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To Divest or Not To Divest: Maine Colleges Differ on Fossil Fuels Strategy

Jenny Ibsen
Bowdoin students ended their three-day sit-in to urge the school to divest from fossil fuels.

BRUNSWICK, Maine - Students at Bowdoin College today ended a three-day sit-in to urge the school to divest from fossil fuels. President Barry Mills met with students Thursday afternoon.And while the two groups failed to reach an agreement, students say that, for now, they'll focus their efforts on garnering support from students and faculty.

The debate over whether colleges should divest from fossil fuels is gaining attention on campuses across the U.S. But what do schools really stand to gain or lose? What schools stand to lose from divesting, some say, is, potentially, a lot of money.

That was a driving reason behind Middlebury College's decision not to divest in 2013, says spokesman Bill Burger. "We have very real concerns about the impact a restricted investment strategy may have on the returns and growth of our endowment, which, of course, is essential to the future of Middlebury."

Another issue is that fossil fuel investments often co-mingle with other investments. In 2013, investment advisor Cambridge Associates estimated the financial impact of divesting for Pomona College in California - a school with about 1,500 students and a $2.1 billion endowment. It concluded that Pomona would take a $419 million hit on its endowment market value if it divested from co-mingled fossil fuel funds - and that would amount to nearly $7 million less in endowment spending per year.

According to Bowdoin officials, college President Barry Mills, a former corporate lawyer in New York City, believes Pomona's situation mirrors what would happen at Bowdoin. But not everyone agrees that divesting is a bad investment decision.

"We divested for the moral imperative, but not at the expense of smart investment planning," says Melik Peter Khoury, executive vice president at Unity College, the first in the nation to divest from fossil fuel in 2012. Khoury says since divesting, Unity has met all of its investment goals, adding more than $2 million to the $13 million endowment it started with.

And the fact that some fossil fuel funds co-mingle with others, Khoury says, is not a strong enough reason to reject divesting. "Make the commitment to divest, and every time one of those items is freed up, it can then be re-invested. You can have a three-year timeline. You can have a five-year timeline. You can have a seven-year timeline. If you're really that worried, you can have a 10-year timeline."

The CEO of Pax World Mutual Funds, Joe Keefe, says there's a growing body of data to show that so-called Environment, Society and Governance - or ESG -  funds don't perform any differently than traditional funds. "And, in fact, there is research suggesting that ESG funds carry less risk and may even deliver better performance over the long term."

Keefe says divesting is an important consideration for companies and institutions. "But divesting from fossil fuels isn't the only way you can account for climate change in your portfolios."

Assistant Business Professor at the University of New Hampshire Fiona Wilson says it's just as important to consider what to invest in. She says a couple years ago, a group of students at UNH employed that strategy successfully. They researched and presented the school with data that showed sustainable funds can perform well.

As a result, "The University made a commitment to create what's called a sustainability sleeve," Wilson says. "So now anytime a donor gives money to the University of New Hampshire, that donor can indicate their funds should be invested in sustainably-managed funds."

In the case of Middlebury College, when school leaders decided not to divest, they also made a commitment to expand their investment in sustainable funds, says Bill Burger. "And we now have approximately $25 million invested in those companies, and we plan to increase it to $50 million over time."

That's up from about a $4 million investment a few years ago. Burger says Middlebury is also aligning campus operations with sustainable practices, including the purchase of solar power. He says large institutions can make a difference in a number of ways.