Pure Dollars and Cents

The intentions of GU Fossil Free, a group demanding that the university retract investments from all coal and fossil fuel companies, are admirable. They are not, however, in the best interest of Georgetown students.

In its letter to the administration, the student group asks for an immediate freeze on all new coal and fossil fuel investments and a complete divestment from these companies within five years. Yet the benefits of a divestment from fossil fuels are not nearly as far-reaching as the letter implies, and such a change would be a serious blow to endowment growth. While it may be worthwhile for the university to re-examine its portfolio, environmental consciousness cannot dominate investment decisions.

The university’s endowment is vital to its fiscal stability. A larger endowment means more scholarships, higher-quality academics and top-notch faculty. The goal should be to grow the endowment as much as possible, and in order to do so, it must give the greatest value to a company’s financial health and potential for growth. If the university believes that divesting from coal and fossil fuels would lead to smaller returns, then such a decision should be avoided.

In fiscal year 2011, the endowment per full-time student was equivalent to $75,811. To see that figure shrink would have a direct impact on both current and prospective students. The number of scholarships that the university could award, which amounts to a staggering $80.8 million dollars — eight times the contribution of federal aid, to its entering and attending students — would likely decrease. Tuition would likely increase — even more than it is currently projected to — and on-campus organizations would likely lose funding. This would mean that the best and brightest students would have further roadblocks from attending Georgetown, and current students would have limited financial support to effect real change.

Georgetown students are not the first to suggest pulling investments from fossil fuel companies. Students at Harvard called for a similar divestment in November. However, Harvard’s $31.7 billion endowment dwarfs Georgetown’s, which is $1.14 billion and lags far behind that of many other comparable universities. With a significantly larger endowment, the luxury of giving attention to the values and impacts of corporations would be available, but for now, the university’s main priority should be to grow the endowment however possible.

The importance of environmental awareness and social responsibility cannot be understated, and the university is certainly in the right about its recent decision to break from Adidas for the company’s unsavory practices. However, it would be imprudent and ill-advised to adopt every social cause. The university should continue to pursue more fiscally cautious methods to promote social change like providing resources for students to improve sustainability on campus. There is an unfortunate irony in that the administration’s ability to financially support student-led endeavors is tied directly to the size of its endowment, but for this reason it is necessary for the university to examine other channels for promoting social change than restricting its investment opportunities.

Many profitable corporations run into trouble with questionable ethical practices. If we choose to divest from fossil fuel companies, where do we draw the line in refraining from investing in business that may not be ethically impeccable?
The primary directive of an endowment is to protect university investments and grow its assets. As such, the same forces and incentives that guide the market should drive the university’s asset management. To act significantly otherwise would imperil the university’s finances and make it more difficult for the university to live out its values through operation and growth.

Georgetown cannot afford to stray far from the most lucrative investments, regardless of what those investments happen to be. While the university should avoid an imbalance between the strength of its values and the size of its endowment, these two pillars of student life should be kept separate, not pitted against each other.