The college divestment movement is fundamentally misguided

The fossil fuel divestment movement has generated a lot of interest on university campuses in recent years – 72 percent of students at Harvard reportedly voted in favor of the movement in 2012.

Curiously enough though, the movement has been criticized by notable advocates of environmentalism, including Bill Gates and Harvard President Drew Faust who have described it as unwarranted and unwise.

So why has the divestment movement failed to gain the support of so many great minded and well intentioned environmentalists? While also bearing good intentions, they believe advocates of divestment fail to fully understand the implications of the policies they propose. And consequently, they fail to recognize there is at least as much reason to believe they’d improve the welfare of fossil fuel companies as there is to think they’d harm them, and they might also be substantially burdensome for academic institutions.

The logic of the entire movement resides on the false pretense that divesting from these oil companies will be financially detrimental to them in some way; in reality, it is more reasonable for us to expect the opposite to be true.

First off, even if all university endowments in the United States simultaneously divested from fossil fuels, it’s unlikely the selloff would affect the oil and gas companies’ share prices, given their size. American colleges and universities have $12-17 billion invested in the 200 fossil fuel companies that the divestment movement urges they break ties with, while these companies cumulative market capitalizations were $7.26 billion.

The likelihood that you hear mention of the divestment movement in a fossil fuel company’s board meetings or financial statements anytime in the foreseeable future is very close to nil. Simply put, there is an incredibly long list of things that might affect a company’s share price, and in terms of importance university divestment would fall somewhere near the very bottom of this list.

While divestment would almost certainly fail to harm fossil fuel companies, there is a very realistic chance they may harm the schools which abide by its policies.

These restrictions will impose considerable costs on university endowments – most notably diversification and compliance costs. Managing a portfolio with divestment’s limitations is also relatively tedious, as is finding a high quality portfolio manager who is willing to amend their investment to meet your institution’s divestment criteria.

Divestment also distracts highly concerned and motivated college students – a population demographic that has been particularly effective at advocating for social progress – from doing other things to fight climate change that will more effectively bring about the changes they desire, like lobbying for increasing investment in renewable technology research.

Climate change is certainly the biggest problem facing my generation. But it seems a little odd that we are so willing to regularly make financial contributions to these companies in our private lives by consuming their energy (67 percent of energy consumed in the US comes from non-renewable resources), and simultaneously so eager to detest universities’ own shares in these companies and use the income they provide to finance charitable expenditures. Regardless though, divestment won’t hurt fossil fuel companies, but there’s a good chance it’ll be relatively annoying to universities affected. Though I’m environmentalist, that doesn’t get my vote.