Dear Members of the Bates Community,

I write to outline important aspects of our institutional response to the urgent problem of climate change and to address the question of whether the college should divest its endowment from the fossil fuel industry.

Climate change poses a momentous threat to the overall quality of life on Earth. Bates takes this threat seriously and has responded over the years in a variety of ways. The college has been a leader in environmentally sustainable practices and has committed significant resources that have reduced energy consumption and altered our ways of doing business. Along with other institutions, Bates has committed to reducing our carbon footprint with the ultimate goal of carbon neutrality.

Members of the Bates Energy Action Movement (BEAM), a student organization, have conducted a thoughtful campaign since the fall of 2012 urging the college to divest from the 200 companies that hold the largest fossil fuel reserves. We have considered this request seriously, met with student advocates to understand their arguments, studied the literature on the subject, and analyzed the impact of divestment on our endowment and institutional mission. I personally have met with students from BEAM a number of times, and, within the past year, other members of the college administration and the Board of Trustees have also discussed the pros and cons of divestment with the students. These meetings have included conversations with the Board’s Investment Committee and with the chair of the Socially Responsible Investing Subcommittee.

Based on these interactions over a period of time and a careful review of the full range of implications, the Board of Trustees has chosen not to alter its current framework for endowment investment to divest from the fossil fuel industry.

The Board of Trustees has a fiduciary responsibility to protect our ability from generation to generation to offer the high quality liberal arts education envisioned by our founders in 1855. The college’s endowment provides core support for this mission, and the Board is charged with protecting its purchasing power over time through sound investment policies. In addition, the Board has an explicit responsibility to honor the wishes of donors past and present whose gifts have built the endowment, trusting that it would be prudently managed to provide enduring resources to support the mission of the college.

Bates is committed to socially responsible investing as an important dimension of its investment strategy. So, too, is its external endowment manager, Hall Capital Partners, who recently completed the process of becoming a signatory of the United Nations Principles for Responsible Investing (UN PRI). The Board of Trustees and Hall Capital Partners continually monitor the college’s investment practices to ensure that they achieve the appropriate balance among a number of considerations, as outlined in the following policy statement:

“The Endowment’s strategic asset allocation is constructed to properly balance the need for liquidity, growth and/or preservation of purchasing power, and tolerance for risk. The primary criterion for the selection of the Endowment investment is to maximize return within defined risk parameters, which in turn, maximizes the financial support for the college. In addition, Bates is committed to balancing the financial objectives of the Endowment with the social and environmental priorities of the broader Bates community. The Investment Committee and Chief Investment Officer (CIO) will consider social, environmental and governance impacts when selecting Investment Managers across all asset classes. The Investment Committee and CIO welcome input from student or faculty groups in assessing the priorities of the Bates community with regard to socially responsible investments.”

For a variety of reasons, the Board of Trustees has concluded that it is not prudent to move beyond this strong framework of socially responsible investing to a divestment strategy targeting a specific industry.

An analysis performed by our vice president for finance and administration in the spring of 2013 estimated that a maximum of slightly over 3 percent of the Bates endowment is invested in the top 200 fossil-fuel companies targeted for divestment. Virtually all of this investment is owned by the college through commingled funds, including mutual funds and limited partnerships investing in public and private securities. Employing such funds is critical for diversification of investments and professional money management across asset classes. To guarantee divestment from these 200 public companies, our investment advisers estimate that between a third and a half of the entire endowment would need to be liquidated and replaced with separately managed accounts.  Were we to guarantee a fossil fuel free endowment more broadly than the 200 companies, greater than half of the endowment would need to be liquidated. In either scenario, the transition would result in significant transaction costs, a long-term decrease in the endowment’s performance, an increase in the endowment’s risk profile, and thus a loss in annual operating income for the college. Such a reduction in resources would affect critical college priorities, including financial aid, faculty and staff salaries, and support for academic programs. In short, divestment would potentially threaten core aspects of the college’s mission. Furthermore, as Harvard President Drew Faust has powerfully argued, instrumentalizing an endowment for political ends distorts its function as a core resource for our academic mission, and potentially puts at risk our independence as an academic institution.

Putting our human and fiscal resources toward effective programs on our campus and within our community, on the other hand, allows us to address the problem of climate change directly and through our own actions. This includes scholarship and teaching related to climate change, as well as the systematic measures we take to reduce our carbon footprint.

Bates will continue to take a leadership position in environmental sustainability, building on and enhancing policies and practices aimed at reducing our reliance on fossil fuels. Currently, two full-time positions at the college are charged with leading strategic efforts in support of environmental sustainability: the Manager of Sustainability Initiatives and the Energy Manager. The Committee on Environmental Responsibility, composed of faculty, staff, and students, is an active group that develops new opportunities for sustainability initiatives, and the Energy Task Force, created in 2009, designs and implements projects and policies to improve energy efficiency and conservation on campus. Prior to 2009, our energy budget grew at an annual rate of 5 percent. Over the past five years, the work of the Energy Task Force has enabled the college to reduce that growth each year, resulting in a 2014 budget that is 18 percent lower than the 2009 budget. All capital renovations and new construction have been designed to achieve a minimum equivalency of Leadership in Energy and Environmental Design (LEED) Silver, as will the new residential life facilities to be built on Campus Avenue. The Bates Dining Service in particular demonstrates national leadership in environmental practices, as one of only six U.S. colleges or universities to earn a three-star rating for sustainability from the Green Restaurant Association. That rating includes recognition of Bates’ purchase of renewable energy credits, its broad adoption of Energy Star appliances, its use of occupancy sensors, and many other measures that help reduce the college’s energy demand and climate-altering impact.

The actions outlined above represent a serious institutional and financial commitment to environmental sustainability, and I will continue to collaborate with the Board of Trustees and the entire Bates community to strengthen our efforts and maximize their impact. As with all matters of urgent community interest, I welcome the engagement of our students and their constructive ideas for action.

With all best wishes,

Clayton Spencer