Story of the Week: July 2020

“...universities hold their endowments in trust for students. A decision to accept lower returns in order to put pressure on oil companies would violate this trust while opening the door to various other politically motivated pressures to weaponize the endowment in the pursuit of various other social goals.”

“Asset managers always say that the smartest and most efficient way to keep a healthy investment portfolio is through diversification. Fixating on divestment as the primary goal of a university’s investment strategies threatens both investment returns and opportunities to engage with companies directly. Harvard Forward’s vision and strategy is not only restrictive in considering other more impactful actions, it is also worrisome as it poses a direct threat to the independence and autonomy of the University’s asset management institutions”.

“Harvard Forward, a controversial anti-fossil fuel coalition has secured three seats on Harvard’s Board of Overseers...Overseers have no control over investment decisions or the university’s endowment. The Harvard Alumni Association noted that Overseers “do not have direct influence over the fiduciary, investment, and/or divestment decisions of the University”. Yet, Harvard Forward thinks otherwise. The group launched and coordinated an aggressive campaign to secure seats on the Board of Overseers, leveraging its influence in also electing new members to the Corporation, the government body in charge of fiduciary responsibilities.”

“A hasty divestment brought about by student activists will impact a school’s endowment. While oil stocks have been especially beaten down in 2020 thanks to the struggle of OPEC+ to reach a production agreement and the Coronavirus pandemic destroying a significant chunk of demand, oil companies have traditionally been a steady and dependable stock that pays a significant dividend. Losing such a base means that a portfolio that sensibly balances risk and return can take less risk and, thus, should expect a lower long-run return on its investment.”