Columns, Opinions

Krishnamurthy ’19: What the divestment vote did to campus discourse

Staff Columnist
Thursday, April 4, 2019

Just a few days before spring break, the inevitable became reality: A referendum championed by Brown Divest won handily, with 69 percent of voters — a little over a quarter of the undergraduate student body — in favor. Make no mistake, the divestment campaign accomplished an impressive feat. Over the course of six weeks, pro-divestment advocates held several events explaining their goals, mobilized scores of supporters and managed to bring significant attention to the plight of Palestinians, thousands of whom have been injured, and hundreds killed, in the past 12 months.

But the legacy of the divestment campaign will not lie in concrete improvements to the lives of Palestinians or in the reform of corporate behavior. Instead, the campaign’s lasting effects on campus life will lie in its trivialization of the importance of endowment returns to financial aid and its proliferation of a vague and viral vocabulary about the mechanics of divestment.

First, divestment, even in the hyperlocal form advanced by Brown Divest, could cause non-trivial harms to endowment returns and financial aid, and those harms were not adequately considered during the campaign. (Obviously, divestment will not happen for a number of administrative reasons, but I don’t think this debate about divestment’s effects on endowment performance should turn merely on the logistics.) In the original version of a March 18 op-ed, one supporter of divestment wrote that “funding financial aid is mainly comprised from donors that support The Brown Promise.” This claim was factually incorrect; The Herald had to run a correction. In the corrected op-ed, the author conjectures that, given successful fundraising under the BrownTogether and Brown Promise initiatives, “divestment from specific companies may not have a substantial effect on financial aid.”

Assuming that things might work out okay is a ridiculous way to make investment decisions, especially when those decisions affect the availability of financial aid to low-income students. Let me be crystal clear: Financial aid depends on endowment returns, which divestment places at severe risk.

In a 2016 letter to Congress, President Christina Paxson P’19 observed that 34 percent of the FY 2016 financial aid budget came from endowment returns. The Brown Promise, a part of the University’s BrownTogether campaign, is a pledge to eliminate loans from the University’s financial aid packages and doesn’t fund the majority of undergraduate financial aid. In fact, BrownTogether’s organizers have placed a special premium on “endowed scholarships.” At least $100 million of BrownTogether’s $500 million fundraising target for financial aid will be allocated to the endowment, so that endowed scholarships can be sustained in the long term. Even in the event of robust fundraising, the success of the Brown Promise also depends on the University’s endowment returns.

It should also be noted that the opportunity costs of divestment can be enormous. Consider the tobacco industry, from which the University divested in 2003. Between February 2004 and February 2019, the tobacco industry has massively outperformed the stock market globally, nearly doubling its net returns according to the MSCI World Tobacco Index. While it can’t be specifically determined how much profit the University forfeited, other institutions that have divested from tobacco have felt the heat of foregone tobacco returns. Calpers, the pension system for employees of the state of California, lost $3 billion over 15 years in foregone investment income and even considered reinvesting in the industry.

Given these truths, the claim that divestment will not threaten Brown’s endowment returns amounts to third-rate guesswork. Furthermore, radically reformulating a multibillion-dollar portfolio isn’t easy. (People vastly more qualified than me have explained why in these very pages.) The University chooses its investment managers because it believes they use the best possible information to manage the endowment. Whenever these managers believe they’ve found a better strategy for allocating Brown’s investments, they adopt it. They have a clear incentive to do so: Higher returns mean higher fees for managers. If the Investment Office had reason to believe that a portfolio without the kinds of companies identified by Brown Divest could outperform, even marginally, the current portfolio, it would have already switched — and divestment would be a nonissue.

Simply put, the Investment Office tries to allocate endowment funds optimally, and we should not treat Brown’s investments in potentially objectionable industries as just a moral oversight. These investments were made for a reason, as part of a broader portfolio strategy in which individual investments interact and hedge risks in sophisticated ways. If we do want to tamper with the University’s investment strategy, we should think extremely carefully about what the financial implications could be.

I can understand the impulse to not want to be affiliated with moral wrongdoing. But we cannot allow our commitments to principle, no matter how noble, blind us to the limits and material consequences of our actions. Divesting from profitable companies might alleviate our feelings of culpability for human suffering, but it very well could put a significant dent in endowment returns and undermine financial aid for low-income students. I do not believe that the benefits of divestment — purely symbolic opposition to corporations facilitating human rights abuses in Palestine — outweigh this risk. If they do, supporters of divestment haven’t sufficiently explained how.

Second, the divestment referendum propagated rhetoric that obfuscates what exactly it means for a higher education institution to be complicit in moral wrongdoing through its investments. What constitutes complicity on the part of the University? What does “financial transparency and student oversight,” the second of Brown Divest’s two demands, look like?

Champions of divestment don’t seem to have precise answers to either of those questions. In a March 14 op-ed, Luqmaan Bokhary ’21 asserts that students should not be “morally and ethically content with continuing the status quo of the University profiting from such companies.” As I’ve written before, mere ownership of a company’s shares cannot possibly constitute complicity in that company’s decision-making. For example, insofar as the University’s ownership of Boeing stock does not directly enrich Boeing, is there anything wrong with profiting from increases in Boeing share prices and using those profits to support programming like financial aid?

Further, if the University sells its shares in a questionable company, another investor with no ethical concerns will snap those shares up in a heartbeat, leaving that company unaffected. If these companies won’t change their behavior after their shares change hands, then how does stock ownership lead to complicity?

Bokhary goes on to argue that “the University could potentially find a way to establish financial transparency to its students without disclosing its portfolio to the general public.” The use of the term “potentially” here is immediately revealing. How exactly should the University be transparent about its portfolio? How can it distribute highly sensitive investment information to 10,000 undergraduate and graduate students and simultaneously maintain its competitive edge?

The rhetorical gymnastics surrounding divestment — the failure to provide concrete, specific details and the deliberate deployment of ill-defined terminology — are politically advantageous, but civically irresponsible. My biggest fear for future classes of Brunonians is that the endowment has now become a discursive plaything in campus activism, a rhetorical goldmine to be exploited in order to advance an ideological agenda. At the candidates’ debate a few weeks ago, Jason Carroll ’21, Undergraduate Council of Students vice president-elect, said, “We should divest from human rights abuses in Saudi Arabia. I think we should divest from human rights abuses in China. We need to divest from all of them.”

For the life of me, I cannot see how it’s possible for any investor to (1) identify corporations involved in “human rights abuses” in a given country and (2) build a sound portfolio excluding companies based in some of the fastest-growing economies in the world. (If any student at Brown is capable of doing so, I’d urge them to drop out and start their own hedge fund ASAP.) Ultimately, it’s easy to get people to buy into a feel-good, amorphous vision of the future. It’s much harder to confront the feasibility and costs of our moral fantasies, and ensure that aid-receiving students aren’t cast aside as collateral damage in the pursuit of largely symbolic justice.

Perhaps the strongest argument in favor of divestment is that it attracts attention to the cause of the Palestinian people. But the extent to which Brown’s divesting from companies doing business in Israeli settlements could benefit the Palestinian cause must be weighed against the material costs of divestment in the near term. In the recent referendum, voters did not have the benefit of such careful evaluation. For expressing this concern, I’ve personally been accused of nefariously tokenizing low-income students to attack the divestment campaign. In truth, I’ve tried to be less a doctrinaire critic of divestment and more a proponent of honest, even-handed judgement. The best version of the divestment campaign would have forthrightly accepted the financial risks of its proposal and justified them to students, instead of wishing them away. That’s what an honest, even-handed campaign looks like. And that’s what voters in the referendum deserved.


Anuj Krishnamurthy ’19 can be reached at Please send responses to this opinion to and other op-eds to

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