Barnard’s board of trustees will vote this spring whether or not to divest the college’s endowment from fossil fuels—but no matter the outcome, the decision will largely be a symbolic, rather than financial, move for Barnard.
The Presidential Task Force to Examine Divestment, which was created in January following calls from student activist group Divest Barnard for the college to divest, is set to compile a report detailing what the economic impacts of divestment would be on the college.
Since February, the task force—which is chaired by Chief Operating Officer Rob Goldberg and consists of trustees, faculty members, and students—has been focusing on four elements of divestment: the financial implications, the social impact, sustainability, and the pros and cons of divestment.
The task force’s final economic analysis report, which will be drafted by the end of September and given to the board of trustees in the middle of November before its annual December meeting, will be key in influencing its decision on whether or not to divest the college’s endowment from fossil fuel investments.
Barnard’s endowment, which was worth about $297 million for the 2015 fiscal year, is invested in a commingled fund with 13 other institutions through the firm Investure, LLC.
Approximately four percent of the endowment is invested in fossil fuels, according to Goldberg. Given that any quantitative data comparing the success of fossil fuel free portfolios with fossil fuel portfolios are strictly based on the past, Goldberg said that it makes it difficult to make any projections with certainty into how these investments will perform in the future.
“It makes this very hard because you're—we're asking the board to make a series of decisions about the structure of our endowment that we don't have any certainty is going to be right,” Goldberg said in an interview with Spectator last Thursday. “We have to make sure throughout this entire process that the value of our endowment grows, and that's the imperative.”
Given that the board has a fiduciary responsibility to ensure the success of the endowment, any decision the board ultimately comes to regarding divestment will not be one in which there are proven negative financial impacts.
Though the task force has yet to complete the report in its entirety or make any formal recommendation, there are at least four possible ways in which Barnard could divest from fossil fuels should it choose to do so.
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The first path would involve the college leaving Investure and instead hiring another outsourced firm acting as chief investment officer which does not invest in fossil fuel portfolios.
“We'd have to find someone to help us manage the endowment. We can't do it ourselves. We don't have the bandwidth for it, there's a ton of back office work that has to happen,” Goldberg said. “We had a history of managing it ourselves—it's more efficient for us given our size to join with others.”
This move would mimic that of the Rockefeller Brothers Fund, an $860 million philanthropic foundation run by the Rockefeller family, which left Investure in 2014 in order to divest from fossil fuels. The foundation instead hired the Perella Weinberg Partners as its outsourced CIO.
The second possible path toward divestment would involve the college moving its investments into Investure’s already existing Sustainability Series fund, a portfolio created within Investure’s Global Equity Fund which contains investments managers who target the renewable energy, energy storage, LEED-certified real estate, water conservation, and greenhouse gas emission reduction sectors.
Given the small size of the Sustainability Series, Divest Barnard member Helen Cane, BC ’17, who worked closely with Goldberg and the task force over the summer to help compile sections of the report, said investing solely in the fund isn’t a viable option for Barnard.
Of Investure’s clients, Smith College currently has $1 million—or 5.6 percent—of its $1.77 billion endowment invested in the initiative, and Dickinson College committed $8 million of its $371 million endowment in 2014.
Though Goldberg said this was probably the easiest option for Barnard, the question of whether the fossil free fund would be able to grow Barnard’s endowment still remains uncertain.
“One of the issues with the sustainability fund is that, does it grow as fast as the other portfolios? And I think that's always a consideration,” Goldberg said.
“What we're seeing in schools that chose not to divest is a concern that we're not going to make returns based on those investments,” he added. “There are other entities where, who did choose to divest, where they felt that there were returns to be made in alternative energies and non-fossil fuel funds, and so we're weighing all that now, and that's the thing that's going to be the hardest to sift through.”
Cane said she found other colleges’ methods of analyzing financial impacts to be “very crude,” because they didn’t take into account the fact that the market would inevitably change in the future.
“You can look at what your returns were over the past 10 years and say, 'Okay, what would our returns have been over these past 10 years in only fossil free stocks? Okay, we would have had an 8 percent return as opposed to a 10 percent return. If we project an 8 percent instead of a 10 percent in the future, what does that mean for our finances?’” Cane said.
“That basically is saying we're going to expect the last 10 years to be exactly the same conditions in the market as the next 10 years, which is, no one would ever think that that's actually going to be the case,” she added.
Another path toward divestment, according to Co-Director of the Tamer Center for Social Enterprise and Columbia Business School professor Bruce Usher, is that Investure could create a “mirror fund” which would be identical to Investure’s current set of investments but would exclude fossil fuel portfolios.
A fourth, though certainly not final, path to divestment would have Investure as a firm—and all of its clients—divest from fossil fuels.
Investure has a sustainability advisory group in which schools which are also debating fossil fuel divestment meet every year and have periodic phone calls to discuss the topic.
Though Smith College is still considering its next move on the issue, Dickinson created a task force, called the Sustainable Investments Task Force, to examine the impact of divestment, but the group ultimately recommended in 2013 that the college not divest from fossil fuels at the time. Middlebury College formally announced in 2013 that its board of trustees had too many serious concerns to commit to divesting from fossil fuels.
Goldberg said that because Investure’s business model is not predicated on customizing investments for partners, the fourth path—which could require this kind of customization—was likely the most difficult path.
But for Usher, this fourth option is the best choice, given that it’s more impactful if all Investure clients, not just Barnard, divest.
Though Usher said divesting would result in extra work for both parties, it would not likely pose a negative financial impact to either Investure or Barnard. If anything, Usher said that the decision could show “interesting leadership” on Investure’s behalf and attract other investors to work with them.
Still, task force members interviewed by Spectator said it was impossible to predict at this moment what they would ultimately recommend to the board of trustees in December or if they would even come to a consensus on a recommendation at all.
“For me, there's two main challenges to this process: One is the fact that a lot of it involves foreseeing the future, and it's impossible to know what's going to happen to the economy,” Sandra Goldmark, task force member and assistant professor of professional practice in theatre, said.
“The driving issue behind divestment is climate change, and climate change is an incredibly complex issue, more so I think, for example, than some of the other divestment groups like private prisons or even tobacco,” she added.
But Cane said that no matter the outcome of the vote, the campaign for divestment and increasing awareness for climate change issues would remain.
“The task force is a result of the divestment campaign, but it's also all of these different elements of the college coming together and talking about sustainability, and that in and of itself is something we didn't use to have,” she said. “The campaign is not going to go anywhere.”
The full task force will meet next Friday as it prepares to complete a full draft of its report by the end of the month.