Fueling the Endowment

In the past week, the Divest Andover movement has sparked campus-wide debate over whether our endowment should continue to invest in fossil fuel companies. I take no issue with the authors’ argument that climate change poses a threat to the future of humanity; the scientific evidence supporting the existence of climate change is incontrovertible. With that said, I believe that it is worth examining the issue of climate change both with respect to divestment as well as in a broader societal context. What is the rationale for divestment? Divestment is a powerful statement, an expression of protest. It is intended to apply public pressure to companies, in the hope that they will change their ways. Done on a large enough scale, divestment can attract public attention and media coverage, two vital ingredients of a successful social movement. Despite its merits, I have a number of reservations over divestment. First, there is the question of efficacy. The size of our endowment currently hovers around $800 million, a significant figure to be sure. However, in the grand scheme of global financial markets, the actions of our endowment managers are inconsequential. The average daily volume of trading in Exxon Mobil stock alone is over $1 billion. Even a complete sale of the school’s interests in fossil fuel companies would largely go unnoticed by the markets and would lead to no tangible effect on share prices. How effective would divestment ultimately be in driving meaningful action on climate change? Secondly, I wonder whether Andover would have a louder voice in the climate change debate if the endowment retained its positions in fossil fuel companies. Andover has the ability to vote its shares at annual shareholder meetings. If, as an institution, we choose to go the activist route, voicing our concerns through a shareholder ballot measure would certainly have a greater effect. Whether an educational institution should act as an activist is another debate altogether. Lastly, there is the question of the scope of divestment. The authors of the letter cited the Trustees’ adoption of “an ethical investment framework that calls for divestment from companies causing grave social injury.” Certainly, it can be argued that fossil fuel companies cause “grave social injury.” If we divest, however, there is the broader implication of whether we are obligated to divest in response to other social issues as well. Why should we stop with climate change? Should we divest ourselves from companies like Wal-Mart and Apple, companies that have had their fair share of labor controversies? Aren’t auto companies and airlines integral parts of the carbon economy? On a societal level, there are a number of realities to keep in mind when discussing climate change. First, any transition away from fossil fuels to renewable energy will be a gradual process. The relative cost of solar and wind remains prohibitively high for widespread adoption. I would ask the authors of last week’s letter to consider whether an intermediate transition from coal and oil to cleaner burning fuels like natural gas would be so terrible. It is an imperfect solution, but it moves us in the right direction. Second, companies produce in response to consumer demand. Today, the vast majority of people need fossil fuels to live. Our houses burn heating oil, our electricity is generated by fossil fuel-burning plants, and our cars run on gasoline. Even if people want to lead greener lives, the financial demands of such a transition preclude them from doing so in the near term. As long as consumers need fossil fuels, companies will continue to drill for oil and mine for coal, no matter the amount of social pressure. Lastly, meaningful change will have to come through the legislative process. Congress alone has the power to end tax breaks to oil companies, impose a carbon tax and appropriate support for research and development in renewable energy. As citizens, we can pressure our elected officials to support these policies and to stand up to the powerful oil and gas lobbies. With a problem as complicated as climate change, divestment is just one of many potential paths. It should definitely be an option, but it would be irresponsible not to consider alternatives. We need to recognize that Andover has a number of competing obligations on this issue. One is to provide for the education of youth from every quarter, a task that requires strong performances by endowment managers in order to fund financial aid and operating budgets. Another is to educate its students in the spirit of Non Sibi and to help students develop both knowledge and goodness. There are no easy answers surrounding the topics of divestment and social responsibility; an open and honest community dialogue is our best hope of doing what’s right. Jeremy Chen is a four-year Senior from Monmouth Junction, NJ.