Skidmore College considers divestment from fossil fuel companies

Divestment Hearing February, 25 2015 Photo by Ryan Davis, Co-Art Director There has been increasing momentum in addressing the mounting issue of climate change in recent years. Since 2013, the Task Force on Divestment (TFD) at Skidmore College has been conducting research on the possibility of divesting the College’s investments from fossil fuel companies at the behest of student activists and the Student Government Association (SGA). In February of 2015, the TFD released the first assessment of a two-part process which ends with a recommendation to the Board of Trustees concerning divestment from fossil fuels. Their Divestment Review details the ethical significance of divestment from fossil fuels and provides a cost-benefit analysis done by Colonial Consulting, Skidmore's investment advisor.

The TFD upholds the environmental and social responsibilities of the College as a corporate citizen of the world. The report states:

“Skidmore has recognized the important role that institutions of higher education must play in major societal issues, and this is reflected in our institutional strategic goal of preparing every student to make the choices of an informed, responsible citizen at home and in the world. Furthermore, we acknowledge the deep connection between our commitment to responsible citizenship and our institutional behavior - especially in the realm of environmental awareness and sustainability.”

The TFD is responding to the urgency of reducing carbon emissions in order to prevent the irreversible negative impacts of global warming. These consequences were delineated by 44 scientific institutions from over a dozen countries in The Emissions Gap Report 2013. The report warns that if carbon emissions are not substantially cut by 2020, global temperatures will rise beyond the two degrees Celsius which the scientific community uses as the threshold beyond which global warming will incur irreversible ecological damage. Divestment is a strategy that, although would have little effect on the market value of fossil fuel companies, would send a message to these companies and to the general public. The report states:

“Arguments cited in favor of fossil fuel divestment… focus more on financial risk (to the investor), matching investment decisions with values, creating sustained public pressure and visibility, and finally, fostering an informed public debate.”

The TFD recognizes that the college is undergoing a moral as well as a financial deliberation. Skidmore is not alone nor is it the first; a large number of colleges and universities in the United States and elsewhere have decided on the issue of divestment from fossil fuels. Among those who chose divestment are Pitzer College, Stanford University, Hampshire College, University of Dayton, and Unity College. Reasons cited for the decision to divest include a desire for global sustainability , to support sustainable local enterprises, and to reduce environmental social inequality. Among those who chose not to divest are Vassar College, Bates College, Harvard University, Brown University, and Wellesley College. Reasons cited for the decision to not divest were primarily financial: divestment was seen as too difficult due to the complex and conglomerated nature of the investments and/or comparable non-fossil fuel investment alternatives were unable to be found.

Skidmore’s investment portfolio is also complex and conglomerated, containing many hedge funds with multiple investments in fossil fuel companies. Divestment would not be as straightforward as pulling out from fossil fuel companies directly. Since hedge funds are generally unwilling to tailor a portfolio for a specific client, divestment would require removing all funds from these hedge funds. The report states:

“Skidmore's total investment funds of about $377 million are actively managed by 40-50 managers in largely comingled funds, and our endowment income supports everything from scholarships to personnel to collaborative research. Based on an analysis by Colonial Consulting, we currently invest between 3-5 percent of our endowment in fossil-fuel assets.”

Although research has been undertaken to explore the effects of divestment on the finances of other colleges and universities that made the decision to divest, the results are inconclusive due to the recent nature of these divestments and the time-lag between the decision to divest and divestment actions.

Colonial Consulting “forecasts that full divestment would reduce the financial return on the endowment (over the next 10 years) from 8.3 percent annually to 6.4 percent annually, resulting in an endowment value that is $120 million lower than it would have been without divesting from fossil fuels.”

The TFD requests that the public keep in mind the assumptions underlying the assessments of Colonial Consulting. Colonial Consulting remains optimistic about investing in fossil fuel use and simultaneously protecting the environment. In addition, Colonial Consulting believes that the best and most experienced investment managers invest in fossil fuels, and diverting funds to a different manager, even if environmentally conscious, would mean a lower rate of return on investment.

The TFD expresses hopes that the Skidmore community will participate in this momentous deliberation. Open forums are expected to be held on Wednesday, Feb. 25. Times and places are to be announced shortly.

To read the full report, view: file:///home/chronos/u-656d88bce741d62fed8dc984d84fb72a2147bdf8/Downloads/Final%20Phase%201%20Report%20Feb%2013%20(1).pdf

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