Lessons from Harvard’s Fossil-Fuel Divestment Letter: Elect New Trustees


Cambridge, MA:  Harvard Yard 12/6/10
Cambridge, MA: Harvard Yard 12/6/10

          Harvard’s produced an interesting week for those pushing for fossil-fuel free investments.

           On Monday, its president, Drew Gilpin Faust, posted a long email justifying the University’s positions and offering a small – but important – sop to divestment types.  On Thursday, more than a hundred Harvard faculty endorsed a pointed rebuttal.

           These events overtook my blogging on my reactions to Hampshire College’s superb conference on Intentionally Designed Endowments and to Pres. Faust’s letter.  For a blogger, that’s an uncomfortable situation.  In my case, it worked for the best.  I realised the forces for change require a new point of attack: electing university trustees.

           I’ll start with my conclusion and then proceed to the writing that got me there.

                           Socially Responsible Investing & Endowments

           Socially Responsible Investment (SRI) is a simple concept that’s sometimes difficult to practise.

           SRI expresses the aspiration for consistency in our lives, individually and in community.  Bringing what we own into alinement with our ethical or religious beliefs can be hard for many reasons, often non-financial, emotional.  But within our tolerance for inconsistency, we almost always can achieve it.

           Choosing not to invest or divestment are just two of many means to the end of alinement.  In times of social stress constituents often press institutions to divest.  Then the objective of alinement becomes paired with the desire to mark the bounds – publicly, explicitly – of what is socially tolerable behavior.

Institutional Reaction & Commitment

           Institutions, like Middlebury College or Harvard University, that see themselves as on the right side of the climate issue in their educative functions, building standards, recycling and transportation can’t understand why their constituents won’t cut them slack where the endowment is concerned.

           Their constituents can’t understand why, metaphorically speaking, their institutions have circled armored personnel carriers (Ohio State actually has one) around their endowments.

           Put me on the constituents’ side.

           SRI has within it many tactics other than divestment.  As with engaging companies on climate, they require more effort, more thought than divestment and therefore more commitment, which is why endowments don’t use them.  Lack of commitment.

 The Trustees:  Where Change Can Come

           This posture leaves institutional constituents with no option to advocate but the simple one: divest now.  Since the first South Africa divestment resolution in the fall of 1969 to today …. 45 years of battle, about as long as the Drug War.

           No small part of the constituents’ frustration has come from talking with the wrong people.  Rarely do they discuss their objectives with the people who actually control the university’s investments: its trustees (or their equivalents) and, more particularly, the trustees on its finance committee.

           But there’s an alternative.

           It’s long past time to change the boards of trustees who set investment policies and employ the presidents and investment managers who carry them out.  Let’s do what shareholder activists, like Carl Icahn, do when they want to maximise the value of a company for its shareholders.

           Let’s elect us some trustees!

                              New Faust Letter on Climate & Divestment

           President Drew Gilpin Faust’s latest letter, date April 7, addressed to ‘Members of the Harvard Community’ on Climate Change and Harvard’s investments reminds me of my 1-L Torts exam.

           I had 36 (sleepless) hours to analyze a 1500-word fact pattern:  long mushy sentences woven into immense sponges of paragraphs.  Its confusing syntax, irrelevant facts and diversionary humor concealed a couple of GPA-determining points.

           Pres. Faust’s letter similarly uses 1470 words – without the humor.  While ploughing through it, I recalled ‘Politics & the English Language’ (1946) in which George Orwell drew his first two (of five) examples of bad writing from professors, Harold J. Laski and Lancelot Hogben.

           Pres. Faust has won the Bancroft (2009) and Parkman (1997) prizes for her books in history.  I’d add for her April 7 letter an Orwell.  He reminded us:

Political language – and with variations this is true of all political parties, from Conservatives to Anarchists – is designed … to give an appearance of solidity to pure wind.

           I will spare you two thirds of her apologia, tangled in long, Latinate-larded sentences built of political language, but I will quote in full her discussion of divestment and social investment.

           Of the appearance of solidity in Prof. Faust’s letter there can be no question.  But is there an answer ‘blowing in the wind’?

 Faust’s Text

           Pres. Faust has offered a seemingly significant sop to her critics:  Harvard University will become a signatory of the UN Principles for Responsible Investment (PRI) and the Carbon Disclosure Project’s (CDP) climate change program.

           To set the scene, after 942 words of Harvard-justification and a pitch for more money for Harvard’s $6.5 billion Campaign, Pres. Faust announces:

           Third, in addition to our academic work and our greenhouse gas reduction efforts, Harvard has a role to play as a long-term investor. Last fall, I wrote [link added] on behalf of the Corporation [Harvard’s equivalent of a board of trustees] to affirm our judgment that divestment from the fossil fuel industry would not be wise or effective as a means for the University to advance progress towards addressing climate change. I also noted that, with the arrival of a first-ever vice president for sustainable investing at Harvard Management Company [which runs Harvard’s endowment], we would strengthen our approach to how we consider material environmental, social and governance factors as we seek robust investment returns to support our academic mission.

           Today I am pleased to report that we have decided to become a signatory to two organizations internationally recognized as leaders in developing best-practice guidelines for investors and in driving corporate disclosure to inform and promote sustainable investment.

           Specifically, Harvard’s endowment will become a signatory to the United Nations-supported Principles for Responsible Investment (PRI). The PRI joins together a network of international investors working to implement a set of voluntary principles that provide a framework for integrating environmental, social and governance factors into investment analysis and ownership practices aligned with investors’ fiduciary duties. Harvard Management Company will manage Harvard’s endowment consistent with these principles.

           In addition, we will become a signatory to the Carbon Disclosure Project’s (CDP) climate change program. The CDP is an international nonprofit organization that works with investors to request that portfolio companies account for and disclose information on greenhouse gas emissions, energy use and carbon risks associated with their business activities in order to increase transparency and encourage action.

           Both these significant steps underscore our growing efforts to consider environmental, social and governance issues among the many factors that inform our investment decision-making, with a paramount concern for how the endowment can best support the academic aspirations and educational opportunities that define our distinctive purposes as a university. [Bracketed material and links therein added.]

           What in these 319 words did Pres. Faust commit Harvard’s endowment to do?  Yes, PRI and CDP are important – very important – organisations doing significant work.  But like Oliver Twist we’re left holding our gruel bowl pleading, ‘Please, sir, I want some more.’

 Significance of Endorsing the PRI & CDP

           To its credit Harvard is the first university endowment to subscribe to the PRI or, so far as I can tell, the CDP. 

           Whether Harvard is, in Alex Beam’s sardonic phrase, the World’s Greatest University (WGU) one may debate but not whether its $32 billion is the world’s greatest university endowment.  (That number does not include the value of Harvard’s campuses, patents, art, copyrights, etc., etc., etc., which, logic suggests, dwarfs its endowment.)

           Where Harvard leads, it is safe to follow, generally.  Other universities, responding to pressure to divest carbon-fuel companies, will add their names to lists of PRI and CDP signatories.

           That’s a very big deal when climate deniers control two of the three branches of the Federal government and all branches of more than half the state governments.  That grip will likely become tighter come the fall.

Scepticism Bred of Experience

           As Pres. Faust notes, endorsing the PRI commits Harvard to

voluntary principles that provide a framework for integrating environmental, social and governance factors into investment analysis and ownership practices aligned with investors’ fiduciary duties.

 Whether Harvard does something positive with its endowment depends on how it defines those last five words.

           The news’s placement in Pres. Faust’s letter – buried – signals, I fear, its unimportance to those who run Harvard.  The absence in university-generated copy of any supporting quotations from members of Harvard’s Corporation or its Board of Overseers (its trustee-equivalents) or from Harvard Management – much less, an investment policy – deepens my suspicions.

           After all, Harvard fought divesting from South Africa for more than 20 years, never fully divesting.  Ten years after Nelson Mandela invited companies to reinvest, Harvard students urged the University to divest from companies supporting the Sudan regime.  The Harvard Crimson reported in December 2004:

So far, however, the campaign has done little to change the University’s position.

Jack Meyer, the [then] president of the Harvard Management Company … told The Crimson in November that divestment would only eliminate jobs for the Sudanese people.

 “Divesting is not an effective way to make social change,” he said.

 Pres. Faust shows no sign she disagrees with Jack Meyer.

           Until Harvard’s trustee equivalents adopt meaningful investment policies,  such as the corporate engagement the PRI suggests, and Pres. Faust and Harvard Management commit themselves to implement them, Pres. Faust’s letter can only be said to ‘give an appearance of solidity to pure wind.

$120 Million is What % of $6.5 Billion?

          I quoted all 319 words of Pres. Faust’s third point on SRI.  Just below are the 196 words of her first point.  Keep in mind that the Harvard Campaign to which she refers is a $6.5 billion fund drive that, rumor has it, is halfway to its goal.

           First, and at the heart of our mission as a university, is research. Our research across Harvard—in climate science, engineering, law, public health, policy, design and business—has an unparalleled capacity to accelerate the progression from nonrenewable to renewable sources of energy. The Harvard Campaign has identified energy and environment as a priority, and we have already raised $120 million to support activities in this area. As part of this broader campaign focus, I intend to catalyze the aspects of that research specifically focused on shaping and accelerating the transition to a sustainable energy system.

           I challenge our talented and dedicated faculty and students to identify how their efforts can propel societies and individuals along this path. And I challenge our alumni and friends to assist me in raising $20 million for a fund that will seed and spur innovative approaches to confronting climate change, as an element of our broader campaign efforts in energy and environment. To launch this new Climate Change Solutions Fund, I will immediately make available $1 million in grants to be allocated at the outset of the coming academic year. (Please see here for further information on this fund and the application process.)

           ‘$120 million to support activities in this area’ doesn’t compare well to $6.5 billion.  And, $1 million of new grants seems pretty short money.

           We know it’s all about the money.  And, it’s the trustees who control it.