Over the last few weeks, there has been a growing call for environmental responsibility in Hanover. The Divest Dartmouth movement has called on the College to withdraw all of its investments in the 200 largest publicly traded fossil fuel companies. This push carries enormous implications for the College's ability to continue its financial aid offerings and general long-term financial stability.
One of the most obvious costs that divestment would entail comes in the form of returns on investments in these energy companies. The energy industry is a massive component of the United States' economy, composing nearly eight percent of national gross domestic product. With the ongoing energy renaissance in the United States, the industry delivers solid returns to its investors and holds enormous potential for future profits. Limiting Dartmouth's endowment managers' ability to invest in oil and gas companies will cost the College millions of dollars.
Using cost estimates from Swarthmore College, which has also debated divestment from fossil fuel producers, we can determine a ballpark figure for the financial cost to Dartmouth. Swarthmore's Board of Trustees put the cost of divestment at $200 million over 10 years. Its endowment, however, stands at $1.5 billion, less than half of Dartmouth's nearly $3.5 billion. Therefore, assuming that Dartmouth's investment portfolio is similar to that of Swarthmore, Dartmouth would forgo $450 million in revenue over the next decade.
What would this mean for students at the College? A rough calculation, not taking into account the effects of inflation, enrollment changes or investment strategy adjustments, would put the cost at over $10,000 per student per year. Placing this financial burden on the endowment could adversely affect the College's ability to continue offering generous financial aid packages and also create even more upward pressure on tuition. Assuming that the College decided to make up for the lost investment income through tuition hikes and cuts to financial aid, every student could wind up paying $10,000 for the elimination of divestment. Considering the current cost of a year at Dartmouth estimated this past March at $60,201 any further additions to the price tag would almost certainly prove prohibitive to many prospective students.
Beyond the foregone investing returns, there are a number of other costs that must be included in a discussion of divestment. One such foregone benefit would be the ability to take part in shareholder activism opportunities, which have recently gained traction in the business world. If engaged shareholders were supplanted by investors without the same conscience on certain issues, it would remove incentives from companies to stray from the status quo. Withdrawing all investments in fossil fuel companies would also remove Dartmouth's say in the operations of those companies, which itself could carry costs for the environment.
Perhaps the greatest cost of divestment is the effect that it could have on the energy market both in the United States and around the world. Investments in fossil fuel technologies have led to remarkable improvements in standards of living. Cheap, reliable energy has paved the way for our economy to grow at exponential rates over the last century. It has driven down the price of food, home heating and travel. Divesting from oil companies, particularly now that fracking technology has become widespread, would send the wrong message to oil and gas companies. The ongoing American energy renaissance has allowed the United States to both decrease its trade deficit and achieve its lowest levels of carbon dioxide emissions in 20 years. In short, fossil fuel companies have offered many benefits to society that are too often taken for granted.
Despite the clear drawbacks of divestment, it seems to be eliciting strong support from the student body, as evidenced by the standing room crowds at last week's Dialogue on Divestment. Moreover, the fossil fuel industry is certainly not without blame for the problems that our generation faces, most notably climate change and environmental degradation. There are many students who cannot tolerate the harmful consequences of fossil fuel use. But it is always best to go into any conversation as fully informed as possible. So let's have a discussion about divestment with a more sober assessment of its costs and benefits.
