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The effects of divestment


Oil and gas companies are sufficiently large and profitable that Princeton’s individual environmental divestment efforts will not make a monetary difference. Energy is a $6 trillion global market; America is a third of that total. Gas companies are naturally pro status quo as they want these vast revenues to continue. If divestment is a good, important or actionable cause, it cannot be about hurting the pocketbooks of energy companies. The proposed effort to extract Princeton’s endowment money from fossil fuel companies is interesting in that it is a moral issue, but it is not immediately clear what good its success will do.

In some ways divestment will work to promote a certain level of discourse among the University students, professors and administrators. That is good. Perhaps this effort can inspire the divestment of other university endowments, which, in aggregate, might get the attention of the oil (and gas and coal) companies to branch out into renewable energy.


Perhaps there is also an argument to be made that divesting the endowment is an effort to promote profitable investing, that is, divestment should be considered not because it promotes a social good, but because oil and gas themselves are bad investments. If that is the case, there is a twofold good in divestment, healthy environmental discourse (leading to eventual action) and long-term investing savvy. Princeton will likely be around for a while longer while oil and gas consumption, in the long run, might decrease and eventually cease.

Unfortunately (for the cause of divestment), the endowment is comprised of thousands of gifts to capital from various donors, each of which comes with very specific stipulations. There is no perfect autonomy on the part of the endowment investors to make decisions. The money has strings attached. A substantial gift might be given specifically to paleontology research in Latin America — the University does not have unfettered control of the money. There are significant holdings in energy companies; it would be costly and nearly impossible to divest. Also, when the University gives money to investment funds, it is tough to ask the fund managers to take out specific aspects (in this case the ones related to fossil fuel) of their portfolios, and so divestment is difficult.

Importantly, decisions that Princeton makes have an enormous impact on the Princeton community and less on the world at large. If some of the investments are done poorly, then Princetonians suffer and fewer people get financial aid. It is important that actions taken are in the best interests of the students — by making money for the University, and that should not be sacrificed for some political statement. In fact, according to the ethicist Peter Singer: “There is an important ethical framework to invest funds wisely for a high return over a long term for the student’s best interests.” There are, however, other ethical constraints that are relevant to the fossil fuel industry — it is important that companies endeavor to do as little harm as possible. The Rawlsian principle holds: Those who are better off should not make those who are worse off suffer. The wealthy will indeed suffer harms due to global warming, but the poor will suffer more.

Divestment from oil and gas set potentially negative precedents for the health of the endowment. If the University starts divesting from fossil fuels, what are the next demands going to be? If a student group takes up the cause of divestment from companies that support obesity, will the University have to take that into consideration? All companies do some form of harm, and this leads to a snowball effect of disallowing the University from making sound investments. Princeton might end up not being able to invest in the economy appropriately. It is important not to set a precedent that ties the University’s hands in the future.

Also there are a host of unintended consequences in divesting from fossil fuel companies — Exxon makes water pipelines and brings food supplies to offshore drillsmen — could Princeton divestment jeopardize those sorts of efforts, especially if other institutions follow suit?

Ultimately it seems that divestment is important not because it will have tremendous concrete effects, but rather because it makes people take notice — which could eventually do good. Princeton's actions have the potential to cause larger effects. Perhaps divestment could target coal companies exclusively. That way the University sends a message, but draws a distinct line.


Divestment does not work to alter personal human behaviors — individuals will continue to use fossil fuels every day. It has become clear to me that this is about image, more than tangible effects. Perhaps it would do more environmental good to encourage other more direct behavioral measures than it would to divest Princeton’s endowment. Divestment is purely symbolic. Perhaps it is nonetheless worth it.

Aaron Applbaum is a Wilson School major from Oakland, Calif. He can be reached at

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