College announces it will not divest endowment of fossil fuel stock

by Emily Bary ’14, Co-Editor in Chief

In a statement released to the College community this morning, President H. Kim Bottomly announced that Wellesley would not divest its endowment of holdings in fossil fuel companies. Fossil Free Wellesley (FFW), a student organization, asked the Board of Trustees in October to immediately freeze all new direct holdings in fossil fuel companies, sell off direct holdings in the 200 largest public fossil fuel companies within two years and sell off all holdings in all fossil fuel companies within five years.

“The Board, and I, do not support the idea of using the College’s endowment as a lever for social change and determined that such an action would conflict with the purpose of the endowment,” Bottomly wrote in the statement.

The Board discussed the divestment proposal at its annual winter meeting in early February in response to FFW’s proposal. Bottomly also commissioned a group of trustees, administrators and faculty members to look into the possible effects of divestment on endowment returns in the long-run. The group concluded that Wellesley’s endowment would lose value if the College sold its shares of fossil fuel companies and if it declined to invest in funds that included fossil fuel holdings.

“The result of that examination was conclusive: the cost to Wellesley would be high and the economic impact on fossil fuels companies inconsequential,” Bottomly wrote.

Divestment is complicated because many institutions like Wellesley use outside firms to manage the endowment. Outside managers invest Wellesley’s money in co-mingled funds, alongside the money of other investors, and Wellesley would have to withdraw its money from managers it deems well-performing if it tried to impose restrictions.

Fossil fuel divestment has become a hot issue on college and university campuses recently, and hundreds of colleges have student groups aimed at convincing their institutions to divest their endowments of fossil fuel stock. Only a handful of colleges have opted for divestiture, and they are small schools with small endowments. Wellesley’s large $1.576 billion endowment contributed roughly 41 percent to the operating budget of expenses last year, meaning that Wellesley is very dependent on its endowment and that a decline in the value of the endowment could hurt the College.

Other colleges and universities that rejected divestment proposals have suggested alternate ways for institutions to take action on climate change. Harvard administrators announced the establishment of a social choice fund separate from the main endowment in late 2012. The fund is meant to serve as a vehicle for socially and environmentally conscious investing.

Bottomly wrote that Wellesley has already been engaging in socially responsible investing via a proxy-voting subcommittee, but announced that she would establish a group to “formalize standards and practices of our socially responsible investing going forward.” She also said that Wellesley would fund green investments that pay for themselves through energy savings and use the Campus Renewal project as a way to make College buildings more environmentally friendly.

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