(protestors chanting) – [Narrator] Columbia's
pro-Palestinian encampment triggered similar student
protests across the country and renewed calls for
universities to divest themselves of investments in Israel and companies profiting from
the Israeli war in Gaza. (protestors chanting) – It's the most intense
and contentious debate that I've seen over how
university endowments should be invested. – [Narrator] So, what
would divestment look like? How realistic is it? And what are the challenges involved? What began at Columbia
University on April 17th has swept college campuses
across the country. What unites many students is
their demand for divestment, which has its roots in a
Palestinian movement known as BDS, or Boycott, Divestment and Sanctions.
Divestment, simply put, means
selling off an investment or business interest, but in
practice it's more complicated. To begin with, the demands
vary from school to school. At Yale and Cornell, students have called on the universities to stop investing in weapons manufacturers directly involved in Israel's campaign. By contrast, Columbia protestors
are demanding the sale of holdings in funds and businesses that activists say are profiting from Israel's invasion of Gaza. These include Google and Amazon, which provide technology services to Israel's military, Airbnb because it allows rental listings in Israeli settlements in the West Bank, and Caterpillar whose tractors
Israel's military uses. The target of students'
calls for divestment are university endowments.
– In practical terms, the way divestment could work
depends some on the endowment. Larger endowments invest
a really large share of their portfolio in private
equity and hedge funds. If you're a big endowment, you might have to shift your investments from one private equity fund to another if your private equity
fund manager isn't prepared to follow the investment
guidelines that you've provided. – [Narrator] So far,
universities have flatly refused to adjust their holdings in
response to student agitation. On April 29th, Columbia said
it will not divest from Israel. Other universities that have
refused to divest from Israel include Yale, NYU, the
University of Michigan, and American University. Calls for divestment
have long been a feature of student protests, where perhaps the best
known divestment campaign was during the 1970s and '80s when activists compelled universities to cut ties to South Africa, then under all white rule. In 1985, Columbia said it
would sell $39 million of stock it held in companies
including Coca-Cola, Ford, and Mobil Oil. Eventually more than 150
universities divested themselves of companies doing
business in South Africa.
– I think looking back at the South African divestment demands, the protestors draw a couple lessons. One is that they see that
South African apartheid eventually did come to an end, and whether that was because
of direct economic pressure or a change in narrative
and symbolic isolation of South Africa, I think is probably less important to the protestors than whether
direct economic pressure led to that change. I think the other
consideration for looking back is that it was a very different economy. Wall Street worked differently. – [Narrator] Those calling for divestment of investments in Israel
say they are motivated by what they see as a moral argument, that Israel is committing genocide and forcing Palestinians to
live under a form of apartheid.
Israel has strongly denied
allegations of genocide and says its Gaza operations are justified by its right of self-defense
under international law. More recently, colleges
have heeded demands to dump holdings in private prisons and fossil fuel companies. – And you can look at the
University of California, which back in 2020 announced that it had fully
divested from fossil fuels. – [Narrator] Today, many
university endowments are controlled by fund managers who widely follow a
diversified portfolio model. They typically dedicate
chunks of their portfolio to asset classes such
as stocks, real estate, and private equity,
including venture capital. Ultimately, fund managers
answer to the endowments' trustees who have the final
say on investment decisions. – University endowments
are like private equity and hedge funds because they're managed to maximize returns at the end of the day.
Our endowments today are
bigger than at any time in our history, and that
means that universities are connected to every
corner of the global economy, but they're connected through Wall Street. – [Narrator] Critics opposed
to dropping Israel investments note that it could be difficult because of the secretive
nature of modern endowments. Columbia, like many private schools, keeps most of its financial
information obscure. Its trustees do publish
annual financial reports, but those reports don't
detail specific investments. – Those funds that schools invest in, private equity and hedge
funds, they value their secrecy 'cause what they're trying
to do is beat the market.
They don't want their secret sauce to be out in front of the
entire market and community. – [Narrator] Critics of divestment point out that universities' investments in Israeli-linked
companies likely represent only a small portion of an
endowment's overall portfolio, meaning that the impact of one university or even many universities selling their Israeli-linked
assets could be negligible. A 1998 study found that
voluntary divestment from South Africa had
little discernible effect and that the boycott
primarily reallocated shares and operations from socially responsible to more indifferent
investors and countries. Similarly, a 2021 paper
found that divesting of dirty companies that fail to meet ESG criteria
is not nearly as impactful as its practitioners
might like to believe.
Another hurdle to divestment is the nature of modern endowments. Because universities tend to now invest in more complicated financial vehicles, disentangling those
investments isn't as simple as selling specific stocks. If say a university is
invested in an Israeli company through an index fund,
which is made up of many, perhaps even hundreds of other companies, it would require the
selling of that entire fund, which could mean an overhaul of the endowment's investment strategy. – I think it's disingenuous to suggest that it's too complicated to divest from a certain set of
assets in the economy because it shuts down debate.
There really are a lot of investment managers
out there whose businesses is to help investors like endowments to invest their assets
according to criteria that aren't just maximizing
return on investment. (light music).