Why many universities are rejecting protester calls for divestment from Israel

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• Geoff Bennett:

  As we just heard, Brown University announced today it will vote on divestment this fall. But how difficult would it be for other schools to divest from Israel?

  Last night, we heard a perspective arguing that it can be done more readily. Tonight, we hear a different take.

  We're joined now by Chris Marsicano, who studies higher education and public policy. He's an assistant professor of education studies at Davidson College.

  Thanks so much for being with us.

  So, we know that Brown University, their corporate board, will vote in October on this proposal to divest from Israeli interests. Meantime, Columbia University, Columbia President Minouche Shafik said, in her words, that Columbia will not divest from Israel.

  What's your assessment of these two approaches based on what you know about both institutions?

  Christopher Marsicano, Assistant Professor of Education Studies, Davidson College: Well, first, Geoff, thanks for having me on tonight.

  I should mention that both of these institutions' approaches are extraordinarily different. What Brown has agreed to do is that the Brown Corporation vote on effectively a proposal that's based on a 2020 proposal that called for the divestment from just 11 companies.

  Those 11 companies would be divested from part of the direct investments of Brown University, which accounts for less than 10 percent of Brown's entire endowment. Columbia is saying, we're not going to engage in that right now. We need to see what the situation is over the next weeks and months before we even have this conversation, and, candidly, we need to have a graduation.

  So it's two different approaches. Part of the reason why Brown may be interested in having this conversation is because of how narrow the approach is. When we look at these encampments across the country, what we're seeing is, students are asking for divesting from three different areas, weapons manufacturers, businesses in Israel, and businesses that do business with Israel.

  Brown's just looking at 11 institutions, 11 businesses.

• Geoff Bennett:

  Well, big picture, how feasible is this? Because the perspective we heard last night is that, technically, it's very doable. It's just a matter of these institutions moving their endowments into socially and ethically responsible funds.

  How do you see it?

• Chris Marsicano:

  So this is a very different situation than ESG investing with fossil fuels or even South Africa 30 years ago.

  It's very complicated in terms of how universities invest. The vast majority of university endowment funds are not invested in direct stocks, like stock pickers. We're not running E-Trade accounts as endowment managers.

  What they're doing is investing in hedge funds or private equity. And oftentimes, with the vast majority of institutions, they're looking at index funds. Now, that's a lot of different businesses packaged in these funds. And it's difficult to know at any given time what those businesses are doing.

  The way I'd like to talk — to think about it is, you may invest in, say, Pepsi, but not know that Pepsi is about to buy SodaStream, an Israeli company, as they did in 2017. If an endowment manager wanted to completely divest from Israel, that would mean, once that deal is closed, divesting from Pepsi altogether.

  And there just aren't index funds that have that ability to move quickly and that complete knowledge of how deeply tied companies are to the Israeli case. So, while it is theoretically possible and while we have seen divestment from fossil fuels, while we have seen divestment from private prisons, and while we have — I mean, while we certainly saw divestment from South Africa during apartheid, it's not terribly functionally possible.

• Geoff Bennett:

  Does divestment work? Does it bring about the kinds of changes that these demonstrators are calling for? What does history, what does the data actually show?

• Chris Marsicano:

  It's a great question.

  And the jury's a little bit out. But what we do know is that divestment works in some cases and not in others in terms of actually affecting the economy of the place you're trying to divest from. But really what divestment does and protests for divestments do is put political pressure on those that are the target of those divestments.

  So we're pretty sure that — from research, that divestment in South Africa didn't make a big economic impact, which shouldn't be a surprise, as universities weren't heavily invested in South Africa during the apartheid era. But the political pressure, the slow drip of headline after headline after headline announcing different colleges and universities divesting certainly put political pressure on the apartheid regime.

  We're seeing some evidence that political pressure through protest is happening tonight. When we hear last week that Prime Minister Netanyahu specifically mentions campus protests in the United States, that lets us know that college students have captured the attention of key stakeholders for peace. We will see if they can keep it as the semester ends and graduations begin.

• Geoff Bennett:

  Let me ask you this.

  Should a university invest its endowment in a way that aligns with its values, however that is defined, or should chasing returns, increasing the value of that fund be the guiding or in some cases the sole principle?

• Chris Marsicano:

  Well, legally, endowment managers have to act as fiduciaries.

  And while, certainly, they have considered ESG funds or other sort of moral or ethical ties in their funds, at the end of the day, they are required to be able to justify their investment decisions based on short-term or long-term potential gains.

  Because we don't know to what extent there will be a negative or positive return from divestment from Israel, it's really hard for an endowment manager to even talk about or even think about divesting based on purely moral imperatives and values imperatives from the institution.

  Now, we do know from my own research and the research of others that divesting from fossil fuels made, at worst, a negligible effect for institutions like Stanford and Dayton and Syracuse and, in many cases, may have had a positive effect. But we just don't have those data yet with respect to investments in Israel.

  And so it's really hard for endowment managers to even have this choice. At the end of the day, they are supposed to, by law, make investment decisions based on risks and the potential rewards.

• Geoff Bennett:

  Chris Marsicano is assistant professor of education studies at Davidson College.

  Thanks so much for your insight and putting some context around all of this. We appreciate it.

• Chris Marsicano:

  Thank you so much for having me, Geoff. It's been a pleasure.