University Trustees Should Say No to Divestment

This essay argues that universities should commit their endowments to a non-divestment policy, investing solely for risk and return. We acknowledge that there are narrow conditions under which divestment may be legally permissible. Instead, our argument is pragmatic and informed by our normative view of the university. Pragmatically, divestments do not pass a cost-benefit test. They are unlikely to produce the desired social benefits but are likely to complicate endowment management and create litigation risk. By contrast, investing solely for prudent risk and return minimizes management costs and is all but a fiduciary safe harbor. We consider the possibility that a divestment could be justified on reputational grounds but conclude that such a divestment would be legally problematic and is as likely to damage the university's reputation as to improve it. Normatively, we argue that a non-divestment policy is most consistent with higher education's long-standing ethos of open-ended inquiry and that universities will best serve society by focusing solely on their charitable purpose of research and education.