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Middlebury College last week said it will sell its holdings in fossil fuel companies, phasing them out of its endowment over 15 years and making no new investments in the sector. The decision represents a major reversal of the college’s 2013 rejection of campus activists’ demand that it divest these holdings.

What has changed?

The weather, mostly. And perhaps the climate on campus and in Middlebury’s investment house.

A new president has welcomed what amounts to a years-long, ongoing debate on the issue, pushing to broaden the debate to include campus sustainability. Administrators and trustees have quietly engaged with a new and impatient group of students who see the effects of climate change more clearly than ever.

“We made this conversation about what we do about our energy use in the next 10 years,” said Laurie Patton, a religion scholar, poet and former Duke University arts and sciences dean who became Middlebury’s president in 2015. Framing the divestment debate more broadly was crucial to its success, she said in an interview. The broader conversation included a commitment, among others, to getting 100 percent of the college’s energy from renewables.

“Once people start thinking more collaboratively, and not based on a single issue, that changed the conversation on campus and allowed trustees to be more part of the conversation,” she said. It also allowed people who wouldn’t necessarily have seen divestment as “their issue” to consider it. “So people started to collaborate a lot more,” she said.

Alec Fleischer, a Middlebury junior from New York City who is majoring in environmental science, said the mood has changed considerably since he arrived on campus in 2016 with plans to help revive the divestment proposal. The response from college leaders at the time, he said, was “a resounding no. We were told to stop. ‘It’s never going to happen.’”

But a spring 2018 student referendum that found about 80 percent of students in favor of divestment -- and a faculty referendum last fall with 98 percent approval -- showed strong campus engagement in the issue, he said.

In the meantime, the urgency of the climate change debate has grown, said Jeannie Bartlett, a 2015 Middlebury graduate and veteran of the earlier divestment effort. “It was abundantly clear in 2013, but I think we continue to feel that closer to home every year.”

A seminal 2014 report by the Intergovernmental Panel on Climate Change made it “abundantly clear how fast we have to move,” said Bartlett, who now works for the Vermont environmental group She said the northern Vermont farmers she works with are seeing more frequent and intense rainstorms that are washing out their planted fields “in ways that didn’t used to happen.”

Middlebury students, of course, have long seen climate change as a serious problem -- the college was the first in the U.S. to offer an environmental science major. But Bartlett said it came down to new leadership: once President Ronald D. Liebowitz left for Brandeis University, she said, the conversation changed.

“I never got the sense that this effort was something that he thought the college should do, at least very soon,” Bartlett said. “Yeah, he helped create a dialogue and a platform for the conversation, but I didn’t get the sense that, in conversations between him and other administrators or investors or the board, that he was pushing for divestment at all.”

By contrast, she said, Patton seemed much more interested. “I think that her heart was behind it from sort of an earlier point.”

For her part, Patton said trustees, students, faculty and staff “remained in the conversation over years. Student generations came and went, trustees sometimes came and went, but everybody committed to staying at the table, even if they couldn't find consensus for years. I really want to underscore how powerful that is.”

New Tools to Track Investments

In 2013, Liebowitz said Middlebury’s Board of Trustees basically had no choice but to keep a small proportion of its endowment, then valued at $970 million total, in the fossil fuel sector. The college’s money managers had to stay the course, given “the lack of proven alternative investment models, the difficulty and material cost of withdrawing from a complex portfolio of investments, and the uncertainties and risks that divestment would create,” Liebowitz wrote at the time.

The college has since 2005 retained the services of the Virginia-based investment firm Investure, which by 2013 managed the endowments of 13 colleges, universities and foundations, with a combined fund of about $10 billion.

Middlebury’s funds by then were commingled with the others’, and it was “unlikely” that any of the 150 fund managers tasked with managing Middlebury’s portion “would adopt a policy of fossil-free investing,” Liebowitz said -- especially since the firm would have to reinvest more than half of its portfolio to do so. And he explained that Investure would have to gain the agreement of the other 12 institutions to do it. To pull out of the fossil fuel sector, he said, would require nothing less than withdrawing from the 13-member Investure consortium “at considerable cost now and in the future.”

Nearly six years later, Investure still manages Middlebury’s endowment, now valued at just over $1 billion. Suddenly, extracting its money from fossil fuels is not such a heavy lift.

David Provost, executive vice president for finance and administration, said that in 2013, Investure didn’t have systems in place that allowed it to understand “where every one of those dollars ended up. That has changed in the last two years.” Investure has made a significant investment “to be able to drill down into the investor's level -- we have a better understanding of where money sits,” he said. “The sophistication and the advances in the reporting, and the ability to look into the funds is making what was very difficult five [or] six years ago easier now.”

Another factor making the shift easier: the new plan calls for a years-long, gradual reduction in fossil fuel investments, with Investure phasing out direct investments by 25 percent over the next five years, 50 percent over eight years and 100 percent in 15 years. Later this year, the college said, Investure won’t make any new investments on Middlebury’s behalf in private investment funds that focus on oil and gas. At the moment, the investment in fossil fuels stands at about $50 million to $60 million, or about 5 percent of the endowment (other colleges that have "divested" have merely committed not to invest in the sector in the future, but didn't have any holdings subject to divestment).

Patton, Middlebury’s president, said the gradual drawdown “felt to us like a moderate approach that really minimized our risk financially. And that's a really different approach than, ‘We have to do it now.’”

Because of the slow drawdown, she and Provost said, the effect on the endowment will be minimal.

But Fleischer, the environmental science major from New York City, said his understanding is that the 15-year drawdown represents “a floor, not a ceiling.” In other words, he said, advocates will continue pushing for a faster timeline.

Hard to Make a Financial Case

Middlebury is by no means the only campus that has debated divestment over the past several years. The environmental group estimates that 1,029 institutions have divested from the sector or pulled back on certain types of investments, such as coal or coal and tar sands. In the process, the group says, they've withdrawn an estimated $8 trillion in fossil fuel investment. Of those, the group says, 15 percent, or about 150, are educational institutions.

Divestment fights have also played out with mixed results at Brown, Cornell and Harvard Universities, among others that hold large endowments. In 2013, then Harvard president Drew Gilpin Faust wrote a lengthy public letter explaining why the university shouldn’t divest, saying students should be “very wary of steps intended to instrumentalize our endowment in ways that would appear to position the University as a political actor rather than an academic institution.”

Faust added, “The endowment is a resource, not an instrument to impel social or political change.”

A 2018 Inside Higher Ed survey found that most colleges' chief business officers agree with Faust: 58 percent said decisions about investing endowment funds should be made primarily on financial considerations, rather than political or ethical ones. In prior surveys, the percentage has been near 60 percent.

In a few cases, courts have gotten involved in endowment conflicts. In 2016, a state appeals court rejected a move by Harvard students pushing for divestment who had filed a lawsuit to assert “special standing” so that they could be considered a nonprofit benefiting from Harvard’s endowment.

Also in 2016, a Barnard College task force stopped short of recommending that the college totally divest from fossil fuel companies. Instead it called for divesting from companies mining coal and tar sands, which are considered particularly harmful to the environment. And it recommended divesting from fossil fuel companies that deny climate science or that attempt to undermine climate change mitigation efforts. Barnard said it wanted to highlight scientific integrity and reward companies that follow best practices, while divesting from companies that ignore science. Among the educational institutions that have divested in some form, many have taken that route, according to

Robert Goldberg, at the time Barnard’s interim president (now its chief operating officer), told Inside Higher Ed that the move was an attempt to “shift the narrative and also to differentiate companies in the industry.” He added, “A more nuanced approach is potentially a more impactful approach.”

Barnard has since partnered with the consulting group Fossil Free Indexes and the Union of Concerned Scientists to evaluate 30 oil and gas companies' positions on climate science and climate change. A 2017 analysis found that none of the 30 companies denied the existence of climate change or made statements in direct opposition to the scientific consensus that human activity is a primary contributor to it. But Barnard said two-thirds of the companies -- including all 14 U.S.-based companies -- scored “poor” or worse on its analysis, either misrepresenting the science, downplaying the need to reduce emissions or providing no position on the science. Barnard said it was in the process of working with its investment group on a divestment approach based on the analysis.

Advocates for divestment have long said that the strategy will move the needle on climate change by effectively starving energy companies of funding. But Brad M. Barber, a professor of finance and the associate dean at the University of California, Davis, Graduate School of Management, said it’s not that simple. While there may be a moral case for divestment, he said, “the financial case is a little bit harder to make.” For one thing, other investors will almost certainly swoop in to buy shares. Even if share prices drop, he said, lower stock prices allow investors to buy them at a bargain and earn higher average returns. This is what happened when boycotts hit tobacco stocks, he said: “If a lot of people or investors eschew a particular investment, it's possible that that investment could be discounted and offer good returns.”

After the Middlebury announcement, environmentalist Bill McKibben, a founder who is also a Middlebury professor, wrote in The Guardian that the Vermont students “never gave up, passing on the activist torch to each new entering freshman class.”

He also offered kudos to Patton, who he said “proved an adept conciliator able to help her institution move.”

Like many at Middlebury, McKibben said a lot has changed elsewhere since 2013, with record-high annual temperatures in four of the past six years and “hurricane after firestorm after drought,” among other disasters. At the same time, he said, the prices of solar panels and battery storage have fallen sharply, making solar energy generation and storage “the cheapest way to produce electrons across most of the globe.”

And the fossil fuel sector, he said, “has underperformed the rest of a surging stock market.” He noted that if neighboring New York State had divested of such stocks in its pension fund, it’d be returning $19,000 more per retiree. Investure referred questions about performance of Middlebury’s endowment to the college.

Patton said environmentalists have made the so-called stranded asset argument, which posits that fossil fuels’ value will eventually go down as users move to alternative energy sources. "We are open to having that debate, where reasonable people could have different views," she said. "Ultimately we had to focus on risk assessment: What would happen if the value of fossil fuels went up? What would happen if the value went down? And we felt that, in both cases, our model could work to preserve the value of our endowment and allow us to fund our educational mission."

Barber, the UC Davis finance professor, said that while short-term downturns in one sector may have an effect, endowment investors generally operate on very long-term horizons, making it “hard to make a very clean financial argument” for divestment.

“Looking at the performance of any particular industry or sector over the course of a year or two or even five years is really difficult to draw [an] inference about whether it consistently outperforms or underperforms,” he said. Mutual fund managers “are really good” at thinking longer term. “The general public will look at what's happened in the last month or the last year and draw strong inferences. You just can't -- there's too much volatility in markets to do that.”

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