The Drawbacks of Divestment
Sitting at the inauguration of the Goel Center for Theatre and Dance on Saturday, it dawned on me just how much our endowment does for the Exeter community. It allows us to create, as one trustee put it, “both functional and beautiful” spaces for learning. It allows us to send kids halfway across the globe every break. And, it is for this reason that many Exonians, myself included, are able to be here.
Thus, how Exeter manages its endowment should be of concern to every student as we are all affected by its strength. In this regard, Exeter is pretty lucky. I could ramble off statistics from obscure financial reports, but, I think it’s more evident in the actual Exeter community that our Academy is in a position of financial strength, allowing the Academy to invest in a series of initiatives and programs, chief among them the South Campus Renewal. But a less visible, yet still very real expense takes up a plurality of the endowment — financial aid. In FY 2017, 35% of spent endowment revenue went towards allowing nearly half of our student body to attend.
This endowment is, of course, held in various top funds and its returns are often earmarked for specific programs. Thus, if we were to shift what funds we invest in, returns on the endowment and programs funded thereafter would be affected. Now, here’s where the issue of divestment comes in. In light of the recent UN report on climate change, there have been renewed calls for the Academy to divest from fossil fuels, as certain other institutions are doing. They cite the moral bankruptcy of oil companies, and as they view it — Exeter should not, in their view, condone said corporations through investment in the fossil fuel sector.
This perspective is absolutely understandable, and one that I’m inclined to support on a first glance. I think most people on this campus understand the gravity of climate change and similarly, most understand that the entire global community, Exeter included, needs to take a stand. Thus, when considering divestment, we don’t need to belabor the same climate change statistics again and again. We know it’s a huge problem and if there were no consequences to divestment, I think we would all be pretty much in agreement on the path forward.
But therein lies the problem -- divestment isn’t without consequences, as it would require us to shift away in part from those top funds Exeter has selected towards fossil-free ones. And if that leads to lower endowment returns, it will have effects -- on both our long-term projects and, more importantly, on financial aid. So, if we are going to make some sort of “moral stand” or start a social movement by divesting, we ought to tread carefully, lest our relatively small stance cost a potential Exonian the ability to attend the Academy and contribute to the world in his or her own unique way.
I’m not opposed to divestment on principle, and I’m not sure that anyone aware of the present climate situation feasibly could be, but, there are practical concerns that far outweigh the desire to take a stand. It’s up to proponents of divestment to prove to us with reasonable probability that divestment won’t affect endowment returns, that it won’t affect the viability of our financial aid program and that it won’t affect our ability to embark on projects like the Goel Center. And until proponents of divestment produce actual evidence to that effect, I’m inclined to believe the Trustees and Exeter’s world-class financial advisers when they tell us otherwise.