Fossil Fuel Divestment Is Bad Business And Ineffective Policy For Universities

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This article co-written with Julia Morriss and Claire Zeng, students at American University and Georgetown respectively.

The Fossil Free campaign has propagated the idea that our schools should divest from fossil fuels. Ridding college and university endowments of these investments, the activists argue, will ensure that schools of higher learning will lead the way in addressing one of the most challenging issues we face today: climate change.

Some of our fellow students have taken up the mantle for this cause. They have staged sit-ins and walkouts, written letters to trustees, protested on numerous quads and caught their share of headlines along the way. But what does divestment actually accomplish? Despite the good intentions of our fellow students, these efforts could actually limit access to educational resources by increasing student costs and undermining the primary mission of our schools – to educate.

Endowments are critical sources of funds. The proper management of these funds directly affects every student and the quality of education for which their tuition dollars are meant to pay: Financial aid, scholarships, faculty retention efforts and research are just some of the areas that endowments support.

According to George Washington University’s 2013 annual report, 11.48 percent of the school’s endowment was allocated for student aid. The 2012-2013 990 forms for American University and Georgetown indicate that approximately 22 and 47 percent, or $5.8 million and $15.4 million respectively, of annual endowment expenses were allocated towards grants and scholarships. The need for these funding streams to continue to grow cannot be overstated.

Swarthmore College and Wellesley College conducted internal audits to better understand the actual cost of divesting from fossil fuels. Each institution projects its endowment could lose roughly $20 million per year over the next 10 years if divestment policies are adopted. These are lost funds that otherwise could have been used to bring talented low-income students to campus or retain a valued professor.

But even if the financial detriment to students was negligible, divestment from fossil fuels wouldn’t address the root contributors to climate change. The fallacy in the symbolism of divestment is that fossil fuel companies don’t burn fossil fuels. Consumers do. The U.S. Energy Information Administration reports that in 2012, the fossil fuel share of our energy consumption stood at 82 percent.

Fossil fuels are vital to everything we use, from our food, to our clothes, to the medicines we depend upon. They allow us to have fresh produce year round and enable us to heat our homes in the winter. It’s impossible to switch entirely to other sources of energy at present without harming those we most wish to help.

In the developing world, the biggest air pollution problem comes from burning dung and other biomass in homes for heat, a problem that primarily affects women and children. Expanding access to electricity from all sources could dramatically improve the lives of the impoverished.

Furthermore, the argument that energy companies created this system of fossil fuel dependence through campaign contributions is not as categorical as some students proclaim. Fossil Free activists cry foul that taxpayers pay billions in subsidies. What they don’t realize is that some of the largest expenditures for fossil fuel subsidies are for tax exemptions for farm fuel and the Low-Income Home Energy Assistance program, which eases costs for families who already spend a quarter of their income on energy.

This is not to say we can’t cut greenhouse gases. But there are more nuanced ways of doing that which would be far more effective than blanket vitriol directed at fossil fuels. The dialogue we see on our campuses rarely considers the costs to people’s lives, which, as socially conscious students, we must take into account.

It’s no surprise that many schools across the country have rejected divestment. This past January, Georgetown’s Committee on Investments and Social Responsibility voted against GU Fossil Free’s divestment proposal. When posed with the same decision late last year, American University’s board of trustees concluded that: “Since the conditions for board’s primary fiduciary responsibilities cannot be satisfied, the finance and investment committee concluded that divestment is not an option the board can take to express a position on climate change.”

American University’s decision was made based on the mission of the endowment, but numerous institutions have arrived at the same decision for a range of reasons. In 2013, Harvard President Drew Faust wrote that there was a “troubling inconsistency” in considering that “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.”

We respect and appreciate the commitment and passion of our fellow students in trying to address the challenge our generation faces. But let’s find more productive, meaningful ways to concentrate our efforts that won’t financially undermine access to education for our fellow students.