As an environmental science student, I am constantly reminded by my peers in DivestNU of their intent to force Northeastern to divest endowment funds invested in fossil fuel companies and research. They claim that divestment will allow Northeastern to be a “leader in social change for an ethical and just cause,” similar to divestment movements against apartheid South Africa in the 1980s. Unlike the 1980s, however, this divestment would not only have a negative financial effect on the school, but would also fail to impact climate change or carbon emissions. Let us assume for a moment that Northeastern does end its investment in fossil fuels. While it would be a moral victory for DivestNU, this divestment will not negatively affect fossil fuel companies. This is because another investor will quickly pick up the investment that Northeastern has dropped. It must be understood that it is energy, not fossil fuels, that the world economy craves, something that fossil fuel companies are able to provide. Since the demand for energy is high, the investment returns of fossil fuel companies are also high. As long as such investments remain appealing, these companies will enjoy a constant supply of investors despite any divestment by Northeastern.
But let’s continue with the notion that DivestNU is successful. We know that any investment opportunity Northeastern ends will quickly be picked up by other interested investors. Many divestment groups nationwide assert that divested funds should be re-invested in renewable energy, but DivestNU has never said this publicly. Their website states that they are not interested in telling the school how to spend divested funds. So what does the group really achieve if no money is lost by the fossil fuel companies? Nothing.
Recently, Smith College responded to calls for divestment, stating that any such actions would have a negative overall effect on the college. This is because the economics of endowments are more complex than divestment groups let on. University endowments are typically entrusted to investment managers that seek out the best economic opportunities for their clients. These managers then mix the funds with money from other investors. Smith College points out that any divestment commitment would severely limit which investment managers they could choose from. This is because, as previously mentioned, fossil fuel investments can yield high returns and as a result can be found in many investment portfolios. If Smith College divested, at worst they could see an investment loss of 2.5 percent, about $14 million a year.
Divestment is not a sound component of Northeastern’s response to global climate change as it does nothing to decrease global carbon emissions or even remotely damage fossil fuel companies financially. Transparency surrounding investment loss as a result of divestment by Smith College illustrates how much the divestment movement can harm an institution. DivestNU, if successful in removing fossil fuel investments from the school’s endowment, would result in the restriction of Northeastern’s ability to develop funds that go toward scholarships and capital investments to aid in the school’s unprecedented rise in nationwide rankings and prestige.
– Roy Apostle is a senior environmental science major.
Photo courtesy Creative Commons.
