Normally, when I receive another alumni fundraising appeal from Dartmouth's development office, my main concerns are how much generosity my checking account can absorb and what I'm going to do with another tote bag. But, as I await the next request, I have a new worry: Will my donations be funneled through obscure financial instruments into investments that support global warming? Weapons production? How about union-busting? Or even slavery?
For years, students have fought for social and environmental responsibility in endowment investing. Long-term residents of the Hanover plain will remember when Dartmouth Review staffers destroyed a shanty-town erected on the Green to push for divestment from South Africa. And when I was a freshman, a number of us launched a successful effort to get Dartmouth and, eventually, other New England schools to sell off bonds that helped to finance controversial hydro-electric projects in Canada.
But now, universities are increasingly turning to hedge funds, secretive firms that can shield endowment investments from public scrutiny. Maybe Dartmouth students wouldn't stand for it if they knew that their education was funded by investments in arms trading or tobacco. But invest through a hedge fund, and they'll never find out.
Is there reason for concern? While I was a master's student at Yale, we discovered that one hedge fund, Farallon Capital Management, was investing Yale funds in a water-marketing scheme in Colorado. Local communities were fighting the project, charging that it threatened both farmers' livelihoods and the ecological integrity of the Great Sand Dunes national monument.
Digging further, we found that Farallon is one of the largest hedge funds in the world, that the firm specializes in investing for universities and other tax-exempt investors, and that many of Farallon's investments raise ethical questions. For example, Farallon was a principal partner in a super-elite golf course in California that never followed through on promises to provide public access and mitigate environmental damage.
Farallon helped finance construction of a giant coal-fired power plant in Indonesia, despite government objections over environmental concerns. The project received long-term contracts to sell electricity at inflated rates to the Suharto regime in Indonesia, while many observers noted that a Suharto relative was a partner in the project.
Farallon also joined a partnership that bought a bankrupt textile company in Argentina. Even though the owners reported they had turned the company around by the end of 2000, it failed to pay workers' wages for several months the following year.
Last Friday, as part of a national day of action involving 70 campuses, I and other alums wrote Jonathon King, Dartmouth's Director of Investments, asking if the College invests in Farallon. If the answer turns out to be "yes," then there is ample reason for students to be concerned.
As institutional investors who collectively control almost $200 billion of assets, colleges and universities play a major role in the global economy. Students need to come together on the Dartmouth campus and many others to debate how we can reconcile college and university investment strategies with the values at the core of the Academy. But first, we need more disclosure about where our monies are invested, so we can ascertain the facts on which that debate must be based.
"Hypocrisy in anything whatever may deceive the cleverest and most penetrating man," wrote Tolstoy, "but the least wide-awake of children recognizes it, and is revolted by it, however ingeniously it may be disguised." Students, while no longer children, retain enough idealism to be revolted by the hypocrisy of schools that teach one lesson in the classroom and another through their actions. For colleges like Dartmouth, and for the planet and its inhabitants, the stakes could hardly be higher.
