In the past few months, divestment has evolved from a burgeoning movement on a handful of college campuses to a nationwide effort, though only three schools have agreed to divest their endowments from fossil fuels thus far. At Bowdoin, members of Green Bowdoin Alliance (GBA) have scaled up their efforts to push the College on the issue, and submitted a formal proposal last week that urges President Barry Mills and the Board of Trustees to divest from the top 200 publicly traded fossil fuel companies within the next five years.
In a joint statement provided to the Orient on Wednesday, Mills and Paula Volent, senior vice president for investments, wrote that approximately 1.4 percent of Bowdoin’s endowment is invested in these 200 companies. The College invests in them through large commingled funds that contain hundreds of other stocks. Divesting from fossil fuels would require a turnover of over 25 percent of the endowment, according to the statement.
Bowdoin’s investment office estimated that by substituting a fossil fuel-free index for the commingled funds with exposure to fossil fuel companies, the endowment’s average yearly return over the past decade would have been five percent lower.
From that estimate, which Volent admitted was conservative, the investment office approximated the monetary impact that divestment would have on the endowment.
“Over a ten-year period we would lose over $100 million,” Volent said.
Mills said that without that $100 million, the College would be crippled financially and would have to make significant cuts to the yearly operating budget.
“Let’s say we don’t have that money,” Mills said. “Would we fire faculty? Would we fire staff? Would we kill programs at the College? You can’t save that much money without drastically changing the program of Bowdoin.”
Mills met with six students from GBA last Friday to discuss the group’s proposal. Matthew Goodrich ’15, Bridget McCoy ’15, Hugh Ratliffe ’15, Courtney Payne ’15, and two other students were present at the meeting, where Goodrich presented Mills with a formal proposal for divestment, titled “Consider the Polar Bear: Divesting from Fossil Fuels at Bowdoin College.”
Goodrich, McCoy and Margaret Lindeman ’15 are listed as the main contacts for the initiative in the document, which was adopted from a similar proposal submitted by students at Tufts University.
The discussion last Friday centered around the feasibility of divestment, and Mills spent the majority of the hour-long meeting explaining how the College spends and invests the endowment, and asking the students how they would compensate for the monetary loss that divestment would incur.
“This is not a new subject. For four years, alums have asked about socially responsible investment,” Mills said. “We know we would earn less. If we could have earned the same or more, what do you think we would have done?”
The GBA proposal frames divestment as a moral obligation that supersedes economic concerns, while also arguing that green funds can perform just as well or better than traditional funds.
“We don’t think you’re going to lose that much money from the endowment,” one GBA representative told Mills at the meeting.
“It is morally wrong for Bowdoin to invest in, and profit from, corporations whose business model is antithetical to the common knowledge of the scientific community and the common good of this planet,” the proposal states. “Financing our education is not worth selling our future.”
Doing the math
Environmental activist and Middlebury Scholar in Residence Bill McKibben has positioned himself as the public face of the movement, and just concluded his nationwide “Do the Math” tour of college campuses to urge students to push their schools to divest. Middlebury President Ronald Liebowitz said that he is willing to look into divestment in a campus-wide email in which he also disclosed that 3.6 percent of Middlebury’s $883 million endowment is invested in fossil fuels, according to The Nation. McKibben offered a different figure, telling the press yesterday morning that less than 1 percent of Middlebury’s endowment is invested in fossil fuels.
According to GBA, over 500 Bowdoin students, faculty and staff have endorsed its cause, which similar groups are pushing for at 234 colleges around the country, at McKibben’s latest count. Unity College, Hampshire College, and Sterling College are the only schools that have committed to divestment.
The GBA proposal cites McKibben several times. McKibben will participate in a panel discussion on divestment at Bowdoin this weekend via Skype, joining Unity College President Stephen Mulkey, Sierra Club Executive Director Glen Brand, and other environmental activists.
At last Friday’s meeting, Mills asked the students to “be equally skeptical of McKibben as you are of me.”
GBA’s proposal argues that the College has a responsibility to do whatever it can to support the effort to combat climate change, and states that divestment will send a strong message compelling the federal government to end subsidies for fossil fuel companies.
The investments of every college endowment in the country account for 0.1 percent of investment in U.S. oil and gas companies, according to a study by the American Petroleum Institute.
“Divestment is not synonymous with sacrifice. It does not have to lower investment returns or reduce the diversity of Bowdoin’s student body by slashing financial aid. Socially responsible funds can perform just as well as traditional mutual funds,” the proposal states.
The authors offer several options for how the endowment could be reinvested in funds that are not tied to fossil fuels. The first option is to invest with Green Century Capital Management, which invests in environmentally responsible mutual funds. The second is to adopt a self-managed green revolving fund (GRF) to invest in Bowdoin’s sustainable infrastructure.
Mills said that although green funds do sometimes outperform other mutual funds, they will not outperform the funds in which the College has invested.
“Bowdoin invests its money without a lot of risk but earns returns that are at the highest level of almost any other college or university in the country. The people who are going to come here tomorrow—the socially responsible people—they’re going to describe to you how you can invest your money and they’re going to compare that to people who basically invest their money in a very plain, vanilla way,” Mills said. “So when they say they can earn the same return that our investment committee is returning, it’s not true. They can earn a return. It will just be less.”
In fiscal year (FY) 2012, the endowment returned 2.6 percent, bringing it to $902.4 million in a year when the national mean for endowment returns was -1.0 percent, according to Cambridge Associates. In FY 2011, the endowment returned 22.3 percent and stood at $904.2 million.
Mills said that the College has an obligation to maximize endowment returns in order to fulfill its fiduciary responsibility to donors.
“For 200 years people have been giving Bowdoin College money as an endowment and they give us the money because they want us to educate students and create a campus like we have,” Mills said. “They tell us, ‘I’m giving you this money,’ and it’s our responsibility to manage it prudently to get a maximum return.”
Mills and Katy Longley, senior vice president for finance and administration, said that the College has invested heavily in sustainable infrastructure since the fall of 2008.The College committed to carbon neutrality by 2020 in fall 2009.
Over the past five years, Bowdoin has spent over $2.5 million from its operations budget on sustainability projects, including converting properties to natural gas, weatherizing buildings, and installing solar panels on Thorne Hall.
The College has also spent over $93 million on large capital projects like the construction of Watson Arena and Buck Fitness Center—both certified green buildings. Longley said that a large portion of the budget for capital projects was direct investment in sustainability.
“It’d be fair to say that of that $93 million investment under capital projects, at least 10 percent of that is efficiency related,” she said.
In total, the College has allocated at least $11.8 million to sustainability initiatives since fall 2008.
Time will tell
GBA’s proposal cites the success of past divestment campaigns at the College, offering them as examples for how the administration should proceed.
“In 1987, the College completely wrested its portfolio from the hands of the apartheid regime in South Africa, and in 2006, cleansed its earnings from the blood of Sudanese genocide victims in Darfur,” the proposal states. “Bowdoin was able to make these statements of social responsibility without sacrificing student financial aid or other essential programs of the College.”
Mills said that these past examples were different because the U.S. government had placed legal restrictions on investments in Sudan and South Africa.
“The two times we divested before it was basically illegal to do business with those places,” Mills said. “The government had enacted rules that made it a problem to invest in the Sudan. The same thing was true back in the apartheid days.”
Volent added that the College did not technically divest from Sudan, since it had no investments there in the first place.
“We didn’t have any investment in Sudan,” Volent said. “It was against the law to invest in Sudan, so we didn’t have any exposure.”
Mark Kritzman, senior lecturer in finance at the MIT Sloan School of Management, studies the costs and benefits of socially responsible investment. He gave a presentation at a divestment panel hosted by Middlebury College on January 22. The final slide of his presentation asked whether there was a more effective strategy than divestment.
“Well intentioned investors should attempt to measure whether it is more effective to restrict investment choices and incur a direct cost or to invest without restriction and deploy the savings directly toward social improvement,” Kritzman suggested.
Mills said that he believes that Bowdoin can better serve the environment by producing scientists than by divesting from fossil fuel companies.
“The answer to this problem is fundamentally investment in education and science,” he said.
“That’s what we do. We are an educational institution. We are not a political action committee.”