Recently, a group of students began a campaign known as the Princeton Sustainable Investment Initiative (PSII), seeking to implement a series of proposals concerning the University’s management of its endowment and environmental impact. Specifically, PSII calls on the University to report on the environmental impact of its investments and ultimately to cease investing in companies that are deemed insufficiently environmentally friendly. Members of the PSII have arranged to meet with the University Resources Committee on March 3. The Board urges the University to reject this effort to politicize the endowment and unduly tie the hands of the Princeton University Investment Company. Caving to such demands would fruitlessly compromise the endowment’s return on investment and, more importantly, doing so would risk the many benefits that a strong endowment affords to Princeton students, especially a strong financial aid program.

PSII demands that the University symbolically adopt the United Nations’ Principles for Responsible Investment and sign the Carbon Disclosure Project, calculate and publish the carbon footprint of the endowment’s various investments, and design and implement a plan to divest from environmentally dubious companies and impose this plan on all external investment managers.

If implemented in a nominal way, the proposal will simply result in increasing reporting costs for PRINCO without shifting policy, which would simply be a waste. However, if this is to have an actual effect, it will require significant adjustments to the way in which the endowment is invested, permanently limiting the investment choices of PRINCO. That would be unwise.

Were Princeton to divest itself of companies that are deemed environmentally unsound, it would have no impact on those companies’ behavior. There is a global market in such equities, so the impact of one institution’s divestment would be minimal. Even if many institutions similar to Princeton were to do so, the impact would be quite limited. Should the price of such companies’ stock dip even slightly below what it would be based solely on their earnings, any investment firm more interested in returns than sustainability scruples will increase their holding in these companies.

While PSII proponents might point to the impact of divestment in apartheid South Africa, the example only weakens their case. While there was a global consensus on international divestment from South African companies, noticeable impact of divestment on the relevant companies’ stock prices seems to have been effectively nonexistent. Moreover, non-renewable energy usage is not apartheid. While apartheid was entirely unjustifiable, the harnessing of certain energy sources is not without benefits. Fossil fuel use has certain costs, but the cheap energy it provides can be crucial for economic development and the livelihood of many people worldwide. It is inappropriate to politicize the endowment; indeed, once the endowment becomes politicized, it may become increasingly restricted as more groups push for divestment in whatever industry or country they find objectionable.

Furthermore, PSII’s demands would be costly. They would impose burdensome accounting costs on PRINCO simply to measure the environmental impact of every single company in which PRINCO has holdings either directly or indirectly. Moreover, portfolio allocation changes would impose costs that stem from selling large amounts of an investment, to say nothing of forgone potential returns from the investment. Furthermore, many investment structures employed in oil and natural gas extraction are entirely illiquid. Leaving these would entail substantial legal expenses and losses on the investment.

On top of this, PRINCO’s operations going forward would be hampered by needing to examine the possible environmental impact of any company before taking a position on it. These problems would be multiplied, since the proposal mandates that PRINCO only employ external asset managers who follow the same restrictive policies.

PRINCO does critical work for the University. The returns on the University’s endowment enable Princeton to grant generous financial aid packages to 60 percent of students. If these returns are threatened, then so too is Princeton’s ability to welcome all students, regardless of financial situation. PSII’s willingness to risk certain benefits for the sake of a misguided symbolic gesture is the mark of activist naïveté.

Aditya Trivedi ’16 recused himself from the writing of this editorial.

Jeffrey Leibenhaut ’16 and Jill Wilkowski ’15 abstained from this editorial.

DISSENT:

The majority opines that University divestment would have marginal effect on the finances of affected companies, and would thus be ineffective as a means of protest. While it is true that the withdrawal of Princeton’s investments cannot alone materially impact the financial performance of these companies, the majority’s position ignores the significance of divestment’s symbolic role. Divestment as a political strategy expresses principled discontent and exposes the environmentally irresponsible business practices of companies who profit by contributing to global warming. Given the University’s prominence in mainstream media and the public consciousness, employing its endowment as a means of social change is perhaps one of the strongest ways that it can institutionally convey dissent. In so doing, the University would play an important part in setting a precedent for other institutions of higher learning, following Stanford’s recent high-profile decision to divest from coal.

By continuing to actively hold investments in environmentally-harmful corporations, the University may tacitly be placing its imprimatur on industries harmful to our planet. The same concern was the basis of the 2013 faculty petition to divest from companies that manufactured firearms.

Furthermore, the majority’s claim that divestment would be unreasonably costly seems to be blown out of proportion. Though new reporting measures and asset liquidation would surely come at some cost, we feel that these expenses would be warranted given the importance and urgency of acting against climate change. As of this year, the University’s endowment stands at an enormous $21 billion, the highest for any university globally on a per capita basis, and one of the world’s largest in absolute terms. With this in mind, Princeton could likely afford to make portfolio changes without substantive effects to student life (or financial aid, as the majority claims).

Signed,

Brandon Holt ‘15 and Kevin Wong ’17

The Editorial Board is an independent body and decides its opinions separately from the regular staff and editors of the ‘Prince.’ The Board answers only to its chair, the opinion editor and the editor-in-chief.

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