College to explore divestment possibility

Posted by Alex Hodor-Lee

Skidmore College President Philip A. Glotzbach announced the formation of the "Task Force on Divestment" this week. The initiative follows a series of student petitions to freeze the College's financial investments in fossil fuel companies.

According to David Katz '14, a Sustainability Committee (SuCo) representative, students in the Environmental Action Club (EAC) and SuCo have been pushing for divestment since Spring 2013.

By April 30 of last year, student-organizers had gathered more than 500 signatures and, on that day, the Student Government Association passed a divestment resolution. Senator Talia Arnow '13, "Sustainability Manager at EcoMotion" and founder of Skidmore Composting and Senator Alex Barber '13, former Sustainability Senator, drafted the "Resolution 23-51: A Resolution to Support the Development of a Socially and Environmentally Responsible Investment Policy."

The SGA Senate, which in its resolution cited the serious threat of climate crisis and the disastrous effects of global warming, "supports prompt development of a socially and environmentally responsible investment policy by the Skidmore Community." This support is meant to ensure that none of Skidmore's assets are tied up in corporations incommensurate with The Carbon Tracker List, a list maintained by Carbon Tracker, an NGO. The list identifies publicly listed companies, examining their fossil fuel reserves-such as oil, coal, gas etc.-that are traded as valuable assets in the stock exchange. Senate also urged the school to divest from investment vehicles such as hedge funds or mutual funds with more than 5% invested in fossil fuel companies.

'Endowment'

Endowments and their operating efficiencies reveal how much each college/university spends on individual students' education, a metric that isfactored into the preeminent college ranking services' formulas, according to a U.S. News & World Report. In 2012, the College's endowment was listed at just over $280 million in the same report.

The College also received a B+ on The College Sustainability Report Card in 2011, up from a C in 2009. However, the College has continually received its lowest marks in endowment transparency and its lowest grade, a D, in shareholder engagement. According to Green Reportcard, the "shareholder engagement" category reflects the extent to which Colleges and Universities actively pursue a shareholder responsibility committee that examines and explores sustainable business practices.

College endowments hold principal; essentially, they act as a savings account. Portions of the endowment are invested in other ventures. These endowment investments perform primarily two functions: to grow the school's principal and accrue income. These institutional endowments generally pay out about four to five percent of the total endowment in the Annual Fund, most of which goes to campus operations and programs. However, the endowment mainly provides long-term financial stability for the College.

According to the 2012 Skidmore College Endowment Report,endowment assets grew by nine percent during fiscal year 2012.  The report also revealed where the majority (57%) of restricted funds-annual funding that is extracted from the endowment-was distributed to: student scholarships, totaling just over four-and-a-half million dollars, some of which may be jeopardized by divestment.

However, like many colleges, Skidmore College does not reveal information about which companies the Board of Trustees and their investment strategists have invested in.

Divestment Climate

Student divestment campaigns have spawned at colleges across the country. Their primary aim is to convince college administrators to liquidate their shares in fossil fuel companies (FFCs) and to discontinue investing with them.

This week Boston College and Warwick University made announcements about plans to divest in FFCs. Student divestment efforts have been raging for nearly three years, and most prominently began at Swarthmore University.

However, only nine colleges and universities have committed to divestment. In January, Brown and Harvard University rejected the idea of divestment. Last September, the board of managers at Swarthmore College also wrote in an open letter that they did not agree in divestment "because [they] believe that to do so would have no measurable effect on halting climate change and at the same time would pose an unacceptable risk to the College's finances."

Other peer schools to Skidmore College, including those of the New York Liberal Arts Consortium have failed to make a real impact when it comes to divestment.

"The problem I have found in every instance without exception is that trying to use investment portfolio to accomplish a social or political causes comes up short in every way you can imagine," said Christine Wood, a Vassar College trustee, in an interview with University Business.

The same article also warns that divesting leaves institutions voiceless.

"Stockholders are the only way you can truly engage the company...if you don't own shares you're not eligible to vote with a proxy, you can't elect boards of directors, you can't vote on share proposals. You are completely without a voice" said Wood.

Wood also believes that divestment is the easy way out.

"Would the best solution to be to put up a 'for sale' sign in front of your house if there are problems in the neighborhood? No, you engage and you try to rectify the situation. Divestment is the easiest thing to do," said Wood.

The respective Boards of Trustees at both Middlebury and Colby announced they would not divest their fossil fuel holdings.  At Pomona College, David Oxtoby acknowledged the "real and growing threat" of global warming and the College's environmental values. However, Oxtoby conceited in a politically tempered statement that divestment would jeopardize the College's chief purpose to "make Pomona great."

Skidmore Divests

The three aforementioned colleges and Swarthmore University will add direction to the College's decision, as articulated in a Feb. 9 letter from President Glotzbach.

The letter, which was emailed to all students from SGA President Sam Harris '15, outlined a two-phase plan: firstly, to research the value of divestment in the context of the College's devotion to sustainability and in relation to aspirant colleges, and secondly, to assess the financial risk associated with divestment, at which point a non-binding policy recommendation is to be distributed to trustees.

It's unclear exactly how much of the College's endowment is tied up in FFC's, but as SGA Senator Emily Singer '15 told The Skidmore News "we don't know the exact number because we invest in companies, which then invest in fossil fuels, but the number is roughly around 5-10 percent of the endowment."

"We want to freeze all current assets in fossil fuel companies and potentially over time withdraw our money from them and reinvest in companies that we are already currently investing in," said Singer.

Singer, who sits on the student-led SuCo, explained the risks of divestment.

"The downfall is that for a few years the college may not be getting as much money as it had when it was investing in fossil fuels, but after a few years, the momentum of investing in either alternative energy companies or just other companies will eventually pick up," said Singer. "That is literally the only negative effect of divestment."

However, Government professor Bob Turner, who focuses on environmental politics, said he felt less hopeful. In an email to The Skidmore News, Turner said: "The critique of any form of social investing, where one makes investments on the basis of social, ethical, political factors instead of economic criteria, is that you potentially diminish your economic returns. A smaller endowment means less money for financial aid, new buildings, salaries, etc. There is also the question about whether carbon divestment will have any significant impact on those industries."

It remains to be seen whether or not Skidmore College will acquiesce to the direction shown by other colleges, or if the Board of Trustees will show leadership on the issue of climate change. 

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