Last month, the philanthropic Rockefeller Brothers Fund announced it would sell off the fossil fuel stocks that helped to enrich it. Pitzer College, one of the Claremont Colleges, had beaten the Rockefellers to the punch. Its decision to divest, in April, made it an early adopter in the movement to shift endowment money for the sake of the planet. Donald Gould was at the center of the process — a Pomona College graduate who heads an asset management firm and also heads the Pitzer board of trustees' investment committee. As colleges and universities once shed their South Africa investments — something
How did the divestment movement get to the board of trustees?
Students came to the investment committee in the spring of 2013. I spent the summer thinking long and hard about the issue, and one of the "aha" moments I had was that it wasn't principally an investment matter. If you read about the divestment movement — in particular about schools that have rejected it — you find it's been approached as an investment issue. It's understandable. It's a request to sell things from the endowment portfolio. But if you look deeper, you realize it's only secondarily an investment issue. It's really a climate issue.
You've said you read about
That definitely played a role. It was $2 billion in annual sales they were willing to forgo. Somebody was quoted saying, "We hold ourselves out as a place for people to go to get healthy, and we can't reconcile that with selling cigarettes." That's exactly where my thinking was going on this fossil fuel issue. What I liked was that CVS wasn't demonizing tobacco companies, nor were they praising them. They were simply saying it's inconsistent with who we are to be selling this stuff.
Similarly, a lot of people misinterpret divestment as some kind of judgment on the fossil fuels industry, and certainly there are people in the divestment movement for whom stigmatization is a primary objective. I don't feel that is necessary. I feel to be betting on a perpetual stream of profits from this industry — the product of which is CO2 emissions we're trying to wean the world from — is fundamentally inconsistent with what Pitzer is. I referred to the CVS decision in my memo to the board; I tried to boil it down to one word: alignment. Divestment would align our actions with our values and mission. To me it was really that simple, even though the issue overall is pretty complicated.
A thesis by one student in the working group argued that you were the change agent in helping to persuade the board to act.
I think many of the other trustees didn't really have a view on the issue. Probably the most skeptical would have been the investment committee trustees, because we're trained to think in terms of not wanting anything that constrains asset choices. I'm what you might call an unlikely environmentalist: I didn't come to the board with a particular progressive agenda on points A, B and C. I think I'm viewed as a very deliberate and rational person, so when I concluded that divestment was right for Pitzer, people listened to that.
Doesn't a board have a fiduciary responsibility to deliver the best dollar outcome for an institution?
There's a misunderstanding of "fiduciary" in this context. The definition of fiduciary is someone who puts the interests of the client in front of all other interests, including their own. Our fiduciary duty is to do what's best for Pitzer College. The college has competing priorities; the endowment is only one of them. My argument was that the importance of aligning our actions with our values as an institution had to take precedence in this case.
We obviously weighed in on what we thought the impact would be to the endowment. If the conclusion had been that it would be devastating, then as laudable as the goal is, we might have to say it would be imprudent, but our conclusion was that the cost would be quite manageable and the benefits substantial.
What were the numbers?
I started doing some analysis to see what the stock market has done with and without energy stocks. My conclusion was that removing these from our portfolio was not going to have a meaningful impact on the endowment. I have to quickly follow that up: You cannot divest willy-nilly. If you divest from fossil fuels today and from consumer staples tomorrow, pretty soon you won't have much of an asset universe and the impact on the endowment would be substantial and quite negative. Divestment must be very rare action and it must meet a very high threshold.
Speaking in Boston on this topic, I got questions from the audience: What about Coca-Cola selling sugared drinks that contribute to childhood obesity and diabetes? The slippery slope argument: Where does this stop? It's a legitimate question, but to me climate change dwarfs pretty much any other issue we face now. A scientist at Oberlin, David Orr, says, "Whatever your cause, it's a lost cause on a dying planet."
The decision was not just to divest but to take action on campus.
If all you did was divestment, that's a little hollow. Divestment was one arrow in the quiver.
What were some others?
Pitzer is considered one of the greenest colleges in the country and is one of the first colleges to have an environmental studies major. Most of the low-hanging fruit has already been picked, but we set a target of reducing our carbon footprint by another 25% by the end of 2016. One major element is replacing electricity from fossil fuels with electricity from renewables.
Have you been asked for divestment advice from other colleges?
Absolutely. Not surprisingly, most [from] students dealing with investment professionals who are probably reacting with the same skepticism I initially voiced at Pitzer.
I list three things: You have to recognize that divestment is a policy issue first and an investment issue second. Second, get all the constituencies in the school involved. A lot of universities say they have students involved, but a better way is to say they're tolerated. In our case, everybody listened to each other. Finally, the divestment conversation created an opportunity for a broader conversation. Our board would have been unlikely to support divestment in a vacuum but was quite enthusiastically supportive as part of a broader plan.
Will it make a difference in climate change?
Yes, but I can't prove it.
What I can tell you is that I believe our political system is broken in many ways. It doesn't very well represent society as a whole. It does a good job representing the narrow interests in many groups, and the fossil fuel industry is one of those. Actions like divestment are derided as purely symbolic, but the idea that symbolic is pejorative, that's completely wrong. When Rosa Parks took her seat on the bus, that was symbolic, but it made a difference.
Acts of symbolism evolved from a dream to a possibility to a reality to an inevitability. We look back now and say, of course women have the vote, how could it be otherwise? The idea that we can as a planet come up with public policy on energy that helps mitigate the worst effects of climate change — we can't give up hope that we can achieve that. We have a fiduciary duty to do the opposite.