By SUSAN JONES
“Divest” has become the rallying cry of pro-Palestinian protesters at college campuses throughout the United States. The groups want their universities to end all investments in Israel-related funds and businesses to put pressure on Israel to stop its war against Hamas in the Gaza Strip.
This isn’t a new tactic, but it is one that’s only been marginally successful at Pitt.
In March 1987, the Board of Trustees voted to purge Pitt's endowment of holdings in companies doing business in the then-racially segregated nation of South Africa. The vote came after long discussions by an ad hoc committee of the board, and the decision was made after several other universities had already divested from South Africa. The ban remained in effect until June 1994, when the trustees rescinded the policy in response to South African reforms.
More recently, Pitt student, faculty and staff groups first started asking Pitt to divest from all fossil fuel-related investments in 2014. In 2021, the Board of Trustees agreed with its Ad Hoc Committee on Fossil Fuels to recommend Pitt stay the course to reduce holdings in fossil fuel-related businesses in the consolidated endowment fund to zero by the end of 2035.
Through both of these process, it was made clear that the power to make substantial changes to the University’s investments lies solely with the Board of Trustees. Then-Chancellor Patrick Gallagher said in 2019 that the board has an important “balancing act” to maintain a steady income from the endowment, while still aligning investments with the University’s core values as much as possible.
While University administrators can’t make changes directly to the consolidated endowment without board approval, they can work to present a strong case to the board. Gallagher said in 2019 that resolutions, petitions or signatures from student groups won’t necessarily strengthen the case for the board, as critical analysis is what’s needed.
Pitt’s Consolidated Endowment Fund was $5.56 billion at the end of the 2021-22 fiscal year, according to the latest filling of the University’s annual 990 IRS form.
The decision to move toward fossil fuel divestment came after a long process that started in January 2018 when Gallagher created a Socially Responsible Investment Committee of faculty, students and staff “to investigate and provide a foundation of facts that could be used by the University to explore socially responsible investment (SRI) strategies that may be suitable for consideration for the University’s endowment.”
That report led Gallagher to instruct the Office of Finance to develop Environmental, Social and Governance (ESG) criteria and present it to the trustees’ Investment Committee. The board subsequently developed a socially responsible investment policy and formed the ad hoc committee on fossil fuels.
The University has since produced two ESG reports, in 2022 and 2023, that update the consolidated endowment fund’s exposure to fossil fuels. The 2023 report also said external investment managers that oversee approximately 87 percent of the consolidated endowment fund by value “have formal ESG policies in place or take ESG considerations into account when making investments.”
Holdings in fossil fuels decreased from 10 percent of the endowment in 2015 to 5.9 percent as of June 30, 2021. During the next year, the percentage climbed to 8.1 percent as of June 30, 2022. The report said, “The increase in total exposure to fossil fuels was primarily attributable to changes in the market value of fossil fuel companies and commodity prices for oil and natural gas and was not the result of new investment activity.”
“Most of the remaining exposure is in private equity investments, which are expected to drop to zero by the end of 2035,” the ad hoc committee’s report said.
Chris Marsicano, an assistant professor of education studies at Davidson College who studies higher education finance, gave an explanation of how some of the endowment investments work to PBS:
“What they're doing is investing in hedge funds or private equity. And oftentimes, with the vast majority of institutions, they're looking at index funds. Now, that's a lot of different businesses packaged in these funds. And it's difficult to know at any given time what those businesses are doing.
“The way I'd like to talk — to think about it is, you may invest in, say, Pepsi, but not know that Pepsi is about to buy SodaStream, an Israeli company, as they did in 2017. If an endowment manager wanted to completely divest from Israel, that would mean, once that deal is closed, divesting from Pepsi altogether.”
Thus far, no university has agreed to protester demands to divest from Israel, and some, like Columbia University in New York and the University of California, have specifically said they would not divest. The protesters at Columbia were seeking divestment from several multinational companies, like Google, Amazon and Alphabet (the parent of Facebook). Only a few schools, such as Brown University, have said they are open to a dialogue about divesting.
Susan Jones is editor of the University Times. Reach her at suejones@pitt.edu or 724-244-4042.
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