FRequently asked questions
Why are we demanding that Yale cancel its holdings in Puerto Rico’s debt and divest from fossil fuels? How are these two things related?
Our two demands are deeply interconnected. Yale invests in the fossil fuel companies causing the climate crisis, as well as the hedge funds exploiting the people who are first affected. We can’t speak about the climate crisis without acknowledging how it is already affecting marginalized communities in disproportionate and unjust ways. By profiting from Puerto Rico’s economic distress, Yale is continuing a pattern of exploitation stretching back centuries, implicating itself in ongoing U.S. colonialism and imperialism. Yale could instead choose to invest in renewable energy infrastructure and use its considerable political and economic influence to push for climate justice in Puerto Rico and New Haven. (You can read our full demands in English and Spanish.)
How much money does Yale have invested in fossil fuels? How about Puerto Rico’s debt?
Yale’s endowment is purposely opaque and inaccessible to students, but we can see a small part of their investments by looking at their public SEC filings and IRS 990 forms. As of fall 2019, we know that Yale has at least $454 million invested in fossil fuel companies, mostly through many layers of fund managers. However, their true holdings are likely much higher. In previous filings from 2018 and 2019, Yale has held direct investments in fossil fuel companies like Antero, a fracking company with a higher record of spill violations than any other company in North America, and Hallador Energy, the coal company that Scott Pruitt went to lobby for after leaving the EPA.
Yale is invested in Puerto Rico’s debt through several of its fund managers: these are corporations that manage small pots of the endowment and invest Yale’s money in a range of funds. Yale’s 5th largest fund manager Baupost is the largest holder of Puerto Rico’s debt, with over $911 million in COFINA bonds. As of 2016, Chief Investments Officer David Swensen sits on the board of Baupost, and up until the 2018 debt restructuring agreement, Baupost was suing Puerto Rico to be repaid before any recovery from the hurricanes could happen. Yale continues to make huge profits from Puerto Rico’s economic distress, while austerity measures on the island have forced hundreds of public schools to close and slashed the University of Puerto Rico’s budget by half.
It’s important to recognize that the specific details of Yale’s current investments in companies that harm people and our planet aren’t actually essential to our cause. David Swensen himself has said that it doesn’t matter whether fossil fuels or private prisons are in the endowment today, because “it could be in there tomorrow.” What we want from Yale is a public statement condemning these investments on the grounds that they are immoral, and a promise not to support these extractive and exploitative industries through our endowment in the future. Given Yale’s position of power in the world of institutional investing, this is what will have the most impact.
If we divest from these companies, we won’t have any power over their behavior. Shouldn’t we try shareholder engagement first?
Yale has tried shareholder engagement in the past. In 2016, students from the Dwight Hall Socially Responsible Investing initiative, in coordination with the Yale Advisory Committee on Investor Responsibility (ACIR), used Yale’s holdings in ExxonMobil to introduce a shareholder resolution that would’ve required the company to disclose money spent on lobbying related to climate change. This proposal, while meaningful, fell far short of addressing ExxonMobil’s key role in extracting fossil fuels at the expense of frontline communities and funding groups that promote climate denial. And even this small resolution failed to pass!
At the end of the day, shareholder engagement is a fundamentally flawed strategy for addressing climate change. The fossil fuel industry represents the single largest obstacle to national and international climate action. For example, ExxonMobil’s own scientists found that burning fossil fuels were causing climate change 50 years ago, and yet they lied to the public and spent billions on climate denial. In its role as an investor, Yale’s first goal is to make money, and Exxon’s entire business model is premised on extracting as much oil as possible to generate a profit, no matter the consequences. There’s no way to change that through shareholder engagement; any attempt to do so would risk Yale’s profits. These fossil fuel corporations need to go out of business, in order for us to stop climate change and have a shot at a livable future.
How can we ask for divestment when we all rely on fossil fuels to turn on our lights and heat our homes?
It’s true that we all use fossil fuels in our daily lives, and therefore we’re all a little bit responsible for climate change. On average, people in the U.S. produce many times more greenhouse gases every year than people in the Global South. However, a recent study found that just 100 corporations have been responsible for over 70% of global emissions since 1988, including ExxonMobil, Shell, Chevron, and BP. Fossil fuel billionaires who have discredited scientific research, funded decades of climate denial, and vowed to extract as much oil and gas as possible are truly to blame for the climate crisis.
Yale’s official position is that climate change is the fault of consumers, not producers. Our university has entirely disregarded the disproportionate impacts of climate change on marginalized people, claiming that “without consumers, fossil fuel suppliers would not have a market for their products.” They equate communities who consume fossil fuel-based products out of necessity with corporations who profit from that consumption and corrupt the political process to prevent government regulation. This is a fossil fuel industry talking point. Rather than blindly accepting our current reliance on fossil fuels, we can fight for a world where everyone can thrive, free from rising seas, toxic fossil fuel infrastructure, and crippling debt. And we can demand that Yale do the same by taking a stand against the ways in which our university’s investments legitimize continued fossil fuel extraction and exploitation of those on the frontlines of climate change.
Will divestment hurt the endowment?
Nope! Many studies have shown that divesting from fossil fuels has no impact on endowment returns. Institutions that have divested (most recently Middlebury College, Smith College, and the University of California system) have seen a slight dip in returns immediately after divestment, but over longer periods of time, they perform as well as or better than funds that remain invested in fossil fuels.
Additionally, if you support climate action, fossil fuels aren’t very smart investments right now. The world’s coal, oil, and gas companies have over five times as much carbon in their reserves as scientists tell us we can safely burn while staying below 2°C of warming. And these reserves are factored into shareholder reports and stock prices. Essentially, if we manage to cut our emissions enough to avert the most catastrophic impacts of climate change, we would find that these fossil fuel companies are actually valued at five times their true worth. Our economy has a massive carbon bubble, and by investing in fossil fuel companies, Yale assumes that these investments will be profitable, i.e. that all their reserves will be burned, which would lock in devastating levels of climate change.
What about programs I care about like financial aid?
Yale has more than enough money to meet our demands and to support vital services like financial aid. Our endowment is worth more than $30,300,000,000. That’s larger than the GDP of 90 countries. The endowment is invested to generate a profit, and only a small part of the interest each year is spent to fund the university’s operations (about a third). If Yale spent slightly more of the interest, the endowment would continue to grow but at a slower rate, and tuition could be free for all students.
Arguments that pit financial aid and climate justice against each other are unfair and disingenuous. These arguments ultimately put the burden for climate inaction on our most vulnerable students. If it seems like financial aid might be one of the first things cut if our university was short for cash, we need to demand that Yale realign its priorities. (Check out Students Unite Now, the campaign to eliminate the student income contribution!)
Will Yale’s divestment impact fossil fuel companies financially?
Financially impacting fossil fuel companies has never been the goal of divestment. Even with a $30 billion endowment, Yale won’t be able to put ExxonMobil out of business single-handedly. However, divestment would be an incredibly powerful political statement, publicly stigmatizing the fossil fuel industry. Our Chief Investments Officer is the single most influential person in the world of institutional investing; if Yale divested from fossil fuels and cancelled their holdings in Puerto Rico’s debt, hundreds of other universities would follow our lead.
Even though the divestment movement didn’t set out to impact these companies financially, we actually have begun to cost them real money. Shell and Chevron are now listing the divestment movement as a major risk to their profits on reports to shareholders. And OPEC secretary Mohammed Barkindo called climate activists “the greatest threat to our industry.” So far, universities, banks, churches, cities, and countries with assets worth over $11 trillion have pledged to divest.
Can Yale actually cancel Puerto Rico’s debt? How would that work?
Yale’s connections to Puerto Rico’s debt are numerous. For example, Yale’s largest-ever donor Charles B. Johnson, who funded the creation of Benjamin Franklin and Pauli Murray residential colleges, is the second largest holder of the debt (after Yale’s 5th largest fund manager Baupost), and he has offered additional loans to rebuild Puerto Rico’s power grid, but only if they pay back what they owe first. Yale could immediately cancel any debt that it holds directly, such as debt that was purchased from another creditor. Additionally, as a major investor, Yale could use its substantial influence to pressure fund managers like Baupost to cancel their holdings in the debt, by threatening to cut ties with these funds if they refuse. A public statement by Yale announcing that they had cancelled the debt they held and condemning ongoing colonialism in Puerto Rico would have a ripple effect across the world of institutional investing. Yale could also leverage its political influence and lobbying power to push for changes in federal policy to reverse forced austerity policies on the island and conduct a full audit of the debt, much of which is believed to be illegal. (Read more about the debt here.)
Could Yale cancelling Puerto Rico’s debt actually hurt Puerto Rico by preventing them from being able to get a loan in the future?
The short answer is no. Puerto Rico is already in a very complicated financial situation, and by cancelling the debt it holds, Yale would forgive that debt, not requiring it to be paid back and not impacting the island’s ability to take future loans. We’re calling for Yale to cancel the debt rather than divest, because cancellation could actually materially improve the lives of millions of Puerto Ricans rather than simply passing the debt on to another creditor who would continue extracting wealth from the island.
You’re probably thinking about what happens if you default on a student loan or mortgage: if you stop paying it back, your credit score can go down, and you’ll have a hard time taking out another loan. But, for Puerto Rico, the situation is pretty different. Of the island’s $37.8 billion debt held in capital appreciation bonds (about half of the full debt), only $4.3 billion is actual money lent to Puerto Rico—the remaining $33.5 billion is interest. That’s an interest rate of 785%! Most of this “debt” is dubious at best, possibly illegal, and definitely unpayable. It’s not money that was lent to Puerto Rico and needs to be repaid; it’s just profit for investors like Yale. Ultimately, solving this crisis will probably require massive government action that should be led first and foremost by Puerto Ricans. However, Yale could make a huge statement by canceling the debt it holds and calling on others to do the same, instead of profiting from ongoing imperialism and standing in the way of a just transition for the island.
Removing investments from a fund is a long and complicated process. Do you really expect Yale to do this tomorrow?
Of course not. In general, institutions that have divested from fossil fuels make a public statement committing to divest, explain their reasons, prohibit new investments in these industries, and set a reasonable timeline for removing current investments. When Smith College committed to divest in October 2019, their endowment managers immediately froze any future investments in fossil fuels and launched a 15-year phase out of current investments. Middlebury College published a similar timeline with intermediate targets along the way, such as 50% divestment by 2027. What we do expect from Yale is an immediate commit to divest from fossil fuels and cancel their holdings in Puerto Rico’s debt, a public statement condemning such investments and calling on others to follow their lead, and an open and transparent process that is accountable to the student body.
Yale administrators and hedge fund managers claim that student activists don’t understand the complexity of what we’re asking for. They attempt to distract from their own complicity in the climate crisis by misrepresenting our calls for divestment from companies whose business models are premised on fossil fuel extraction as a slippery slope leading to divestment from anything tangentially related to fossil fuels. We will not be dissuaded. Yale’s fund managers are paid millions of dollars to manage the endowment; they could figure out how to divest and cancel the debt if they wanted to. It’s our job as students to hold them accountable to principles of justice. You don’t need to have an advanced degree in finance to know right from wrong.
Have you tried going through official administrative channels?
The only channel for students to engage with the administration on issues of ethical investing is the Advisory Committee on Investor Responsibility (ACIR), which only has the power to make recommendations to the Corporation Committee on Investor Responsibility (CCIR), which can then make recommendations to the Yale Corporation. This convoluted configuration means the Yale community can never engage with the bodies that have actual decision-making power.
In the past seven years, we have worked extensively with the ACIR, presented at countless meetings, exchanged hundreds of emails, crafted dozens of memos, talked in offices, coffee shops and conference rooms — even cried in meetings from the urgency of the climate crisis — providing all the research, the facts, the precedents that we were asked for. All the while, the chair of the ACIR, Professor Jonathan Macey, campaigned to be on the board of the Hess Corporation, a global fossil fuel company. Fossil Free Yale believed it was working alongside the ACIR to build a more sustainable future in the face of a shared determination to fight climate change. We were wrong.
After years of attempting to go through official channels, we have come to believe that this process serves only to stall and suppress student voices. Faced with the urgency of the climate crisis, we had no choice but to escalate and engage in direct action in order to make our voices heard. (Read more about the structural problems with the ACIR here.)
Have you tried meeting directly with President Salovey or Chief Investments Officer Swensen?
Student groups calling for endowment justice have never been allowed to meet with Salovey, Swensen, the Yale Corporation, or anyone with actual decisionmaking power over Yale’s investments. We have reached out many times through many different channels, and have always been redirected to the ACIR (see above). In April 2019, while students and New Haven community members held a sit in at the Investments Office for the third time that year, other members of the coalition confronted Swensen directly at a talk he was giving on personal finance. He remained silent and refused to acknowledge us.
Have you tried holding a referendum where the student body can vote on these issues?
In 2013, the Yale College Council held a student body-wide referendum on whether Yale should divest from fossil fuels. 54% of all undergraduate students voted, and 83% of those who voted were in favor of divestment. In the past seven years, student support for divestment has only grown stronger. Dozens of student organizations joined the Yale Endowment Justice Coalition and signed onto our most recent demands, including the Association of Native Americans at Yale, Students for Yemen, the Yale Women’s Center, the Yale Student Environmental Coalition, the Yale College Democrats, Movimiento Estudiantil Chicano de Aztlán (MEChA) de Yale, Yale Students for Prison Divestment, and Yale Outdoors. The Yale College Council published a statement in support of our action at the Harvard-Yale Game, and remains committed to pressuring the administration to meet our demands. And in 2019, almost 1000 current students and recent graduates pledged not to donate to Yale until they divest from fossil fuels and cancel their holdings in Puerto Rico’s debt.
Have you tried getting support from alumni?
In the early days of our campaign, we circulated a letter from alumni calling on Yale to divest. Hundreds of alumni have also pledged not to donate to Yale until our demands are met. Leading up to the action at the Harvard-Yale Game and after, we received an outpouring of support from alumni of all ages in the form of donations, media connections, wisdom from the 1980s apartheid divestment campaign at Yale, letters to the editor, and op-eds. Several alumni, including Academy Award nominee Sam Waterson ‘62, participated in the action at the Game. Alumni remain a key focus of our campaign; as potential donors, they are in a unique position to hold Yale accountable. (Check out our Alumni Toolkit for ways to take action, and email email@example.com if you’re interested in helping to organize other alumni!)
Have you tried getting support from faculty?
Hundreds of faculty supporters have signed a letter in support of our demands, and several have participated in direct actions alongside us, written statements of support, and served as advisors to students facing disciplinary proceedings for engaging in civil disobedience. At the end of 2019, the Faculty Senate discussed divestment at their final meeting. They will hold another meeting in the spring to deliberate how they might put pressure on the university to take more aggressive climate action. Faculty have a critical role to play in influencing Yale to be a leader in climate justice. (Email firstname.lastname@example.org to get involved!)