April 30, 2013
On Sunday night, April 28, Middlebury College hosted a second panel discussion on the topic of whether the institution should divest its endowment of investments in the fossil fuel industry.
While the first panel in January brought together a diverse group of professionals, this panel was comprised solely of students, whose perspectives on the complex issue of divestment and endowment management were equally varied.
Sophomore Jeannie Bartlett, the co-president of the Socially Responsible Investing Club and a member of the Advisory Council on Socially Responsible Investing, began the discussion by taking the broadest view possible, asking “Am I doing the best thing that I can be doing for the world right now? It’s a good question for all of us to ask and answer.”
On that issue, there was no debate among the panelists. But what was exposed during the course of the next two hours — with Jim Douglas, the former Vermont governor, current executive in residence at the college, and 1972 Middlebury graduate, moderating the proceedings — were differences of opinion on how to achieve what was best for the world and what role Middlebury should play in this effort.
Divesting from fossil fuel holdings would not only align Middlebury’s investment practices with its position as a leader in environmental education, Bartlett argued, but it would also place the college at the forefront of a national movement. “The divestment movement is bringing the conversation about climate change to new audiences, we are expanding the conversation to college and university board rooms, to investment banking sectors.”
Senior Janet Bering, an environmental studies and biology major and a member of Middlebury’s Environmental Council disagreed. “I’m skeptical that divestment is a tool for change,” she said. “I think it’s a distraction; it’s not the right conversation that we should be having.” Too much time and energy is being spent discussing financial models and endowment practices, Bering said, rather than climate change, and largely for symbolic ends. “We need a better movement. I don’t know what it is, but it’s not divestment.”
“I think symbolism is hugely important,” countered senior Zach Drennan, a double major in political science and economics and the author of the forthcoming book “The End is Not Near: How Energy Innovation Can Unlock Local Economies and Avert Climate Catastrophe.” “I find our investment in fossil fuel companies to be hypocritical to our position as a leader in environmental education and a champion of sustainability initiatives. We need to bring our sources of funding in line with our values as an institution.”
But how? Junior Ben Wiggins, a political science and economics major and a member of the Student Investment Club, pointed to the complexities of the college’s endowment management, in which an outsourced investment office (Investure) combines Middlebury’s portfolio with those of six other colleges and universities and seven charitable foundations.
“We either convince all of the other schools and foundations that participate with us at Investure that they should divest, or we leave Investure. And at what risk?” Is it worth it to divest if it means freezing staff salaries, he asked. If it threatens our financial aid budget? If it means deviating from our commitment to holding comprehensive fee increases to the Consumer Price Index, plus one percent?
Senior Michael Patterson, a classical studies major and private investor, spoke to those concerns: “Divestment increases risk within our endowment because it reduces diversification. . . . Diversification provides the only means to reduce risk because it protects us from the uncertainties of the future. By spreading a portfolio’s assets across different companies, industries, and asset classes, a portfolio has greater protection from the volatility of the market.”
Patterson called attention to the relationship between Middlebury’s endowment and financial aid, pointing out Middlebury’s $55,570 comprehensive fee for 2012-2013, the 42 percent of the student body receiving financial aid, and the average grant per student of $36,277. He also noted that Middlebury spent $37 million on financial aid. “Without an endowment capable of sustaining a $37 million expenditure (and growing) every year, Middlebury will not be able to provide adequate financial aid,” said Patterson. “This is why it is absolutely imperative that our endowment achieves maximum returns through proper diversification of assets.”
Wiggins and junior Ryan Kim, an economics major and member of the Student Investment Club, both voiced the opinion that if they had, as Kim stated, “mathematical proof,” that the endowment would not suffer by divesting from fossil fuels, then they would both change their position and support divestment.
Drennan and sophomore Teddy Smyth, an environmental studies major and student organizer of the club Divest for Our Future, both offered that divesting from fossil fuels would not only be in keeping with the college’s environmental stewardship, but it would make for a sound investing strategy. “I’d argue that it’s a risk to stay invested [in fossil fuel companies],” said Drennan. “Any breakthrough in clean energy or any future regulation of the fossil fuel industries will make these companies a lot less valuable.”
Drennan concluded by offering a way forward. “Not all fossil fuels are created equal, some are much more dangerous and harmful than others. So perhaps there’s a middle way. Maybe we first focus on the top 100 coal companies. Let’s divest from coal as soon as possible. Let’s make a realistic accomplishment. See how it works. Then we can move on to oil.”
Reporting by Matt Jennings
Photography by Brendan Mahoney