Monday, May 16, 2016


          By request an explanation of the divestment movement making its way across university campuses.

          A few starting facts.  Universities have endowments, large pots of money that they use the interest from to fund things.  These exist at all levels: sometimes a particular research chair (a set professor’s job) will be funded by a particular endowment.  Or a faculty will have an endowment, or the university itself will.  The more money in these funds, the more the university collects.  Sometimes money comes in from major donations, or alumni shake-downs fundraising.  On top of these sources of endowment money, universities also invest the money in these funds to make more money.     

          Divestment is the opposite of investment. It’s a deliberate decision on the part of a fund manager (in this case a university) to not invest in a particular thing.  These kinds of issues also exist with regard to major pension funds (which universities also have).

          In recent years, there have been two controversial issues around divestment.  The first is to do with Israel.  Due to critiques of the way Palestinians are treated by Israel, there is a ‘Boycott, Divest, Sanction’ (BDS) movement which is especially prominent on campuses.  This movement calls for divestment from economic activity in Israel.  The idea is to pressure the Israeli government through an economic boycott.  As you’d imagine, this is controversial, and results are far from clear cut

          The other source of controversy has been divestment from fossil fuel companies.  In light of growing concerns over climate change, universities have faced pressure from students and academics to divest from fossil fuel companies.  Some groups have called for total divestment, others have called for divestment from companies which engage in climate change denial or overly aggressive fossil fuel exploration (oil sands, say).

         At issue is what principles should govern how a university uses its money.  Is the object just to make more money, or should there be other considerations?  Certain people argue that the fund manager’s job is to increase the fund, full stop.  The problem is, if people in a university setting are not willing to consider the moral implications of their decisions, who is?  It rings a bit hollow for institutions based on critical thought to intellectually harden themselves to an obvious problem. 

          And so universities have found themselves increasingly in difficult positions, not necessarily wanting to divest but forced by their own university community to do something.

          Decisions on the largest scale are made by university boards of governors, or by committees of those boards.  So when you see a story about divestment in the news announcing that a university did or didn’t divest, it comes back to a board of governors decision.  More likely, though, it comes from the executive committee of the board.  As someone who’s sat on a university board of governors, I can tell you that the full board is unwieldy.  It can be a huge table, and meetings can’t go on for 12 hours (or shouldn’t), so a lot of the leg work is done elsewhere.  This can leave the president of the university with considerable influence.  Ultimately, the decision may in fact have been made by the president of the university.

          This puts some of them in uncomfortable situations.  In the long run, however, I suspect this issue will become moot.  Fossil fuel exploration is very, very expensive, and the issue of stranded assets may make certain kinds of fossil fuels unprofitable in the long run.  As that happens, universities (and everyone else) may automatically divest from those kinds of industries without having to be prompted to do so.    

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