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January 24, 2013

Middlebury Tiptoes into Divestment Conversation

MiddleburyEnvironmental activist Bill McKibben's latest campaign to lead colleges, foundations and churches to divest their fortunes from fossil fuel companies is catching on like wildfire. McKibben's "Do the Math" tour launched divestment campaigns on more than 200 college campuses, and two colleges and the city of Seattle have already pledged to yank their investments from companies McKibben and his group charge with environmental destruction.

But McKibben's own Middlebury College, where the Vermont writer serves as a scholar in residence, isn't rushing to jump on the bandwagon. Cautious exploration was the theme of the night on Tuesday, when Middlebury made good on its promise to broach the topic of divestment with a panel discussion about the college's $900 million endowment. The panel discussion follows a heated campus debate this fall about the topic of divestment, which students — along with McKibben, who was on Tuesday's panel — are promoting as the newest tactic in the fight against climate change. At Middlebury, students are also targeting arms manufacturers in their divestment campaign.

According to Alice Handy, the founder and president of Investure, the company that manages Middlebury's endowment, those funds actually make up just a very small portion of the school's $900 million endowment. College president Ron Liebowitz announced in December that roughly 3.6 percent of the endowment — around $32 million — is tied up in fossil fuel companies. Handy further clarified on Tuesday that less than 1 percent of the endowment is invested in arms manufacturing companies, and that slightly more than 1 percent is invested in the 200 fossil fuel companies McKibben's group is targeting with their national divestment campaign.

With a focus on the mechanics of the college endowment, the evening's panel was fairly buttoned up: more Econ 101 than environmental rally. At the heart of the night's discussion were two questions. First, what factors should college trustees consider in determining whether or not to pursue divestment? And second, is divestment an effective strategy for addressing concerns such as climate change? 

The two-hour conversation is available to stream online.  

Much of the discussion boiled down to the logistics of investing. Handy explained that Middlebury's hefty endowment is co-mingled with the funds of other Investure clients, a fact that could make divestment tricky if college trustees decide to move forward. Meanwhile, MIT lecturer Mark Kritzman shared the results of a mathematical simulation that he says pinpoints the possible costs of socially responsible investing. Kritzman estimates that the college could lose as much as $420 million in returns over 20 years if the institution "limits" its investment universe — a number McKibben later challenged as unreasonable in light of how small a percentage of the endowment is tied up with fossil fuel companies or arms manufacturers.  

So far, Middlebury students don't seem concerned about the possible costs of divestment. Student Government Association president Charlie Arnowitz, a last-minute addition to a panel consisting largely of investment professionals, says the topic has stirred up the most vigorous on-campus debate he's seen in four years at the college. According to an SGA poll of around 45 percent of the student body, 63 percent of students believe the college should apply the principles of socially responsible investing to its portfolio, compared with 14 percent opposed. 

The evening's most vigorous debate centered on divestment's possible efficacy, and pitted McKibben against panelist — and fellow environmentalist — Ralph Earle, a renewables-focused venture investor and former assistant secretary of environmental affairs for Massachusetts. "I think climate change is the most critical issue that we face as a society today," said Earle, before thanking McKibben for his activism. While he finds himself in "complete agreement" with's goals, Earle doesn't believe divesting fossil fuel stocks will be an effective tool in fighting climate change. Instead, he pushed for shareholder activism, proxy voting, and a doubled-down focus on renewable energy research.

To that, McKibben said this: "Effectiveness needs to be measured against what we're doing at the moment. ... Let's try to use less carbon in our lives. Drive better cars. Make personal commitments." Those, McKibben said, are strategies that have been in use for some time. "My car gets even more than 50 miles to the gallon," he said. "And the arctic melted last summer. We have to up our game." 

At the panel, McKibben distributed a letter written to Middlebury's board of trustees by noted investor and philanthropist Tom Steyer, the founder of a $20 billion hedge fund. In his letter, Steyer, one of the most successful investors of all time, makes three points: that divestment at Middlebury would be feasible, meaningful and a good investment strategy.

McKibben, who spoke last among the six panelists, asked students to hold their applause during his rapid-fire remarks; instead, supporters snapped their fingers in apparent approval of his comments. He drew the night's only standing ovation.

"For Middlebury, divestment is not a problem. It is an opportunity, one that we should seize now," said McKibben. He pointed out that students aren't pressing for unreasonably speedy change, but rather asking for slow, reasonable progress. "I am confident — I think I'm confident — that we will do it. It is hard to imagine how we could live with ourselves otherwise."

Photo by Kathryn Flagg  

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