Divestment Referendum

Resolved: In accordance with its guidelines for ethical investment, Yale should divest its endowment from those fossil fuel companies contributing the most to climate change and associated social harms.


A referendum was held from November 17 to November 20, 2013, on whether Yale’s investment office should divest from companies that have operations in the field of fossil fuels.

In the days leading to the vote, YCC  provided opportunities for all sides to be heard and present their case.

Divestment FAQ

What is a referendum?
A referendum provides students a chance to voice their cause by holding a campus-wide vote on a specific issue. The issues involved in each referendum are submitted by a group of students petitioning for the referendum and are not the views of YCC in any way. All students wishing to have a referendum must create a petition that follows set guidelines. The role of YCC in the referendum process is to simply provide a neutral channel through which students can reach out to the student body. Read more about the referendum process at http://ycc.yale.edu/referendum.

Does the YCC support the issue being discussed?
YCC maintains a neutral position on any referendum. YCC’s role is to empower student voice and activism by creating the platform for the referendum. In the event that a referendum is held and is considered binding, YCC will be required to express this position as described by the referendum process.

Why did we have a referendum on fossil fuel divestment? Why should I care about the referendum?
Holding a referendum is a standard procedure to get student opinion on important issues at many universities. YCC created a referendum process this year to empower student voice and activism on campus.

YCC is not directly involved with divestment. Fossil Free Yale presented YCC with a petition of 1000 undergraduate students, and as part of the YCC procedure regarding referenda YCC decided to hold a referendum on the matter. YCC does not have a position on divestment since it is a political issue, but we are facilitating an opportunity for students to voice their opinion on the matter. Other groups are encouraged to petition for a referendum following the guidelines on the YCC website.

What turnout makes the referendum legitimate? How many votes does it need to pass?
It is misleading to refer to referendum as “legitimate” or “passing.” The results of each referendum will be publicly announced no matter the outcome. However, there are guidelines that determine whether YCC must adopt the position of the referendum.

What makes a referendum binding for YCC?
A referendum has to meet three requirements for it to be binding for the YCC:

  1. At least 50% of the student body must vote.
  2. At least 50% of those voters must have voted “yes.”
  3. Must amount that at least 1/3 of student body is in support of the referendum.

The first condition guarantees sufficient representation of student opinion. The second condition states that the majority of those interested in the issue must be in the positive. The third condition prevents the voice of the loud minority from overwhelming the silent majority. Without the third condition, only a quarter of the student body needs to say yes for the referendum to become binding. YCC can also vote to adopt the position of the referendum even if these conditions are not met. These conditions only ensure that YCC is responsive to an issue that the significant portion of the student body feels strongly about.

If 40% of the student body votes, and they all vote “yes,” then the referendum is not binding for YCC. But if 40% of the student body votes “yes,” and 10% vote “no,” then the YCC is bound by this position. Why does adding no-votes make the referendum binding for YCC?
The first condition is enforced in order the allow for proper representation of student opinion and demonstrate that enough students are aware of the issue. Indifference is as much of a factor as dissent. If the YCC is bound to endorse a cause, a significant portion of the student body must demonstrate care for the issue. If less than the majority of the student body care for the issue then it is not necessarily one that the YCC is obligatorily bound to support.

Pro Statement

(Submitted by Fossil Free Yale on November 3, 2013)

The investment of Yale’s endowment is subject to guidelines, formally adopted in 1972, set forth in The Ethical Investor (a book authored by members of the Yale community). These criteria are commonly referred to as need, proximity, capability, and last resort. According to these guidelines divestment from a company’s stock is appropriate if: 1) that company’s activities are causing “grave social harms,” 2) Yale understands these harms and their sources well, 3) Yale is able to divest (without unduly harming its financial standing), and 4) other means of ameliorating the harm are insufficient and divestment would help address that harm.

1.     Extraction and combustion of fossil fuels cause climate change. According to the Intergovernmental Panel on Climate Change, unless significant efforts are undertaken this decade, the stabilization of global temperatures will be nearly impossible. The World Bank warns that 2°C of global warming will result in increased incidence of floods, more intense storms, and widespread food and water shortages. However, if present rates continue, earth is set to exceed even this target of 2°C—to around 4°C.

2.     Yale’s accomplishments as a leader in research are a given. In the words of former President Levin, “[i]t is, after all, our scientists who have identified the causes and effects of climate change and who are researching ways to address it.”

3.   Divestment must not unduly harm the financial strength of the Yale endowment. According to the research (done by firms including Aperio Group, LLC), fossil fuel divestment is unlikely to significantly impact the financial strength of an endowment. Portfolios without fossil fuel stocks demonstrate risk and return comparable to standard portfolios.

For example, computing the returns of indices (like the S&P 500 and Russell 3000), with and without fossil fuel investments has not yielded evidence of any significant impact on returns.

4.  The combustion and extraction of fossil fuels cause climate change and other social harms which have not been adequately addressed despite their longstanding nature. Divestment outside of Yale has already had significant impact, according to a recent Oxford University report. There has been documented positive influence on investor and policymaker opinion. Divestment at Yale would lead to more widespread consequences—Yale has historically been a pioneer in ethical investment policy, but is also a leader in portfolio management.

Any divestment proposal would be subject to approval by both Yale’s Advisory Committee on Investor Responsibility, and the Corporation Committee on Investor Responsibility. Fossil fuel divestment would very likely be approached by screening companies dealing in coal, oil & gas to determine a list for those which fail to meet certain data-based cutoffs. Yale would divest from those companies that failed to meet its standards.

For FAQs, visit this webpage. In working with the Yale Advisory Committee on Investor Responsibility, students authored a comprehensive report outlining the case for fossil fuel divestment, available on request.

Rebuttal to the Pro Statement

No rebuttal to the pro statement was submitted.

Con Statement

(Submitted by Students for a Strong Endowment on November 8, 2013)

Under the stewardship of David Swensen, the university’s endowment has enjoyed truly remarkable growth. This is not a lucky accident. It is a product of the flexible mandate granted to the Investments Office, which allows finance professionals to react to market conditions at any given time.

In order for this success to be sustained, enabling future generations to enjoy the same resources that we have benefited from, we must put the university’s financial stability ahead of the desire to use Yale’s investments to make a political statement.

We do not seek to in any way belittle the efforts of those who rightly draw our attention to their profoundly held environmental concerns. They pose sensible and valid questions. But we strongly believe, for a number of reasons, that the university’s endowment is an entirely inappropriate location to air those questions.

Most troubling is the notion of precedent. We worry that the example set by divestment would encourage anyone with a cause to use the endowment as a means of political expression – once Yale accepts this notion, it would inevitably come under pressure to divest its investments in numerous other sectors. Some would call for divestment from companies involved in particular countries. This approach is unsustainable and economically unsound.

Moreover, it is a simple fact that we use the electricity and gas that fossil fuels produce in every aspect of our daily lives. We consider it unproductive to engage in wholesale condemnation of the means of their production when we depend on its results.

We profoundly respect those around the world who work within the fossil fuel industry – sometimes exposing themselves to significant personal risk – and do not wish to align ourselves with a movement which seeks to destabilize the companies that employ them. It is also evident that withdrawing investments from businesses within this sector will make it more difficult for such firms to research and implement sustainable projects of their own.

Similarly, we believe that a policy of divestment from fossil fuels would restrict the endowment’s capacity to invest in renewable energy, since such investments could no longer be hedged by maintaining a presence in more conventional companies within the sector.

If we are to sacrifice our endowment’s flexibility in pursuit of political goals, it is crucial that we remember what the consequences of our actions might be. We do not want to see financial aid cut. We do not want the university to be unable to attract globally renowned faculty. We do not want Yale to lack the funding that it needs to maintain its support of world-leading research. Supporting divestment would be a signal that these crucial institutional goals are no longer our first priority.

As students who care deeply about the future of our university, we hope that you will join us in voting ‘no’ to divestment. In doing so, you will play your part in helping Yale thrive for many years to come.

Rebuttal to the Con Statement

Students for a Strong Endowment Rebuttal

Fossil Free Yale point to a desire to maintain “the endowment’s…political reputation,” but they forget that Yale’s endowment is not a political fund. Its investments seek not to make profound ethical statements, but to deliver consistent returns for the university, so that it can fund institutional necessities like faculty salaries, financial aid and world-class research.

Divestment would clearly limit the range of possibilities open to the Investments Office. Harvard’s President Drew Faust identified this lost flexibility as a key reason for refusing to implement divestment at her own school. Even potential investments in renewable energy might be scuppered if an appropriate hedge could no longer be found in the fossil fuel sector.

There are very specific occasions when Yale avoids investing in companies for ethical reasons, but these are not a precedent for what Fossil Free Yale now proposes. The wrongs of apartheid, for instance, are not in doubt. In contrast, the merits of fossil fuel companies are a matter of dispute; emissions need to be balanced against the benefits we derive from production. The fact that we are having this conversation is proof enough that any decision to divest would be taking a side in a political debate.

It would be the first debate of many. Divestment would suggest that any area of the university’s investment portfolio could be divested so long as the associated student campaign was sufficiently enthusiastic. Global warming matters. So do sweatshops. So does child labor. So does the treatment of women in Saudi Arabia.

To act on one of these issues alone seems odd and singular. To act on all of them would render our endowment impotent. We reject the notion of turning a thriving endowment into a permanent political protest for whichever pressure group feels like its time is now.

Organizational Endowments

Pro: Fossil Free Yale

Con: Students for a Strong Endowment

Pro Endorsed by: Roosevelt Institute New Haven Chapter, Party of the Left

Referendum Campaign Guidelines

  1. Students should not actively lobby others to promote their position on the referendum until campaigning officially commences.
  2. Excessive emailing is not allowed. Emails to colleges and college years must be discussed with administration first. No email can be sent to the entire college.
  3. Rules on posting and publicity should respect the University’s policy at http://yalecollege.yale.edu/sites/default/files/URegs%2013-14_102413.pdf, page 69-70.
  4. Violation of the rules should be reported to the Student Life Director and complaints will remain anonymous.

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