America’s colleges and universities have been under significant pressure from their special snowflake students to clean up their act in terms of endowments and where they invest their money. The current trend in this area seems to be toward divesting from any funds benefiting Israel, but before that movement became the flavor of the day, protesters were already demanding divestment from nasty old fossil fuels. That’s a pretty tough sell on the best of days, particularly when you consider the proven track record of the energy industry as an investment option.
New York University was facing the same demands over the past few years, with liberal students and alumni demanding they do the right thing and leave it in the ground. They agreed to consider the demands in a serious fashion and after an extended period of review they’ve come back with their answer. No thanks… we’d rather remain financially solvent. (Divestment Facts)
New York University has officially announced it is rejecting divestment in a newly released memorandum to the NYU community. This spring, student activists and campaigners in support of the divestment movement called upon the university to divest its holdings in fossil fuels, despite the costs of such a decision. Luckily for the NYU endowment and its beneficiaries, the school has rejected such a decision.
As previously featured on DivestmentFacts.com, a report from Prof. Bradford Cornell of UCLA specifically determined how much divestment would cost at NYU and four other leading universities. According to this report, NYU’s endowment would lose $4.16 million every year if it divested from fossil fuels. In addition a recent report by Prof. Bessembinder of Arizona State University finds there are serious fees to consider in regard to the transaction and management fees of divesting, and keeping a fund divested.
I’ve no doubt that the University would have loved to appease their activist students, but clearly reality prevailed. As the university noted in their response, complete divestment from any and all funds which associate themselves with the oil and gas industry would have left some very slim pickings in terms of investment options, none of which are top performers. But more to the point, they took the time to instruct the activists on the futility of such a divestment plan. It wasn’t going to actually channel more resources to renewable energy companies or do any damage to traditional energy concerns because the shares would not be removed from play. Any investments they sold off would simply go to new investors and the total investments in fossil fuels would remain the same. It was a symbolic gesture which would cost them dearly and nothing more.
New York University wasn’t alone in this decision. Two months ago Stanford reached the same conclusion, angering their own set of activists. (The Guardian)
Stanford University’s board of trustees has voted not to divest from fossil fuels in a move that has drawn widespread criticisms from students and environmental groups as other colleges across the US have pledged to end oil and gas investments in response to campus protests.
The decision at Stanford, a prestigious university that has advertised itself as a “leader in combating climate change”, comes after years of protests at the northern California campus, including a high-profile sit-in last year during which students demanded that the school “completely divest” its $22.2bn endowment from the fossil fuel industry.
Many of the largest schools have endowments valued in the billions of dollars and they guard that money jealously. Taking a stand against the oil and gas industry looks great on paper and adds to your liberal bona fides, but it costs money to play in the Ivy League. Where the rubber hits the road, somebody has to make smart business decisions, and there’s little profit in bowing to the demands of a group of hipsters carrying picket signs who have never had to manage any accounts larger than their own exorbitant student loans.