Many of GW’s programs have faced acute funding pressures following an enrollment decline. As two-thirds of the school’s revenue source come student tuition and fees, GW has seen eight million dollars were slashed from its budget. The university’s creative arts and musical programs has been hit especially hard.
For the board of trustees, this means that management of investment and endowments --along with our food and mailing services -- are outsourced and they no longer yield control over which companies to invest. This is generating controversy among GW’s environmental advocacy groups, who have denounced investments toward the fossil fuel industry and are calling for “divestment.”
Last April, divestment supporters stormed a ceremony celebrating the school’s commitment to sustainability. Activists stood adjacent to president Knapp as he inaugurated the Earth Month festivities, flaunting their banner insisting that the president divest from fossil fuel companies. GW -- and the financial management firms -- should stand firm against these claims.
Our school has a fiduciary responsibility to maximize and maintain a stable revenue source to provide its students with the best educational experience. Energy is a safe and responsible investment. But pursuing a divestment strategy that fits social and risk-minimizing objectives is demanding and costly. Clean energy funds are highly specialized and have been under-performing (e.g., PBW ETF, GAAEX, CGAEX ). Oftentimes, renewable energy funds are also not consistent with divestment ethos because they include companies deemed unacceptable by divestors. The board should not allow organizations to to interfere with the institutional and financial judgement.
Otherwise, GW stands to lose a large chunk of its assets. There's empirical evidence for this. Bradford Cornell, visiting professor at Caltech, forecasted Harvard's endowment portfolio after divestment, he found that they could stand to lose $108 million annually. In other words, 7% of Harvard's endowment would vanish each year from inefficient investment. Given GW's financial situation, divestment would be a harrowing strategy.
A strong argument can be made that a small sacrifice to the university’s profits in the short run will produce immense benefits in the long run. As endearing as the claim is, the world cannot move beyond fossil fuels for a few decades. The World Bank finds that eighty three percent of energy consumption in the US comes from fossil fuels, which translates to the production of over a trillion tons (or tonnes in the proper usage) of energy to charge our IPhones, provide heating/cooling, and so on. Even if the four-thousand accredited universities in the United States divested, non-renewables will continue to fuel our lives.
Then proponents claim that the GW student body is willing to bear a slight investment loss. However, let’s not forget outrage that erupted last month over budget cuts to student organizations. Perhaps a tuition increase could be arranged to offset investment losses, but that would be met with hostility.
GW’s environmental advocacy stands on weak ground. First, they are wrong in drawing the parallel between morality and fossil fuels. For example, whereas Jim Crow and Apartheid policies held groups of people behind out of cultural misunderstandings and sheer racism, petroleum has cultivated wealth and prosperity without prejudice to individuals.
It is attributed to the rise of modern medicine and has lifted millions out of poverty by virtue of increased commerce and trade. Natural gas too plays a role in saving lives of hundreds of thousands by minimizing our reliance on coal, which when burnt releases lethal pollutants.
Second, it is false to imply that fossil fuel companies -- which is labeled as the Carbon “underground 200” in environmental advocacy spheres -- are the sole culprits of climate change. In reality, energy usage stems from our thirst for business and development. In an age of supply chains, fossil fuel companies exist only to serve the energy-intensive demands of civilization. Governments are also responsible for collaborating with each other to create incentive structures to discourages fossil fuels, i.e., putting a price on carbon emissions. Finger pointing at energy producers alone is imprudent.
Already, renewable energy has made tremendous strides owing to private-sector investments, as former vice president Al Gore pointed out last February. Energy storage projections from the last decade were beaten by as much as fifty-eight percent this year, costs of installations have diminished by ten percent each year for the past thirty years, and renewable sources are about to cross Grid Parity -- the threshold below which renewables are cheaper than fossil fuels. Environmental advocacy should be championing the engineers and scientists involved in renewable development as well as businesses such as BP who invest heavily in these activities.
Environmental advocacy is an integral part of GW’s forum of ideas. The world would be better off with ecologists and atmospheric scientists than with lawyers and lobbyists. However, our school’s advocates hold zero stake in university finance. They should show far more understanding of the school’s financial pressures and the complexities of investment management.
Admittedly, supporters of divestment have been successful in raising awareness to a global issue, yet they mislead followers into believing the effectiveness of their work. We all care about the planet, but we should focus on making a real difference (i.e., scientific research and carbon pricing), not what makes us feel good.
