinformation campaigns. There will be no reason for a fundamental alteration of investment strategy, so long as we don’t aim for perfection – that is, zero holdings of the stocks of specific companies.

As members of the ACSR we devoted a substantial portion of last spring to researching and discussing divestment. We came to two conclusions. First, there is a compelling moral case for divesting from at least some of the worst actors whose behavior is directly at odds with the College’s core academic mission. Second, the College invests in a complex financial environment, and because of commingled funds, divestment is much more difficult now than it was a few decades ago. This second fact does not cancel out the first, but instead asks us to take creative steps toward divestment, judiciously and thoughtfully setting realistic goals that balance the moral and financial considerations.

Karen Merrill is the Rudolph Professor of American Culture in the history department. Anand Swamy is a professor of economics. 

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