Dear Members of the Swarthmore College Community,
Following extensive preparation, analysis, and robust discussion and debate by managers on both sides of the issue, the Board of Managers of Swarthmore College reached consensus not to divest from fossil fuels. The sense of the meeting was to reaffirm its investment guidelines, which since 1991 have stated that the “Investment Committee manages the endowment to yield the best long term financial results, rather than to pursue other social objectives.”
The Board is fully committed to addressing the threat of climate change, however. To affirm our commitment, the College will intensify its sustainable practices as an institution. Our efforts will cut across all aspects of College operations including new construction, energy consumption, water usage, and recycling, and also the curriculum and investment practices. We will build upon important environmental efforts that have long been underway and expand upon them.
Additionally, the Board decided to establish a Green Fund. This new option will enable alumni and others to contribute to an alternative fund that will not invest in fossil fuels. Individual members of the Board pledged personally to match anticipated contributions.
We are grateful to the students, faculty, staff, and alumni who contributed materials for this important discussion, and to those who have been actively engaged in the issue of climate change, helping to focus our attention on the need for action.
Gil Kemp, Chair
Statement on Sustainability and Investment Policy
The managers of Swarthmore College agree that climate change is the most pressing issue of our time and that Swarthmore College can—and must—play a leadership role in helping to curb the seemingly insatiable appetite for fossil fuel. We believe that in order to effect real and tangible change, we should focus our efforts on reducing both institutional and individual consumption of fossil fuels.
Our actions over the course of this year have reinforced our commitment. In December of 2014, the Board of Managers committed $12 million toward making the new Biology, Engineering, Psychology (BEP) building a model for environmentally intelligent construction practices and energy usage.
In February, the Board sponsored a two-day sustainability forum that focused Swarthmore’s efforts on environmental sustainability and outlined the steps needed for the College to address climate change. Among the initiatives proposed, and already underway, the College plans to:
- Accelerate improvements to the energy efficiency of existing buildings, including an evaluation of the College’s rental properties for their use of energy and water.
- Implement the Sustainability Framework for all construction and renovation projects.
- Manage the acquisition and use of college-owned vehicles to improve fuel efficiency and reduce emissions through smarter vehicle usage.
- Explore the use of solar energy to provide a portion of the College’s electricity.
- Take steps toward becoming a zero waste campus in order to respect our community neighbors, reviewing the College’s purchasing habits and implementing ways to reduce waste sent to the Chester incinerator.
- As a prelude to ambitious curricular initiatives, support pilot programs, such as the development of an interdisciplinary course for fall 2015. Initially this will provide year-long stipends for student research and project management assistants.
- Create cultural change within the campus community by supporting the work of our student Green Advisors in the residence halls and academic buildings.
Our Fiduciary Responsibilities
While the Board is committed to taking positive action to champion environmental sustainability, it must stay true to its governance responsibilities as the stewards of the College and its endowment. The College’s budget is dependent on the endowment to support financial aid, sustain its exceptional faculty, provide academic and extracurricular programming, and build and maintain facilities.
In particular, we seek to preserve our increasingly rare stance of need-blind admissions, funding student need with all scholarships and no loans, and expanding access to our education for those who cannot afford it. In fact, increasing the access of exceptional low-income, first generation, and minority students to Swarthmore is a top priority. At the present time, our endowment contributes about 50 percent of the College's annual operating expenses and provides an average of $40,000 per student per year to over 50 percent of our students, who are aided. Our reliance on the endowment will increase over time. Next year, for example, the endowment will provide over $70 million to cover the operating costs of the College.
We believe that deeper inquiry and engagement with our investment managers can best bring into alignment our core values and our fiduciary obligations. Our investment portfolio is highly diversified to mitigate the risks of the marketplace, and we rely on our investment managers to make choices in the best long-term interest of the College. In fact, for the last several years Swarthmore has not had direct investments in coal production companies. We continually monitor the performance of our external investment managers to assure the long-term viability of our endowment and investment strategies.
As part of our ongoing commitment to addressing climate change, we pledge to make environmental considerations part of the criteria by which investment managers are evaluated. Already we have made progress in this area. In December of 2014 we sent a letter to each of our investment managers asking them to describe their approach to climate change and their answers are being used in our ongoing due diligence we conduct for the individual managers. Two thirds of our 60 respondents consider climate change in their investment process. Further, the investment managers who do so have dedicated significant resources to defining, measuring, and analyzing the environmental impact of their investment decisions.
Our Decision on Divestment
Over the last four years the Board has engaged in substantive, probing discussion and debate on how we can best balance our goals and commitments. In September of 2013 the Board reached consensus not to divest from fossil fuel holdings. Our just-concluded May meeting was primarily focused on re-examining this decision, and included the presentation of extensive research, options, and a wide variety of views leading to robust debate.
In keeping with our Quaker traditions, our Board of Managers operates on the basis of consensus rather than a majority vote. This does not mean that to reach consensus 100 percent of the Board must be enthusiastically supportive of a particular proposal. Consensus means that the “sense of the meeting” indicates that a clear majority of the Board favors a decision and that those opposed are willing to stand aside or not actively oppose the majority.
In 1991 the Board adopted the policy of not using our endowment to take positions on social issues, believing that it could lead to a continuing stream of other divestment initiatives that in the aggregate could significantly harm the College’s long-term financial standing.
After long and deep discussion and debate, the Board decided not to modify its investment guidelines to allow for use of the endowment to meet social objectives. This decision effectively ratifies the Board’s September 2013 decision not to divest from fossil fuels, either on a full or partial basis.
We believe that the donors to Swarthmore College over the last 150 years have assigned to the Board the obligation to steward our endowment carefully in order to fulfill our mission to educate students.
It would be difficult, if not impossible, to replace our current investment managers with ones of similar quality, if we were only to invest in funds that were fossil fuel free. By having access to the best investment managers, the College has achieved excellent returns in a shifting landscape. If we were not able to work with these investment managers, it would cost the college between $10 and $20 million annually based on the past performance of our current managers. Our endowment is large but it is still finite. If returns were lower we would be facing difficult budget choices.
As evidenced by our commitment to ensure the carbon neutrality of BEP, we believe the best use of our voice and resources is to continue to focus on sustainability measures on our own campus that address consumption of carbon resources at the College.
Further, in order to be responsive to those alumni who would prefer to not have their contributions in an investment pool that contains fossil fuel companies, it is the consensus of the Board that we create a Green Fund, an alternative investment fund within our endowment that does not invest directly in fossil fuel stocks going forward. Alumni can earmark their future contributions for this fund which we expect to have in place later this year.
We are aware that there is no decision we could make that would please every participant in this global debate about climate change, sustainability and investment. However, we have examined the issues as closely and as conscientiously as we can and have reached consensus – both as the stewards of the college as well as citizens of the planet – in order to do the right thing for Swarthmore, our students, alumni and faculty, and all of our generations to come.