Amherst and Coal Divestment

The possibility of ending the College’s investment in coal was first discussed on campus back in September, when Bill McKibben spoke to a crowd of almost 900 students, faculty members and town residents in Johnson Chapel. McKibben, the founder of the environmental group, delivered a speech outlining the hard climate realities our world faces today. He emphasized the need to take immediate action, and to that end, formally endorsed an Amherst coal divestment campaign. Afterwards, inspired students rallied on the steps of Frost library to voice their concern, and thus, the coal divestment campaign was born.

Deidre Nelms ’13, the current head of Green Amherst Project and leader of the divestment campaign, met with the Association of Amherst Students (AAS) Senate to discuss the possible revival of the Advisory Committee on Investor Responsibility. The revival of the committee would be an important first step in the process of coal divestment. The College cannot support a divestment campaign every year. Enthusiasm would wane and divestment campaigns require lots of time, energy and organization. Formalizing the process would promote efficiency and ensure student input into the future investment process.

Green Amherst Project (GAP) has been circulating an open faculty letter to the trustees on the threats posed by coal, which has received more than 30 faculty signatures to date. A student petition has also been circulating that has accumulated more than 300 student signatures. GAP is always seeking more signatures, though, so if you would like to sign the petition, contact Deidre Nelms ’13.

Many of you might be asking what divestment actually is, and why we believe that coal is an industry we need to divest from. These are important questions which deserve an answer. Here is an excerpt from the faculty letter in circulation:

Amherst devotes considerable resources to educating students about the scientifically proven risks of
climate change, in addition to the adverse societal consequences of mountain-top removal coal mining.
Coal burning power plants are the single largest factor in America’s contribution to global warming, and
account for 20% of greenhouse gas emissions. The American Lung Association reported in 2012 that
pollution from coal kills 13,000 Americans each year due to mercury poisoning and airborne illnesses,
presenting a major public health risk to predominantly low-income communities in many parts of
Appalachia. On their own terms, these adverse consequences resulting from corporate irresponsibility,
although considerable, would not be enough to warrant divestment. However, by establishing an
environmental studies program, Amherst has already made a public educational commitment to advancing
climate research and counteracting scientifically unsound information about climate change. Investment
and financial trust in coal as a viable, long-term energy source is blatantly inconsistent with the scientific
research that Amherst students and faculty work to produce, and is thus in direct conflict with the
Amherst’s mission as an educational institution. Divestment from the coal industry is not merely a political
statement, but a policy that is intrinsically consistent with the educational mission that our college has
pledged to promote.

On Saturday, October 20th, the Green Amherst Project met with William Ford ’83, the lead member of the Amherst Board of Trustees on endowment investing, to discuss the recent Amherst coal divestment campaign. Ford made it clear to the GAP that the trustees would most likely not support complete fossil-fuel divestment, which would include oil and gas industries as well as coal. However, divestment only from coal could be very positive for the school, Ford believed.

In order for the trustees to support divestment, Ford emphasized that Amherst could not act unilaterally in divestment, but only in conjunction with another college of similar academic caliber. The reasons behind this stipulation are complicated and somewhat obscure, but essentially, Amherst has a reputation as a moderate investor, a reputation the Board wishes to maintain. This requires some sort of non-partisanship in our investment practices, and complete fossil-fuel divestment could be considered too politically radical. If we were joined by another high-level educational institution as a partner, it could be seen in a less radical and more reasonable light.

There are a couple of potential partners the College is considering. Swarthmore is currently running a similar campaign for which they are pushing for divestment from a list of sixteen companies they have deemed to be the most environmentally irresponsible. Appropriately, they call these companies the “Sordid Sixteen.” After these divestments, Swarthmore plans to push for across-the-board fossil fuel divestment. Another college, Bates, wants to divest as well after learning of our trustee’s receptivity to the movement, but with an eye towards complete fossil-fuel divestment in the future. Lastly, Earlham College, though not comparable to Amherst in academic stature, has a parallel coal divestment movement growing. As a singular partner, Earlham would not be enough of an influence in the academic world to persuade the trustees, but joint action by Amherst, Bates and Earlham could tip the balance.

This is not just an academic movement, limited to college campuses. National movements are developing across the country. Most significantly, and the Responsible Endowment Coalition (REC), two of the most prestigious environmental and social activism groups worldwide, are planning a collaborative movement, designed to spread awareness about divestment and provide support for colleges and universities in the divestment process. Their movement will make its debut sometime in November.

Navigating and understanding the world of endowment investing is a complex, often convoluted, process, even for the initiated. I will lay out the basics, though, to help put the divestment movement in context. The REC defines an endowment simply as, “a large amount of money from which the school draws financial health.” The goal is not to spend all of the money, though, but grow it. Alumni contributions and other gifts are contributed to the financial pool of the endowment and to make it grow, it is invested in various things. The financial returns on the investments either go back into the endowment for further investment, or are moved to a college’s operating, or checking, account. Tuition and grants also feed into the college’s operating account, which is used to pay for the college’s operating costs, including room and board, and faculty and staff salaries.

The Board of Trustees, living up to its title, is entrusted with the College’s success, and thus, makes the broad decisions on how and what to invest in. As mentioned before, investing is a complicated business so the Board of Trustees usually hires outside firms to administer the endowment’s investment, which is the case at Amherst College where around 70 different firms control our investments. With this arrangement, the Trustees only have control over direct investments they make, not indirect investments made through outside firms. Broader investment policies, outlining which types of investments the College wants to avoid, and which ones it supports, can be communicated to the outside firms, but no guarantees are made whether those policies will be followed. The students and alumni are what make the College’s existence possible; students attend the classes the College provides and could potentially contribute to the endowment later in life, and alumni provide the current and future financial support of the institution. Therefore, we need to hold the Trustees accountable for their direct endowment investments and the investment policies they communicate to outside investment firms.

According to the 2011 annual report, more than half of the College’s endowment is invested in private and public equities. Public and private equities are firms: public equity is traded publicly on the stock market, and private equity is privately traded between shareholders. The details on which firms have been invested in, and which outside investment firm did the investing, is not made public, but Ford was able to reveal some unsettling characteristics of the investments. A significant amount of those public and private equities are coal, oil and gas companies involved in some of the most environmentally damaging sectors of the fossil-fuel industry, including oil exploration, drilling, pipelines and refinement, coal mining, power generation and hydro-fracking. Investment in the fossil-fuel industry is common, however, because of the consistent above-average returns on investment; this is the most profitable industry in the history of money that we are talking about, after all.

Remember, though, that the returns on investment are diverted to the college’s operating account, which it uses to pay expenses. And remember that at Amherst, 59% of the incoming freshmen of the Class of 2015 received financial aid. The conclusion is inevitable and slightly distasteful: the success of the fossil-fuel industries has paid for a large portion of the typical Amherst student’s education. Even students who do not qualify for financial aid receive the benefits that the College pays for with money earned on fossil-fuel investment. For environmental studies majors, or even just environmentally aware and active students, the situation is paradoxical, bordering on comical. We spend a lot of time studying environmental problems, such as climate change or pollution, only to discover that the source of these problems has funded our studies.

Currently, the Trustees directly control only about 3% of the College’s endowment, which might seem small, but amounts to around $60 million. This large sum of money is something we as students, faculty and alumni can influence. The College has directly invested some of this money in coal industries the previous four years but, due to the downturn in the coal industry, we have no direct investments this year. This means that there is no financial risk or complicated investments to untangle because there are no investments. Amherst, this is our opportunity to put a policy in place to bar all future investments in coal and take the first step towards responsible investment and a responsible future.