Op-Ed Submitted by Nathan Graf ’16 and Zein Nakhoda ‘13, members of Swarthmore Mountain Justice
As we head into an exciting Weekend of Action for fossil fuel divestment May 2nd-4th, Swarthmore Mountain Justice wants to clear up some misinformation about fossil fuel divestment and financial aid, especially in light of the recent op-ed by the Swarthmore Conservative Society (SCS)—which, for all its appeal to “facts over passion,” was surprisingly devoid of any research itself.
First, it’s far from certain whether divesting from fossil fuels will threaten the endowment at all, prompting spending cuts of any kind. It is fairly standard practice for colleges to screen industries whose practices are inconsistent with the values of the investor – tobacco, firearms, gambling, military contractors, nuclear weapons manufacturers, etc. Empirical studies show that “socially responsible investing does not result in lower investment returns” necessarily.1
A recent study by the investment management firm Aperio Group suggests that even if a college endowment divested from the entire fossil fuel industry (as classified by Standard and Poor’s), it would only increase absolute portfolio risk by 0.01%, with a theoretical penalty to return of 0.0034%–a negligible amount by investment standards.2 Even our own Professor Mark Kuperburg from the Economics Department has stated on multiple occasions that he doesn’t expect fossil fuel divestment to significantly affect the endowment at Swarthmore, given the small fraction of domestic stocks we are asking to divest.3
But even if divestment were to cause a loss in returns, why would we assume financial aid to be the first thing on the chopping block? Let’s be clear, Swarthmore Mountain Justice will not accept any plan to divest from fossil fuels that would harm financial aid under any circumstances.
But why is that even an option? For an institution that makes financial aid such a high priority, reducing financial aid would be the last measure taken any time the college loses money for any reason. As Ben Wolcott noted in his February Gazette article on the failure of mainstream economics in comprehending the divestment strategy,4 Swarthmore is already adept at negotiating market fluctuations and variations in investment returns to the magnitude that divestment could affect. Despite these fluctuations in the past, the college has been able to manage its money without hurting financial aid. There is no reason why we shouldn’t expect the same for divestment unless the Board makes an active decision to cut financial aid, in which case they would hold sole responsibility for that outcome.
The college pays for roughly 40% of the operating budget using only the interest from the endowment, and there is often interest left over that is re-invested into the endowment. If there were a decrease in returns, the difference could be made up using this extra interest, or by borrowing a small amount from the ever-growing principle of the endowment.
We see the “threat to financial aid” argument as a scare tactic used to intimidate and divide students asking for structural change in the way we invest. The research is clear: fossil fuel divestment and robust financial aid are perfectly compatible.
Beyond financial aid, the SCS op-ed raised other important questions about the political value of divestment. In order to address these and other questions raised throughout our campaign in detail, we’re happy to share a new resource we recently published called “Fossil Fuel Divestment 101”—a one-stop document where much of our research and arguments are compiled.5
We address the proven failure of shareholder resolutions to affect the fossil fuel industry in the context of global warming, the industry’s overstated investment in green tech, the scientific need for fossil fuel reserves to remain in the ground against the industry’s market interests, the political rationale for divestment, and much more. We show that if anything is naive, it’s believing that fossil fuel companies—some of the most profitable and politically entrenched in the world—will change their behavior willingly in a play of “competitive market forces.”
Luckily, there is a growing international movement of campuses, cities, and places of worship working to outmaneuver the industry’s political and economic power through divestment and other means. And Swarthmore still has a chance to be a leader in this movement for climate justice.
We hope the campus will join us in calling on Swarthmore to be the fifth college in the US to divest from fossil fuels. On Thursday, May 2, we will be hosting anti-mountaintop removal activist Dustin White and screening the film Burning the Future to contextualize divestment in the struggle against fossil fuels taking place in Appalachia and around the world. On Friday, May 3, join us at 12:30 p.m. in Kohlberg Courtyard for a demonstration for divestment. The Weekend of Action will culminate on Saturday, May 4 at 11:00 a.m. in Sci 101 with an open meeting of the Board, where students will present a realistic timeline for Swarthmore to divest. See you there!
 A study by Phillips, Hager & North Investment Management states that “the chief finding of this research is that socially responsible investing does not result in lower investment returns.” https://www.phn.com/portals/0/pdfs/Articles/20071012DoesSRIHurtInvestmentReturns.pdf
 “Focal Points: Divestment” by the Daily Gazette; https://vimeo.com/63042887