A principal rallying cry from students protesting Israel’s invasion of Gaza, in Oregon and other campuses around the country, is for university administrators and trustees to sell off any investments they have in companies profiting from the war, or more broadly, from companies invested in Israel’s economy.
Such “divestment” demands have become common since the movement to divest from South Africa and its apartheid regime took off in the mid 1980s. Today it’s a regular tactic of climate and social justice activists, unions and other groups looking to pressure businesses, governments or other institutions to pursue specific policy changes, from climate change and labor conditions to fossil fuels and tobacco advertising.
Last week, protesters occupied and vandalized the Portland State University library for three days until police cleared the building Thursday and made a dozen arrests. Meanwhile pro-Palestine protesters at the University of Oregon entered day nine of a “Gaza Solidarity Encampment” on Tuesday with about 140 tents pitched on a lawn facing the Knight Library.
According to the Daily Emerald, UO’s student newspaper, protesters continued to negotiate a list of demands with administrators. Those include divestment from a broad list of companies that do business in Israel, ending any partnerships with universities in Israel and protecting students who speak out against the war in Gaza. Jewish organizations, meanwhile, issued a joint statement calling on administrators to immediately disperse the protesters and protect Jewish and Israeli students from rising antisemitism on campus.
Even assuming the divestment push had broad support from students or faculty – and that’s far from clear – or that administrators bought off on it, which they haven’t, the process of identifying the companies to divest from would be highly subjective.
Richard Solomon, a Portland accountant who heads the investment committee for Portland State University’s foundation, said you’d first have to “agree on who the sinners are. We might be able to agree on some of them, but for a committee to try and agree on this” would be highly impractical.
At least 38 states have laws, executive orders or resolutions designed to discourage boycotts against Israel, according to The Jewish Virtual Library. They were adopted in reaction to the long standing Palestinian “BDS” movement to boycott, divest and sanction Israel. Oregon, however, is not one of those states.
Politics aside, experts say broad divestment would be difficult to achieve, result in less diversification, more volatility in returns, and would likely have no meaningful financial impact on the companies in question.
Bottom line, university endowments, though some are gargantuan, simply don’t own enough stock to have a material economic impact. Selling a company’s stock doesn’t impact their revenue, and there are always market players willing to step in and buy stocks they consider undervalued.
Meanwhile, the mechanics of any broad divestment are made difficult by the complexity of the investment portfolios that universities hold, which are managed by third parties and held in various forms, including index funds, real estate investment trusts, private equity, corporate and government debt. The trustees of those endowments, meanwhile, are reluctant to see them used as a political tool and have a fiduciary duty to maximize returns.
“Forty years ago, investment managers were stock pickers,” said Chris Marsicano, an assistant professor at Davidson College in North Carolina who has studied the impact of divestment. “That’s no longer the case…Direct investments are a very small part of endowments.”
Big investors, small players
Universities are big investors, some huge. An annual study by the National Association of College and University Business Officers found that 688 participating universities had total endowment assets of some $839 billion as of the end June 2023.
That’s a huge sum of money, but still represents less than two tenths of one percent of the value of equity markets in the United States, much less the world. And it is invested across the full gamut of companies and assets.
Marsicano said there are three things that students across the spectrum have been asking for: Divestment from weapons manufacturers, divestment from Israeli businesses, and divestment from companies that do business with companies in Israel.
“The first two are hard, that last is almost impossible” because it would involve such a broad group of companies he said.
For university endowments that invest in individual stocks, the task of surgically identifying a handful of weapons manufacturers and selling it could be accomplished in short order.
Brown University, for instance, agreed to have five students meet with five members of the Brown Corporation, the university’s governing body, to discuss their arguments to divest its endowment from “companies that facilitate the Israeli occupation of Palestinian Territory.” It’s unclear what the scope of that will be, or whether the endowment will act on the student proposals . In 2020, a university committee recommended that it divest from companies helping Israel to commit human right abuses, according to The New York Times. But that involved just 10 companies.
Divestment from Israeli businesses in general would be tougher, Marsicano said, as Israel is a big player in the global technology and innovation economy. And selling out of companies that do business in Israel would mean dropping investments in nearly every large American company.
That definitional challenge, and where to draw the line, is made more complicated because universities serve multiple constituencies, including influential donors who have pushed back on what they perceive as anti-semitism on campus. Foundation trustees, meanwhile, have a fairly straightforward responsibility: make money to support the university.
In a letter to the campus community addressing student demands, University of Oregon President John Karl Scholz said that divestment, like academic boycotts, runs counter to the university’s obligations to its students, the state, and to some degree, the country.
“The foundation’s work helps finance scholarships and student aid, student housing, teaching facilities, research labs, and the faculty who instruct and support students’ pursuit of their degrees,” he wrote. “I support this vital work and will not ask the UO Foundation to deviate from their responsibilities and approach.”
On Monday, the Working Committee of Graduates for Palestinians UO acknowledged in a statement that “the university has made no movement on any of our demands related to divestment. This is unacceptable because without divestment, the university will continue its complicity in the U.S.- Israeli genocide of Palestinians.”
About 1,000 people turned out at a rally on campus to support the movement on Tuesday, when protesters said they had no intention of meeting university officials’ noon deadline for them to leave.
Small foundations, externally managed
Protesters at PSU initially had a fairly limited demand: that the university cut financial ties with Boeing, the Seattle-based aerospace and weapons manufacturer.
In a letter to the campus community, PSU President Ann Cudd said she initially found the demands “confusing and arbitrary.” She said the university has no direct investments in the Boeing, but accepted philanthropic gifts from the company. She said Boeing was a large employer in the area, and many alumnae work there. But she agreed to a forum in which student and faculty voices could be heard, and to pause accepting any further gifts or grants from Boeing, including ongoing gifts that fund scholarships at the school.
Protesters later amended that demand to include a termination of “all financial, hiring and other partnerships with Boeing and other companies complicit in genocide such as Intel, Siemens, Hewlett Packard and Leupold & Stevens, and also prevent future partnerships and investments into the aforementioned. NO WAR PROFITEERS ON CAMPUS.”
UO student groups, meanwhile, have previously demanded that the university divest from big U.S companies like Caterpillar, Motorola and Hewlett Packard, among others, as well as Sabra, an Israeli manufacturer of hummus, and Sodastream, the soda machine company that was acquired by Pepsi in 2018.
Andy Gitelson, executive director of Oregon Hillel Foundation, which provides services to Jewish students at UO and Oregon State University, called those demands performative, impractical and antithetical to a university’s mission.
“What is the message it sends to Jewish students on campus?” he asked. “Howe are you creating this list of companies? What kind of litmus test does that set up… There are an infinite number of companies with ties to Israel.”
In the scheme of things, PSU’s Foundation is tiny, with just $145 million in investments at the end of its 2023 fiscal year, according to its 2023 financial statements. Some $92 million of that is invested in domestic and international stocks, another $10 million in private equity and hedge funds and the balance in government and corporate bonds, and cash.
The University of Oregon’s foundation is considerably larger – $2.4 billion at the end of 2023 – but still very modest compared to institutions such as Harvard University and Yale University, which have tens of billions at their disposal. And given the size of Oregon’s foundation, it’s unclear where the student demand came from to: “Divest $2.8 billion that have been funneled into weapon manufacturing companies” according to the Eugene Register Guard.
Neither foundation publicly releases a detailed breakdown of their investments, but all the money is managed by external investment managers. To the extent it directly invested in individual equities, the foundations could identify the companies in question and liquidate them quickly. But that’s not typically the case.
Instead, like the average 401(k) investor, the foundation holds shares in a variety of funds that buy stock in hundreds or even thousands of companies, which investors don’t typically pick and choose.
Solomon, the Portland accountant who is on PSU’s investment committee, said all of the university foundation’s stock investments are in funds, and most of the exposure to the large companies identified by the protesters are in index funds, pooled investments that look to mirror the performance of market benchmarks like the Standard & Poor’s 500.
Besides the fact that companies like Intel and Hewlett Packard are major employers and provide lots of jobs to PSU students, Solomon said, large tech companies that do business in Israel are some of the biggest in the country, and make up a substantial portion of those index funds.
Mechanically, it is possible to design custom funds that exclude so-called “sin stocks.” Religious organizations do it. So do individual and institutional investors opposing fossil fuels. UO’s foundation is one of them. It hasn’t made any new investments in fossil fuels since 2016.
But such filtering is time consuming. And unless the resulting fund attracted a broad group of investors, the cost of managing it would be higher and cut into returns. Depending how broad the divestment is, it could also increase the volatility of an investment portfolio, something university trustees look to avoid.
Likewise, the foundation doesn’t have any say in where managers of its private equity and hedge fund investments deploy their money. Those investments are also diversified, invested in so-called fund of funds that hold shares in a variety of funds to seek diversification in asset managers, geographies and strategies.
Those investments are also illiquid long-term plays, meaning they don’t have an immediately available market price or ready secondary buyers. Selling them is possible, but the foundations would likely pay a big price for doing so.
At the end of the day, Marsicano said, the one place student protests are more likely to have traction, particularly in an election year, is on the Biden administration. It is looking to preserve the same coalition that got him elected in 2020, including 18- to 24- year-old voters, even as Republicans use the protests as a wedge issue.
“The Biden administration is clearly paying attention to this,” he said “We know they are because they talk about them…The longer this goes on, the more their motivation to change course to get Israel to the negotiating table.”
– Ted Sickinger is a reporter on the investigations team. Reach him at 503-221-8505, [email protected] or @tedsickinger
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