A Clash of Ideals and Investments at Swarthmore
Kate Aronoff didn’t arrive at Swarthmore College in fall 2010 expecting to be an environmental activist. Nor did she know much about the stock market. She knew even less about asset management and college endowments.
That all changed her freshman year, when she and about a dozen Swarthmore students made a field trip to West Virginia to meet Larry Gibson, widely known and celebrated by environmentalists as the “Keeper of the Mountains.” A short walk from his two-room cabin on land his family has owned for generations, the students could see thousands of acres laid bare by mountaintop removal coal mining operations.
“The difference between the majesty of the Appalachian Mountains that hadn’t been ruined and the mountain peaks that were flattened was so stark,” Ms. Aronoff told me this week, as she was studying for finals. “We saw and heard about how toxic the coal mining industry is and how much of the economy is structured around coal mining. It was a moment when the connection between economic injustice and environmental injustice was just so clear.”
That moment, and others like it, have touched off a nationwide movement that is beginning to affect how colleges, universities, other institutions and pension funds are investing their vast financial resources. A week ago, Stanford University rocked the endowment world when it said its $18.7 billion endowment would not make direct investments in publicly traded companies whose primary business is mining coal for energy generation.
Stanford joins 11 other colleges that, to varying degrees, have pledged not to invest their endowment resources in fossil fuels. But Stanford’s prestige and the size of its endowment have suddenly thrust the divisive issue of fossil fuel divestment, and what is more generally considered socially responsible investment, onto the agendas of investment committees everywhere.
But at Swarthmore, one of the country’s most selective and prestigious colleges, where the student-led divestment movement had its origins, the college’s board members and administrators have listened repeatedly to the student activists — yet have firmly rebuffed their proposals on the grounds that they could hurt endowment income and are unlikely to have any impact on energy companies.
“It’s surprising that Swarthmore, which prides itself on social justice, would be so hesitant when you try to involve the institution itself,” Ms. Aronoff said. “It’s astounding to us to see the ways they continue to resist and won’t put their money where their mouth is.”
College officials seem sensitive to the point. “The students are terrific,” Giles Kemp, the chairman of Swarthmore’s board of managers, told me this week. “There’s no lack of admiration for their idealism. They want to make a positive difference in the world, which is Swarthmore’s mission. The frustrating thing, the ironic aspect is, the board is as much a believer in the threat to us and our children from climate change as the students are. Where we disagree are the tactics. After much deliberation, the board came to a different point of view.”
Swarthmore’s endowment is $1.635 billion, and has generated a one-year return of 11.9 percent, a three-year average annual return of 12.5 percent, and a five-year average annual return of 6.4 percent. All three are better than the average rates of return for all colleges and universities. Much of the income is earmarked for scholarships.
While the activist students vow to keep the pressure on Swarthmore, they held a retreat this week to strategize and savor the Stanford decision, “We’re elated,” said Sara Blazevic, a Swarthmore junior who worked closely with students at Stanford. “I’m amazed at how this has taken off. It’s unprecedented how quickly it’s grown. When we started our campaign, it was kind of lonely. By the fall of 2012, there were 20 to 30 campaigns and then last year it really blew up.”
Students say the Swarthmore movement, which goes by the name Mountain Justice, was in part inspired by George Lakey, a visiting professor in peace and conflict studies, who led the trip to West Virginia and whose class examined various case studies in nonviolent activism, including the impact of divestiture on ending apartheid in South Africa. Ms. Blazevic also went to West Virginia.
“I was shocked to see the degree of devastation,” she said. “And I was troubled and disturbed that my tuition money and alumni donations were being invested in that kind of destruction. It was politicizing.”
Professor Lakey agreed. “The more these Swarthmore students learned,” he said by email from Iceland, “the more the students connected the dots and understood that the choice of extreme extraction over switching to sustainable energy is a choice that is simply wrong,” He added, “They felt gravely disappointed to find that their school, a Swarthmore that insists on its devotion to the future of the students, was in fact committed to a policy that makes the students’ future problematic.”
Ms. Aronoff, who was in Professor Lakey’s class, said she and other students were intrigued by the possibility of divestment, “but we weren’t even sure what an endowment is or how it works. We had to take a crash course on investing.” That led them to the Responsible Endowments Coalition and its executive director, Dan Apfel, who worked closely with the group. “He really helped us get the campaign off the ground after we had the idea,” she said.
The group got a lift when 350.org, led by the writer and environmental activist Bill McKibben, took up the cause, and started a cross-country bus tour to promote divestment. As interest spread to other campuses, the Swarthmore students were the hosts of a conference on the campus in spring 2013. “We thought we’d get maybe six other schools to attend,” Ms. Aronoff said. “We ended up with over 200 students from 75 schools.” A national student divestment network was forged soon after. But Swarthmore itself didn’t budge, although officials always seemed open to discussion of the issue, and the board agreed to an open meeting with students to discuss it.
“By last spring we’d met with them more than 25 times,” Ms. Aronoff said. “There was some value to going through institutional channels and having face time with administrators, but there was remarkably little progress.” At the open meeting, hundreds of students filed in, but many raised other contentious issues, like sexual harassment. The meeting became chaotic. Opponents of divestment were drowned out, and one vented her frustration in an opinion article in The Wall Street Journal (“My Top Notch Illiberal Arts Education”). At the next board meeting, divestment activists gathered in the hallway and used an open microphone to try to get the board’s attention, but board members ignored them.
“As a college that honors its Quaker roots, we encourage students to engage one another and us in matters related to the college and to the world beyond, and we listen to their points of view as we consider important decisions,” Rebecca Chopp, Swarthmore’s president, said. “Sometimes this is difficult, sometimes people do not agree, and sometimes it does not work the first time. But we will always be proud that Swarthmore is a college that supports debate and disagreement.”
Last fall, the board issued a formal letter rejecting the group’s demands. “The managers’ decision not to divest is broad and deep,” Mr. Kemp wrote. “It is our collective judgment that the cost of divestment would far outweigh any potential benefit.” He wrote that divestment would be costly to the endowment, with a decline in income of an estimated $10 million to $15 million a year, and that it would be a “symbolic” act with little if any impact on energy companies or public officials.
Mr. Kemp pointed out that Stanford’s endowment charter explicitly permitted the university to consider social causes in making investment decisions, while Swarthmore’s takes the opposite position. “There are a lot of worthy causes,” Mr. Kemp said, “but the question is, Should an endowment be used to advance them? Last year, there was a lot of agitation for companies to support Palestine and stop investing in companies having to do with Israel. Those students were as fervent in their cause as these students are in theirs.” He added: “The board concluded the way our endowment is set up, we weren’t meant to use for social purposes no matter how noble.”
The student activists wrote a rebuttal that ran in the campus newspaper, contending that Swarthmore’s “chief concern can no longer be the rapid and uninhibited growth of the institutional endowment. Endless growth is a false methodology that inherently prioritizes money over human, moral and environmental concern. It is the same logic on which the fossil fuel industry has operated since its inception, and what has driven us to our current economic and environmental crises.”
And some faculty members have taken issue with elements of the board’s position. “I don’t really support divestment,” said Mark Kuperberg, an economics professor. “I don’t think it will affect company behavior. But I don’t think it will hurt the endowment much, either.”
Stanford’s decision doesn’t appear to have affected the Swarthmore board’s thinking. “Ultimately, after considering many diverse viewpoints, the board made its decision,” Ms. Chopp said. “The board is simply not willing to accept the significant cuts in scholarships, faculty and curriculum offerings that a significantly lower endowment return would necessitate. We believe that to do so would have no measurable effect on halting climate change and, at the same time, would pose an unacceptable risk to the college’s finances.”
Despite their differences, Mr. Kemp acknowledged some pride in the students and what they’ve accomplished. “I may not agree with these students, but I think we can learn from them and admire their dedication and if we disagree, it’s not for lack of respect for their commitment and drive.”