(protestors chanting)
- [Narrator] Columbia's pro-Palestinian encampment
triggered similar student protests across the country
and renewed calls for universities to divest themselves
of investments in Israel
and companies profiting from the Israeli war in Gaza.
(protestors chanting)
- It's the most intense and contentious debate
that I've seen over how university endowments
should be invested.
- [Narrator] So, what would divestment look like?
How realistic is it?
And what are the challenges involved?
What began at Columbia University on April 17th
has swept college campuses across the country.
What unites many students is their demand for divestment,
which has its roots in a Palestinian movement known as BDS,
or Boycott, Divestment and Sanctions.
Divestment, simply put, means selling off an investment
or business interest, but in practice it's more complicated.
To begin with, the demands vary from school to school.
At Yale and Cornell,
students have called on the universities
to stop investing in weapons manufacturers
directly involved in Israel's campaign.
By contrast, Columbia protestors are demanding the sale
of holdings in funds and businesses
that activists say are profiting
from Israel's invasion of Gaza.
These include Google and Amazon,
which provide technology services
to Israel's military,
Airbnb because it allows rental listings
in Israeli settlements in the West Bank,
and Caterpillar whose tractors Israel's military uses.
The target of students' calls for divestment
are university endowments.
- In practical terms,
the way divestment could work depends some on the endowment.
Larger endowments invest a really large share
of their portfolio in private equity and hedge funds.
If you're a big endowment,
you might have to shift your investments
from one private equity fund to another
if your private equity fund manager isn't prepared
to follow the investment guidelines that you've provided.
- [Narrator] So far, universities have flatly refused
to adjust their holdings in response to student agitation.
On April 29th, Columbia said it will not divest from Israel.
Other universities that have refused to divest from Israel
include Yale, NYU, the University of Michigan,
and American University.
Calls for divestment have long been a feature
of student protests,
where perhaps the best known divestment campaign
was during the 1970s and '80s
when activists compelled universities
to cut ties to South Africa,
then under all white rule.
In 1985, Columbia said it would sell $39 million of stock
it held in companies including Coca-Cola, Ford,
and Mobil Oil.
Eventually more than 150 universities divested themselves
of companies doing business in South Africa.
- I think looking back
at the South African divestment demands,
the protestors draw a couple lessons.
One is that they see that South African apartheid
eventually did come to an end,
and whether that was because of direct economic pressure
or a change in narrative and symbolic isolation
of South Africa,
I think is probably less important
to the protestors than whether direct economic pressure
led to that change.
I think the other consideration for looking back
is that it was a very different economy.
Wall Street worked differently.
- [Narrator] Those calling for divestment
of investments in Israel say they are motivated
by what they see as a moral argument,
that Israel is committing genocide
and forcing Palestinians to live under a form of apartheid.
Israel has strongly denied allegations of genocide
and says its Gaza operations are justified
by its right of self-defense under international law.
More recently, colleges have heeded demands
to dump holdings in private prisons
and fossil fuel companies.
- And you can look at the University of California,
which back in 2020
announced that it had fully divested from fossil fuels.
- [Narrator] Today, many university endowments
are controlled by fund managers
who widely follow a diversified portfolio model.
They typically dedicate chunks of their portfolio
to asset classes such as stocks, real estate,
and private equity, including venture capital.
Ultimately, fund managers answer to the endowments'
trustees who have the final say on investment decisions.
- University endowments are like private equity
and hedge funds because they're managed
to maximize returns at the end of the day.
Our endowments today are bigger than at any time
in our history, and that means that universities
are connected to every corner of the global economy,
but they're connected through Wall Street.
- [Narrator] Critics opposed to dropping Israel investments
note that it could be difficult
because of the secretive nature of modern endowments.
Columbia, like many private schools,
keeps most of its financial information obscure.
Its trustees do publish annual financial reports,
but those reports don't detail specific investments.
- Those funds that schools invest in,
private equity and hedge funds, they value their secrecy
'cause what they're trying to do is beat the market.
They don't want their secret sauce
to be out in front of the entire market and community.
- [Narrator] Critics of divestment
point out that universities' investments
in Israeli-linked companies likely represent
only a small portion of an endowment's overall portfolio,
meaning that the impact of one university
or even many universities selling
their Israeli-linked assets could be negligible.
A 1998 study found that voluntary divestment
from South Africa had little discernible effect
and that the boycott primarily reallocated shares
and operations from socially responsible
to more indifferent investors and countries.
Similarly, a 2021 paper found that divesting
of dirty companies
that fail to meet ESG criteria is not nearly as impactful
as its practitioners might like to believe.
Another hurdle to divestment
is the nature of modern endowments.
Because universities tend to now invest
in more complicated financial vehicles,
disentangling those investments isn't as simple
as selling specific stocks.
If say a university is invested in an Israeli company
through an index fund, which is made up of many,
perhaps even hundreds of other companies,
it would require the selling of that entire fund,
which could mean an overhaul
of the endowment's investment strategy.
- I think it's disingenuous to suggest
that it's too complicated to divest
from a certain set of assets in the economy
because it shuts down debate.
There really are a lot
of investment managers out there whose businesses
is to help investors like endowments
to invest their assets according to criteria
that aren't just maximizing return on investment.
(light music)