Whitman continues to divest from fossil fuels despite financial worries

Abby Malzewski, Staff Reporter

Whitman is continuing to reduce investments in Carbon Underground 200 groups more than two years after the initial vote to divest from fossil fuels. The Board of Trustees has identified in their Statement on Divestment from Fossil Fuels that Carbon Underground 200 are the top publicly-traded fossil fuel reserve holders and the primary indicator of Whitman’s divestment progress.

Chief Financial Officer Peter Harvey explained how the Board of Trustees who headed the initial vote to divest are informed of changes in divestment.

“We prepare a report annually for the trustees,” Harvey said “It is posted on our endowment divestment website.”

As of November 2020, the most recent report, the total portfolio exposure of Whitman’s endowment to the Carbon Underground 200 has dropped to 0.35 percent by June 2020 from 0.51 percent in June 2019 and 0.92 percent in June 2018. Annual Investment Committee reports along with the Endowment Divestment Policy are published on Whitman’s website. 

Adam Rooney, a senior economics and Hispanic studies double major, said the college seems to be keeping up with plans to steadily reduce holdings in Carbon Underground 200. Within these annual reports and any additional information on the website, Rooney pointed out that little is announced about the specifics of fossil fuel non-marketable funds. Fossil fuel non-marketable funds are private funds that are contractual commitments to be held for a specific period of time.

“I would be interested to learn what fossil fuel non-marketable funds Whitman has and has sold recently,” Rooney said. “I don’t know what these investments are.”

Harvey said in an interview with The Wire in March 2020 that Whitman decided against immediately divesting from non-marketable funds.

Whitman has recently undergone massive financial changes. From the loss in revenue due to the coronavirus pandemic to the Financial Sustainability Review, Whitman’s investments have required reconfiguration.

In an email to The Wire, Chief Financial Officer Peter Harvey assured that, despite the amount of financial change Whitman is undergoing, divestment plans remain the same.

“Neither the Financial Sustainability Review nor COVID-19 have changed our plans for divestment,” Harvey said.

Rooney seemed to be convinced that Whitman’s financial changes would not have an impact on divestment, but he pointed out that the college can change rates of divestment at any time.

“I would assume that the financial changes brought about by the coronavirus pandemic and the Financial Sustainability Review will not have large effects on divestment specifically,” Rooney said. “However, the college has some control over the rate of divestment.”

Unrelated to the effects of the COVID-19 pandemic or the Financial Sustainability Review, the most likely large-scale change in divestment could be from selling interests in non-marketable investments with fossil fuel exposure. If interests in non-marketable investments with fossil fuel exposure are not sold, the Committee will have to cash out these assets over the next ten years.  

According to the Nov. 2020 report, The Board of Trustees reviewed quotes in Feb. 2020 for selling to investors. These changes could potentially affect how quickly the college divests. 

“Although the Board of Trustees did not commit to selling these assets before their investment terms end, the Investment Committee felt it prudent to evaluate it as a potential option,” the report says. “Based on these quotes the College would need to sell interests in these managers for a 40 percent discount. This discount is too significant to be viable, but the Investment Committee will continue to review this option.” 

The 2020 report also contains optimistic sentiments for the future of divestment at Whitman. Below the bullet point list of actions made by the Investment Committee in 2020, there is a section detailing the next steps. 

“The Investment Committee will continue to reduce its exposure to managers with Carbon Underground 200 exposure and dollar-cost average away from these investments to take appropriate steps towards divestment,” the report says.

Rooney explained dollar-cost averages during the divestment process and how they can be beneficial for the college. 

“When they say that they are reducing exposure with a dollar-cost average away from these investments, that means that the new investments are being bought at a gradual rate, investing a certain amount of dollars each month,” Rooney said. “This is an investment strategy to avoid the price swings of the market and a tool to resist trying to ‘time’ the market when buying and selling stocks.”