0:00

N P R. This.

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Is the indicated for planet Money? I'm

0:14

Adrian, Mom and I Darien Woods This

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morning another campus protest was broken. Our.

0:23

Police in Los Angeles' clear

0:25

Data Pro: Palestinian encampment at

0:27

Cla arresting hundreds of people

0:30

demonstrating against Israel's war with

0:32

Hamas in Gaza. And. This

0:34

is just one of the latest examples

0:36

of attention that's roiling campuses across the

0:39

country. And while the places and details

0:41

might very, there's a consistent theme across

0:43

all these protests. And that's a call

0:45

for divestment. Today

0:55

the show we unpack that term

0:57

divestment what it means, how or

0:59

even if it can work and

1:02

we hear from an expert who

1:04

explains why divestment might not have

1:06

the effect Many believe. This.

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you. To

2:13

learn about divestment, we need to

2:15

talk first about investment. That's right.

2:18

Many colleges and universities have big

2:20

investment funds known as endowments. You

2:23

might think of them as big piggy banks. There

2:25

are a lot of misperceptions, I think, about endowments out

2:28

there. And one is that they're

2:30

just kind of a giant piggy bank, but

2:32

they tend to be a lot more complicated. Adrian.

2:34

Okay, okay. Scratch that analogy.

2:37

Todd E. Lee teaches education finance at

2:39

the University of Colorado, Denver. What an

2:42

endowment really is, at its

2:44

basic level, is assets that

2:46

are being invested, right, to generate some

2:49

stream of revenue. One important

2:51

thing to note about the assets being

2:53

invested here is that, contrary to what

2:55

you might have heard, several

2:57

experts we spoke to said schools

2:59

do not put students' tuition dollars

3:01

into their endowments. Rather,

3:04

endowments are actually funded by donations

3:06

to the school, often from alums.

3:09

And the goal of these endowments is to invest this

3:11

money in such a way that it grows and grows,

3:14

and every year the school can skim

3:16

off a few percent of those gains

3:18

to help pay for things like professorships,

3:20

building renovations, and financial aid for students.

3:23

In order to grow these endowments, schools

3:25

invest in all kinds of things, from

3:28

plain vanilla stocks and bonds to real

3:31

estate, private equity, and hedge funds. And

3:33

so when protesters are calling for divestment, they're

3:36

basically telling the people who control the endowments,

3:38

usually the school's board of trustees, hey,

3:41

we want you to sell off

3:43

some of these investments. And that's

3:45

what we've seen with the recent

3:47

student protests. Although what protesters mean

3:49

by divestment varies from school to

3:51

school. For example, protesters

3:53

at Columbia want the school to

3:56

divest from companies they accuse of

3:58

profiting off Israel's military. The Campaign

4:00

and they specifically call for divesting

4:03

from companies such as Google and

4:05

Amazon because they have contracts with

4:07

the Israeli government. Meanwhile.

4:09

Students at Stanford want their school to

4:12

divest from companies such as Chevron and

4:14

Hewlett Packard which have operations in Israel.

4:16

And. You have protesters at the

4:18

University of Texas at Austin calling

4:21

for divestment from weapons manufacturers that

4:23

supply Israel. Of course, cause

4:25

for divestment are not new to

4:27

college campuses, so in recent years

4:29

students have found success convincing some

4:32

schools to divest from fossil fuel

4:34

companies. But when it comes to

4:36

divesting from companies with ties to

4:38

Israel, N Y U Finance Professor

4:40

David Year back says things get

4:43

more complicated. Israel is so

4:45

integrated into the world economy that I

4:47

think it would be very hard to

4:50

find any prominent company the didn't have

4:52

business in Israel. Don't. David

4:54

says when divestment demands are narrow

4:56

down to specific companies that might

4:59

be easier to disease. But.

5:01

Women talking about endowments. Colleges

5:03

don't just invest in individual

5:05

companies stocks and fact, direct

5:08

investment in stock says actually

5:10

declined in recent years. They

5:12

own hedge funds private equity.

5:14

It's what are broadly called

5:17

alternative investments. This has

5:19

been a growing trend for a university

5:21

endowments over the past few decades, and

5:23

what it means is a lot of

5:25

decisions about what goes in and out

5:28

of a schools portfolio are actually made

5:30

by third parties outside investment managers. If

5:32

you invest in a hedge funds for

5:34

instance, you really don't know day to

5:36

day what that hedge fund owns or

5:39

what the private equity firms only, so

5:41

you'd have to reach down many layers

5:43

to ask questions about something that is

5:45

changing sometimes on a daily basis. And

5:48

other potential challenge to divestment is

5:50

that a lot of the money

5:52

in endowments is actually broken up

5:54

into smaller funds which com with

5:56

donor restrictions. And. that also

5:58

limits the schools abilities tinker with it. So

6:01

those are some of the practical obstacles standing in

6:03

the way of divestment. But let's

6:06

just put that aside for a second and assume

6:08

that some protesters successfully convinced

6:10

their schools to divest from certain

6:12

companies. How effective might

6:14

that be in accomplishing the larger

6:17

goal of these protests? For instance,

6:19

a permanent ceasefire. We

6:21

put that question to V. Told Hennish.

6:23

He's a professor at the University of

6:25

Pennsylvania who studied how social movements and

6:27

shareholder activism affect companies. He

6:29

says if a divestment campaign is simply

6:32

about taking a moral stance or raising

6:34

awareness around an issue, it can be

6:36

effective. Divestment can be part

6:38

of constructing a broader social and political

6:41

movement. Maybe the protests

6:43

build pressure against politicians, for

6:46

voters, for a wide range of companies, not

6:48

just those targeted by divestment, and they change

6:51

the way we think about an issue. But

6:53

if the goal is to directly

6:56

pressure companies and sometimes then governments

6:58

into changing their behavior, V. Told

7:00

says research on divestment campaigns from

7:03

the past few decades suggests they

7:05

can actually be counterproductive. Imagine

7:08

you care really deeply about something a

7:10

company's doing and you want

7:12

the company to change. If

7:14

you sell your shares or if you force

7:17

someone to sell their shares who cares about

7:19

the issue, by definition the person

7:21

who buys the shares, the person who's on

7:23

the other end of the transaction, cares less.

7:26

V. Told says this applies even

7:28

to those fossil fuel divestment campaigns

7:31

we mentioned earlier. If

7:33

the university and many other institutions

7:35

who cared about the climate transition

7:37

sold their shares, who would buy

7:39

it? Who would buy the shares?

7:41

Maybe the Saudi government or maybe the Russian

7:43

government or maybe the Koch brothers. Should

7:46

we feel better about that? By contrast,

7:48

V. Told says being a shareholder gives you

7:50

a seat at the table. And

7:52

he cites this example of an activist investment

7:54

firm called Engine Number One. A

7:56

few years ago, Engine Number One held about 40

7:58

million dollars worth of shares in the oil

8:00

company ExxonMobil. And it wanted Exxon

8:03

to take climate change more seriously. And

8:05

even though the company resisted, this activist

8:07

firm used its seat at the table

8:10

to agitate for change within the company

8:12

and actually got three board members installed

8:14

that pledged to reduce the company's carbon

8:16

footprint. And that's what the research

8:18

shows, that you have much more power holding

8:20

the shares and exhibiting voice than

8:23

exiting, than selling the shares. Still,

8:26

David from NYU says, schools

8:28

have a pretty narrow history

8:30

as shareholder activists. I

8:33

think it's complicated by the fact that many

8:35

of the CEOs are alumni and

8:37

many of the bankers and asset

8:39

managers who they recruit to help

8:42

run the portfolio, they're

8:44

not only alumni, but often donors

8:46

themselves. And so universities have to

8:48

tread very carefully because in the long

8:50

run, they're looking for alumni support to

8:52

sustain the finances of the institution over

8:55

generations. So protesters pushing

8:57

for divestment face a lot of

8:59

hurdles. But what about

9:01

the success stories? What about one of

9:04

the most well-known examples? The divestment campaign

9:06

in the 1970s and 80s against

9:09

South African apartheid. Around

9:12

the globe, protesters called for schools to

9:14

divest from companies doing business in the

9:16

country. And although it

9:18

took years, many schools eventually did.

9:21

And this is often talked about

9:23

as a major reason why South

9:26

Africa's apartheid government lost support and

9:28

was later dismantled. But

9:30

V told us the research around this

9:32

divestment campaign actually tells a more complicated

9:34

story. The divestment campaign was

9:36

not really the centerpiece of the story. It

9:38

was shifts in opinion by some of the

9:41

South African business leaders seeing

9:43

which way their country was headed, the

9:45

risk of violence, the risk of revolution,

9:47

the business leaders in particular saw

9:49

the need for change. And divestment was

9:51

one of many, many signals, but not

9:53

that influential in and of itself. The

9:56

push for divestment, though, was

9:58

influential in getting the world's attention. And

10:01

that is definitely what protesters across college

10:03

campuses are doing right now. This

10:08

episode is produced by Cooper Katz-McKim with

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engineering by Robert Rodriguez. It was fact-checked

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by C.R. Juarez. Kakin Cannon edits

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