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Dr. Stephen Mulkey on Divestment

“The overarching mission of higher education is the maintenance and renewal of civilization. It is morally indefensible that an institution dedicated to the proposition of the renewal of civilization would simultaneously invest in its destruction. Divestment is not optional.”

-Dr. Stephen Mulkey, President Emeritus, Unity College

As Unity College looks toward the future, and the next decade post-fossil fuel divestment, it is important to honor our past. Unity paved the way on fossil fuel divestment, thanks in large part to the brave work of President Emeritus Stephen Mulkey.

“President Emeritus Mulkey always put the institution first, and his vision for divestment helped shape the college we have become today. He showed us that there are times that you must take a leap of faith in order to change the world,” said Unity College President Melik Peter Khoury.

Dr. Mulkey’s work has helped pave the way for others, and in this article, he gives an inside look at the obstacles Unity College overcame – and the steps other institutions can take – to make fossil fuel divestment a reality.

Unity College: When you decided to divest, did you ever believe you’d see the day where colleges like Harvard and Stanford would be following Unity College’s lead?

Dr. Mulkey: The idea for divestment by Unity College originated with a member of the Unity Community. This person called me several times during the first few months of my presidency and urged me to lead the effort to divest. Initially, I was skeptical that our Board of Trustees (BOT) would welcome such an idea, and as a new president, I had a lot of other issues that commanded my attention. Because Bill McKibben and 350.or were pushing this idea, it grew into a concern for me, so much so, that it disturbed my ability to fall asleep at night. I could find no compelling reason not to pursue this, and eventually got in touch with our financial managers and pushed them to come up with a path forward. I knew that we would need to be prepared to answer some hard questions from the BOT.

Divestment had been used before (e.g., boycott of companies in the South Africa during apartheid), but it had never been applied as a strategy to remove the social license of the fossil fuel companies and their allies to continue destroying the future for our children. In late 2011 fossil fuels constituted 18% of market capitalization. Although I initially hoped that our lead would bring needed publicity to Unity College and that other institutions would soon follow, I was aware that big institutions with huge endowments would see divestment as a threat to their return on investment. Ironically, the financial consequences of a mistake in investments would be proportionally far greater for small institutions such as Unity College, which at the time had an endowment less than $10 million.

Unity College Divestment

Dr. Mulkey with Unity College Students in 2012.

Unity College: What is it like knowing Unity has helped pave the way for more than a thousand other institutions and municipalities?

Dr. Mulkey: Naturally, I am very proud of our BOT and the Unity College community for supporting this effort. To my knowledge we were the first institution of higher education to divest from the top 200 fossil fuel companies as requested by 350.org, but it is important to note that one other institution in New England (Hampshire College) had a policy that broadly avoided such investments.

Worldwide the amount under active divestment by many different types of organizations in November 2021 exceeded $39 trillion. Higher education endowments are 15% of this and faith-based organizations represent 35%. Currently the market capitalization of the fossil fuel companies is well under 2% and Exxon was recently excluded from the S&P 500 because of its poor earning performance. Return on investment in renewables now leads the major market indices. Thus, divestment is now good financial management as well as being morally necessary.

Unity College: What were the biggest hurdles the college faced to divest and how did you overcome those obstacles?

Dr. Mulkey: There are several aspects of divestment that need to be assessed before an institution can move forward. Here are three broad categories of considerations that guided my thinking as I developed the argument for the BOT:

Drivers: (1) Importance of social movements for higher education. (2) Possibility of developing a comprehensive supportive investment policy that includes divestment. (3) Essential morality of aligning the mission of higher education with financial investments. (4) Evidence that divestment is materially meaningful (i.e., will it have financial impact directly or through leading other institutions to adopt similar policies)

Barriers: (1) Gaps in the investment chain, e.g., comingled funds in mutual portfolios managed by a fund manager who may not share the goals of divestment. (2) Inadequate data disclosure by fund managers. (3) Limited options for alternative investments. Note that there were dozens of alternatives in 2011 and there are many more now. (4) Inertia in the status quo. This is probably the most significant impediment in the minds of many members of the BOT. Why mess with a portfolio that is showing healthy returns? It turned out that in the subsequent three years after beginning the process of divestment, Unity College’s investments beat the market average, and during the first two years, did so at a substantial margin.

Strategies: (1) Develop a portfolio of investments that could result in positive climate outcomes. Unfortunately, returns on renewable energy companies were far below those available from fossil fuel companies. Thus, Unity College turned to other investments that were not directly aligned with the top 200 fossil fuel companies. This required our investment firm, Spinnaker in Portland, to develop an innovative portfolio, which resulted in very substantial returns and only a small increase in risk. Spinnaker specialized on specific Exchange Traded Funds, which allow a relatively quick pivot from the old portfolio to one that was aligned with the mission of the College. (2) Essential to our divestment effort was the need to address the potential errors of omission. How much would we lose by not being invested in fossil fuels? The only way to assure the BOT that we could address this issue was through actual performance of our new portfolio and the promise that we would proceed cautiously while monitoring market trends.

Unity College: What advice would you give college leadership struggling right now with the decision as to whether they should divest their institution’s endowment from fossil fuels?

Dr. Mulkey: 1. It is essential to be prepared with alternative investment strategies and to provide estimates of possible return on investment. Presently the financial case is easy to make since traditional fossil fuel energy stocks are doing so poorly and renewables are leading the market.

2. Discretely go to the students and energize them to support the new policy in large numbers. Administrations should do this through the faculty and student leaders while remaining in the background. This is tricky because the president reports directly to the BOT, which may not appreciate it if the president organizes to the students to support a policy that they have not considered.

3. It is important that whatever policy the BOT adopts be materially relevant to the intention of divestment. There are many ways that the BOT and donors can use deflection to make it appear that divestment is underway, when in fact there is no real movement. Insist on clarity of mission and language by the BOT. In this case the president must show courage and leadership at the risk of alienating members of the BOT.

4. Be able to assure the BOT and donors that this is in their best interests. Some donors may feel that this is not a proper use of their funds. Consult broadly with the BOT to address their concerns. Note that in many cases divestment from fossil fuels results in an increase in donations, as was the case with Unity College.

Additional thought:

For me, the most compelling statement is the one that I made to the Unity community in 2021:

“The overarching mission of higher education is the maintenance and renewal of civilization. It is morally indefensible that an institution dedicated to the proposition of the renewal of civilization would simultaneously invest in its destruction. Divestment is not optional.”