Guest Opinion: Divestment not worth the cost


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As an alumna of the University of Iowa, I was saddened to read Mia Arndt’s guest column calling for UI to divest from fossil fuels in order to “draw both public and political attention so that legislative measures will be taken to address the harm caused by climate change.”

In my mind, academic resources and access to education are not chips to be gambled away in a political campaign. But that’s what divestment threatens to do: sacrifice the endowment – and opportunities for students and faculty – in the name of making a political statement.

Arndt tries to argue that divesting the university’s endowment from fossil fuels would not shrink its returns, but that’s what happens when you eliminate a foundational sector of the economy from a portfolio. In fact, a new study, released recently by Professor Daniel Fischel of the University of Chicago Law School, shows that divestment would jeopardize university endowments: “Every bit of economic and quantitative evidence available to us today shows that the only entities punished under a fossil-fuel divestment regime are the schools actually doing the divesting.”

In his research, Professor Fischel compared the performance of portfolios that included energy stocks (“optimal”) with those that excluded them on an absolute basis (“divested”) over 50 years. He found that the “divested” portfolio lost roughly 70 basis points compared to the “optimal” one – for each and every year over the 50-year period. Because of this, he concludes, “A reduction in wealth of this magnitude could have a substantial impact on the ability of universities to achieve their goals, such as the research, services and scholarships that they offer.”

In 2013, UI devoted $8 million of its endowment to grants and scholarships.

Based on current tuition rates, $8 million would fund roughly almost 1,000 in-state, or almost 300 out-of-state scholarships. My time at UI shaped the way I view the world, and as a proud UI alumna, I would hate to see future students robbed of opportunities I was lucky and privileged to have experienced because divestment took scholarships away. As Professor Fischel writes, “Talk is cheap, but divestiture is not.”

While divestment would have a measurable impact on the endowment, divestment’s contribution to the fight against climate change is purely symbolic. The American Security Project, a center-left think tank based in Washington, D.C., wrote a report on divestment and concluded, “[T]he divestment movement is ineffective in stopping climate change because it cannot lower the demand of fossil fuels. … The irony of the divestment movement is that it does not serve as a viable option for slowing down the effects of human-caused climate change.”

For these reasons, a long list of institutions, including Harvard, University of Oregon, and University of Tennessee, have unequivocally rejected divestment.

Harvard President Drew Faust wrote, “The endowment is a resource, not an instrument to impel social or political change.” University of Oregon’s Board of Trustees wrote, “The Foundation carefully stewards the endowment to provide stable funding support for the students, faculty, and staff that make up the UO community.” University of Tennessee’s treasurer wrote, “Last year, 90 percent of the endowment’s payout went to supportive scholarships, instruction, and research. Eliminating a broad segment of the market from investment could hinder future funding of these endeavors.”

To these voices, I add my full support. You see, I believe that education is critical to making the world a better place, and my version of a “healthier and more sustainable world” involves expanding access to education to include everyone, especially those least able to afford it now. In this world, the doors to academic institutions like UI would be open for students of all backgrounds. Divestment threatens to shut these doors and turn these students away – because that’s the cost of making a political statement. Is it worth it?

Courtney (Kolb) Loper '07, based in Denver, is Senior Director at FTI Consulting, a global business advisory firm. In the interest of full disclosure, Professor Daniel Fischel is employed by Compass Lexecon, a subsidiary of FTI Consulting.

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