Harvard Goes Too Far in Rejecting Divestment

There has been a growing movement of late to push colleges and universities to get rid of all their investments in fossil fuels, in the same way they were pushed to divest from holdings in apartheid South Africa a generation ago. Harvard has answered: no thx.

Harvard president Drew Faust issued a very thoughtful and polite statement yesterday in which she says that while she agrees with them on the importance of climate change as an issue, divesting from any companies that deal with "fossil fuels" (a standard that could be interpreted in farcically broad ways, if one so chose) is both useless and hypocritical. To wit:

Because I am deeply concerned about climate change, I also feel compelled to ask whether a focus on divestment does not in fact distract us from more effective measures, better aligned with our institutional capacities. Universities own a very small fraction of the market capitalization of fossil fuel companies. If we and others were to sell our shares, those shares would no doubt find other willing buyers. Divestment is likely to have negligible financial impact on the affected companies. And such a strategy would diminish the influence or voice we might have with this industry. Divestment pits concerned citizens and institutions against companies that have enormous capacity and responsibility to promote progress toward a more sustainable future.

I also find a troubling inconsistency in the notion that, as an investor, we should boycott a whole class of companies at the same time that, as individuals and as a community, we are extensively relying on those companies’ products and services for so much of what we do every day. Given our pervasive dependence on these companies for the energy to heat and light our buildings, to fuel our transportation, and to run our computers and appliances, it is hard for me to reconcile that reliance with a refusal to countenance any relationship with these companies through our investments.

Faust's response is rooted in pragmatism. She fears that divestment could hurt the endowment's investment returns, thereby endangering the school's financial stability (doubtful, but a fair point in economic principle); she doesn't think that divestment would cause the companies in question to change anything; and she believes that Harvard can tackle the issue more effectively through things it actually does well, like scientific research.

All fair points. It is unlikely that university divestment would have a serious effect on, say, Exxon, and it is somewhat hypocritical to push for divestment while still living a fossil fuel-dependent lifestyle. One point she makes, however, is more troubling. She writes: "Conceiving of the endowment not as an economic resource, but as a tool to inject the University into the political process or as a lever to exert economic pressure for social purposes, can entail serious risks to the independence of the academic enterprise. The endowment is a resource, not an instrument to impel social or political change." That, respectfully, is bullshit. Harvard's endowment is $32.7 billion. It is, in fact, impossible to deploy $32.7 billion worth of capital in a nonpolitical way. Investing it solely to maximize returns is a political decision just as much as divestment is. A sum of money that large comes with enormous power. Pretending that the school can invest it without making implicit political choices—and without materially benefiting specific political actors—is a fantasy.

Money is power. Power is political. Divesting from fossil fuels may well be a futile move, but that doesn't mean that Harvard can exempt itself from responsibility for the political consequences of its investments. That's a hopeful fantasy. Yes, college kids may be too idealistic. But the alternative is the studied anti-idealism of hedge fund managers. That's not an improvement for higher learning.

(Update: Bill McKibben, America's preeminent climate change opponent, responds to Harvard's decision here.)

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