Don't divest

With the trustees of dozens of higher education institutions across the globe such as Stanford and the University of Maine system voting to divest their endowments from fossil fuel companies, it’s surprising that the Duke Advisory Committee on Investment Responsibility has decided to stay the course and continue to invest in fossil fuels. Even as members of our administration mismanage scandal after scandal this semester, they’ve made the right call with regards to divestiture. Their decision reflects the reality that the University endowment serves as a means to a better university, not a more just world, and that the symbolism such a move would convey can easily be generated elsewhere.

In the end, the goal of those managing Duke’s $7 billion endowment is simple—to maximize returns. Doing so and reaping the profits that result allows Duke to continue improving; according to DukeForward promotional material, almost a quarter of endowed funds support financial aid, while another 19 percent are dedicated to paying professors’ salaries. In other words, while endowment money is certainly responsible for the cranes and mulch paths currently pockmarking our campus, it is also footing the bill for a sizable portion of daily operations critical to our learning. The endowment is small compared to the $32 billion sitting in Harvard’s bank account and the $20 billion in Yale’s, however. Even with DukeForward’s ambitious $3.25 billion fundraising goal, one-third of which will be funneled into the Endowment, we lag far behind many of our peer institutions in terms of fiscal wellbeing. Keeping that in mind, it becomes obvious that not a single sector should be excluded from our portfolio if doing so would compromise its rate of return.

Aside from financial concerns, the Endowment is only rarely used as the means to a political end. A previous petition demanding Duke divest from Israeli companies was ignored in 2004, and a 2005 push for the Endowment and its managers to sell off all shares of Big Tobacco companies ended with a declaration that social justice concerns were taken into consideration when making investment decisions but were not automatically deemed more important than financial ones. The last well-publicized instance of Endowment disinvestment for purposes of activism occurred in 1986, when the Board of Trustees voted almost unanimously to sell the Endowment’s shares in any company doing business in South Africa due to the country’s continued practice of apartheid. However, it did so in the context of more than 100 other universities and 200 companies doing the same, not just the two dozen that have divested from fossil fuels.

Even when Duke did divest from firms associated with South Africa, though, the impact was negligible. According to a New York Times article on the subject, Duke shifted a grand total of $48.5 million to other investments. Such a sum accounts for not even one-tenth of one percent of the nation’s 1986 gross domestic product, a figure that in turn does not acknowledge that many of the companies “doing business in South Africa” are in fact multinational in nature, suggesting the actual effect of Duke’s divestment on the country was even smaller than that proportion. In a similar manner, the companies with which Divest Duke wishes the university to avoid dealings are too large for one university to influence financially. For instance, ExxonMobil, the world’s largest publicly traded oil and gas company, has a market capitalization of $370 billion. Thus, even investing the entire University endowment in that company alone would give Duke a 1.89 percent stake, one not large enough to influence ExxonMobil’s day-to-day practices. In reality, no sane asset manager would permit such an investment strategy, so it is more likely that only a small portion of Duke’s funds are in fossil fuels – for instance, only 8.3 percent of the Standard & Poor 500 index is in energy. In short, an examination of the actual finances of divestment shows that selling off Duke’s shares of oil and gas companies would remove less than a drop from the massive bucket of their financial reserves, a drop that would be easily replaced by entities less concerned about the societal implications of their investments.

Of course, another argument in favor of divestment from fossil fuels is that doing so raises awareness of global warming and makes students realize their university can play a role in the fight against climate change. This argument holds greater merit. The Divest Duke campaigns have mobilized a significant number of students—3,500 have signed its petition—and sparked a campus-wide dialogue. At the same time, however, the university is more than its endowment activity. Professors in a variety of departments conduct research on sustainable energy , and administration mandates that all new buildings meet LEED standards for environmental friendliness. Such activities and policies greatly increase awareness of environmental issues—anyone who has ever ridden a C-1 Express hybrid bus has seen its “Bleed Blue, Live Green” motto—more pervasively than divestment ever could. Why should we jeopardize the financial health of our endowment in order to achieve something other practices already accomplish?

Tom Vosburgh is a Trinity junior. His column runs every other Tuesday.