Investments in Israel that student protesters are demanding universities divest are obscure and difficult to reveal, let alone sell, experts say.
Direct gifts or contracts with Israel have totaled $375 million in the past two decades, but that is drawfed by the multi-billion-dollar university endowments that are broadly invested in stocks and bonds, Time reports.
This means that it is would be nearly impossible for universities to sell equities tied to Israel — since nearly every major U.S. multinational company does business in Israel.
Broad Exposure
“There’s no guarantee that any fund a university owns has no connection to Israel,” says Chris Marsicano, a researcher of higher education finance at Davidson College. “It’s a near impossible task, just functionally getting it done.”
While trusts and endowments of institutions of higher education have screened for environmental, social and governance funds in recent years, the pushback for them to adhere to their fiduciary responsibilities has forced many to abandon ESG.
The same obligation applies to endowments and trusts today.
Endowment managers must uphold this fiduciary responsibility, which could make selling off well-performing mutual funds a “tough pill to swallow,” Marsicano says.
What is more, few endowments are required to share their investments publicly, nor do they want to share their investment strategies with competing schools, Bill Guerrero, chief financial officer at the University of Bridgeport, tells CNBC.
Donors who contribute to school endowments can specify how they would like their money invested. Thus, these arrangements are typically confidential, Guerrero says.
“A lot of people believe an endowment is a piggy bank, and it’s not,” he says. “It’s very, very restrictive.”
Endowments, such as Columbia’s $13.6 billion and Harvard’s $50 billion trusts, are entrusted to boards of trustees and are actively managed to ensure the long-term security of the institutions they serve.
Universities that receive millions of dollars from deep-pocketed alumni who sympathize with Israel also do not want to trigger an exodus of their donations.
Furthermore, the Internal Revenue Service 990 and Securities and Exchange Commission 13F forms that endowments and trusts must annually file provide only high-level, not granular, information on investments. In other words, the filings divulge investment objectives, and sectors and assets classes in the portfolio, not individual holdings.
Protesting students know none to little of this, of course.
Schools Decline to Sell
“Divest all of Columbia’s finances, including the endowment, from companies and institutions that profit from Israeli apartheid, genocide and occupation in Palestine,” the Columbia University Apartheid Divest Group has demanded. “Ensure accountability by increasing transparency around financial investments.”
Specific companies that protesters have mentioned by name include Alphabet, Amazon, Boeing, Google and Lockheed Martin.
Students at the University of Michigan claim their school invests billions with investment managers that profit from the war, specifically drones and surveillance technology used in Israel.
Michigan officials have responded that they have no direct investments with Israeli businesses and that direct investments make up a fraction of 1% of the $18 billion endowment.
Protesters at the Massachusetts Institute of Technology are demanding an end to research contracts from Israel and have published the names of researchers who have accepted money from Israel’s defense ministry.
The University of South Florida said in a statement that it has maintained a consistent position of not divesting for the past decade:
“We have made this position clear many times. USF’s investments are guided by its mission, fiduciary responsibilities and state and federal laws. USF does not select individual stocks or companies for investment.”
Yale University students are more broadly asking it to divest from military weapons. In April, Yale’s Advisory Committee on Investor Responsibility responded to say divestment from military weapons manufacturing did not meet their criteria for divestment “because this manufacturing support socially necessary uses, such as law enforcement and national security.”
Columbia University President Minouche Shafik announced Monday that Columbia would not divest from Israel but expose the university’s investment holdings to students “and increase the frequency of updates to that list of holdings.”
The reason these university endowments are taking such a hard line against protesters’ calls to divest from funds invested in a wide range of companies with strong performance is because they “are basically the university version of the 401(k),” Marsicano says.
“There’s a bundle of different investments, and the goal is to earn enough money in revenue over the next couple of years such that you can take some of that revenue and put it into your operating funds,” he says.
Apartheid, Genocide
However, student protesters have succeeded in convincing colleges and universities to distance themselves from controversial holdings in the past. Student-led campaigns over apartheid rule in South Africa in the 1980s pressured Columbia University to sell off holdings in companies operating in the country.
Following that, by 1988, 155 U.S. colleges had at least partially divested from South Africa, and five fully divested.
In 2005, Stanford University divested from Sudan in 2005. “I don’t want the endowment that’s supposed to be serving me and this community invested in a county that conducts genocide,” Seth Silverman, a Stanford student said during a town hall meeting that year.
In the wake of Stanford’s trailblazing move, at least 60 other colleges and universities did the same.
As for Israel’s counterattack in Gaza, as long as the students believe that their universities are not divesting, their outcries will have a reason to continue.
“Divestment is definitely the vehicle to keep the protests going,” Marsicano said.
© 2024 Newsmax Finance. All rights reserved.
Read the full article here