Climate change is a real problem. Most people underestimate the consequences if human contributions are left unaddressed over the coming decades, but divestment is the wrong solution.
Advocates typically argue that endowment investments financially support companies emitting carbon into the atmosphere. But what does “financial support” mean in this context? One could very well infer that Georgetown is handing over money to the Exxons and BPs of the world and directly funding man-made climate change.
This assumption underscores a flawed understanding of secondary financial markets. If I buy stock in Exxon, I do so from another person willing to sell it to me at a certain price rather than from Exxon itself. This distinction is critical because the up-and-down movements of stock prices have no impact on companies’ financial resources. Divestment, thus, can only induce change by negatively affecting a company’s ability to raise capital in the future. Yet, there are two reasons why divestment would have no substantive impact.
First, the overwhelming majority of investors are profit-seeking individuals or institutions, not endowments. Pro-divestment group Power Shift lists the total value of available oil, gas and coal exploration and mining investments at $1.2 trillion and the total endowment investments in them at $17 billion, or 1.4 percent of the total market. Surely if companies had $17 billion fewer, their abilities to extract fossil fuels would be hampered. However, as argued above, endowments selling all fossil fuel investments would only affect share prices and would have no impact on the profitability of energy operations because selling stock does not equate to removing funds from these companies. A more likely scenario than a negligible price drop is an investor unconstrained by ethical considerations boosting stock prices as they fall, resulting in no net change. Advocates often indicate that divestment succeeded against apartheid in South Africa, but with a much larger market and a smaller percentage of endowment composition, the United States is unlikely to achieve such a result.
Second, even if divesting could affect the stock prices of energy companies, these companies would likely respond in the short-term by extracting more fossil fuels, not less, to boost profitability and stock prices, which runs counterproductive to the divestment cause. “Success” for divestment can only, by definition, affect share prices, but the assumption that share prices directly affect company policy is misguided. They may in certain instances, but in this one, the consequence is the exact opposite of what divestment seeks to accomplish.
Many divestment advocates claim Georgetown’s Jesuit values conflict with the university’s investments, but since investing and divesting do not tangibly affect the environment, no contradiction with values arises. One could argue that Georgetown should, on principle, never profit from companies that contribute to global climate change; the logical extension of this argument is that Georgetown’s financial investments are the means by which it symbolically reflects its values and not the means by which it seeks to sustainably fund scholarships and research. Given that stock investments and real-world consequences are distinct, Georgetown’s investments should not constitute symbolic support for these companies. However, if divestment is merely a symbolic measure, Georgetown’s bookstore should abstain from selling Nike products and the university should prohibit Georgetown University Grilling Society from purchasing charcoal on the same grounds.
Georgetown’s actions and policies that cause real-world impacts, unlike investments, should reflect its values and commitment to environmental preservation. An endowment’s moral obligation is the important task of providing stable capital for the university to fund scholarships, projects and research. Because an endowment hires managers to invest in companies on behalf of the university, divestment would not only make choosing skilled managers who would not agree to investment restrictions more difficult, but it would also fail to affect the environment in any meaningful way.
None of this is to say that Georgetown lacks any moral responsibility for climate change. Rather, it is to argue that responsibility ought to be assessed on real-world consequences.
GU Fossil Free has the opportunity to promote student mindfulness about how our own actions contribute to these problems, and it could even refocus time and resources currently directed at divestment toward boycotting the use of energy, which, unlike divestment, would affect the demand and profitability of extractive companies. If Georgetown has an obligation under its Jesuit ideals to value environmental consciousness, all of these actions could better align with Georgetown than divestment.
Ultimately, GU Fossil Free’s efforts should be directed toward causes that lead to environmental change. Voting to divest, when doing so would have no meaningful — and potentially counterproductive — effects on the environment and negative consequences for the endowment’s ability to fund research and scholarships, would be a mistake.
Deep Dheri is a senior in the McDonough School of Business.
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