Higher Learning: More colleges under pressure to divest, though effect is debatable


Not since the 1980s have there been so many efforts aimed at urging colleges and universities to divest from stocks and other holdings for political and social causes. The campaigns are diverse: Fossil fuels and their effect on climate change. Israel’s occupation of the West Bank. The use of guns in massacres at schools and elsewhere.

Debates about divestment causes are rippling across college campuses nationwide and are particularly heated over the Palestinian-Israeli conflict.

The movements also raise wider questions of whether selling off stocks helps achieve advocates’ goals, such as reducing climate change, and whether colleges’ financial leaders should seek to do anything but earn the highest possible returns.


Whether these campaigns have a significant financial effect is questionable. Still, these movements generate awareness about their causes — perhaps just as important, analysts and others say.

Kenneth Redd, research and policy analysis director at the National Assn. of College and University Business Officers, said he does not think that widespread divestment in academia from oil, gas and coal stocks would have much effect on the energy industry, although it does raise knowledge about these issues.

About a dozen colleges and universities have committed to selling off at least some fossil fuel holdings, most influentially Stanford University, which decided last spring to end coal investments. The UC system, while resisting dropping fossil fuels holdings, previously sold off investments in the gun and tobacco industries. Gun control activists in the national Campaign to Unload group and student governments — horrified by the May rampage that left seven dead at Isla Vista near UC Santa Barbara — are now seeking a more formal ban on weapons industry investment and better public disclosure.

The push for universities to sell off stocks in companies that aid Israeli occupation of the West Bank has made less traction. Student governments at five UC campuses recently have urged divestment and last month, after a heated election, so did the labor union that represents UC’s teaching assistants and tutors.

Katy Fox-Hodess, a UC Berkeley graduate student who is on the executive board of the United Auto Workers, Local 2865, conceded that it was unlikely that the UC regents would dump such holdings soon, but she said she was hopeful for the future. A majority of the union’s members who voted also indicated that they would not participate in exchanges with some Israeli universities.

“We believe universities should not just be intellectual forces in society but also moral forces in society,” Fox-Hodess said.


Pro-Israel supporters said the union unfairly targets one country and ignores human rights violations in many others. Critics also say that divestment and boycotts harm free speech on campus, making it more difficult to take less popular positions.

Two decades after South Africa’s racial apartheid system ended, arguments persist about the effect of divestment and economic boycotts on the previous white regime there. Divestment activists say that those efforts, which went beyond universities to churches, unions and governments, helped destabilize the old system with capital flight and inflation. Nelson Mandela, the former political prisoner who become South Africa’s first black president, specifically thanked U.S. universities for their divestment.

However, a 1991 study co-authored by UCLA finance professor Ivo Welch found that divestment and boycotts had little effect on the value of South African stocks and other economic measurements as other investors stepped in.

“The sanctions may have been effective in raising the public moral standards or public awareness of South African repression, but it appears that financial markets managed to avoid the brunt of the sanctions,” according to the study, originally published in the Journal of Business.

In a recent interview, Welch said the university governing boards such as the UC regents need to look beyond pro-divestment protests.

“Their duty is to administer the money well. Their fiduciary duty is not to pick whatever causes some students want, whether it’s abortion, fossil fuel, weapons, Israel or Saudi Arabia,” he said. Campuses would do better for the world by boosting research on alternative energies rather than divesting oil stocks, he said.

The UC regents in September decided against dropping the estimated $10 billion in direct and indirect holdings in oil, coal and natural gas from the university’s $91-billion endowment and retirement funds, but moved to invest more in renewable energy.

Alden Phinney, a UC Santa Cruz student who is active in the Fossil Free UC campaign, was disappointed and thinks that the recent decline in oil prices bolsters the economic argument for divestment on top of environmental reasons.

Phinney and other student activists said they are influenced by the persistence of the anti-apartheid movement, which occurred before they were born and took, he noted, about a decade to achieve widespread divestment. So he and others said they are prepared to keep pushing.

Such campus activism should not be surprising, according to Redd of the business officers group. Many students, faculty and others, he said, believe colleges “should be held to higher standards than a for-profit company.”

Twitter: @larrygordonlat