I'm sure many of you are aware that protests have erupted on the lawns of well-known colleges and universities. Some of you may also know about one of the things many protesters are seeking: divestiture from companies and institutions that do business with Israel. But is that possible or financially tenable? If you want an idea of the dynamics at play from an investment perspective, it's worth reading this guest essay by Gary Sernovitz. As a private equity executive, Sernovitz had a front-row seat to a prior movement urging universities to divest from fossil fuels; some schools stopped investing in his firm's oil and gas funds while others invested in its clean energy funds. He even wrote a novel on the travails of a college chief investment officer. His bottom line: In taking the easy way out on fossil fuels — schools' exposure to oil and gas investments was often less than 5 percent of their endowment — these institutions put every investment up for debate. If Israel is a target, for political reasons, what countries are next? Even more thorny in this case, Sernovitz writes, is the question of what would be the benchmark by which divestment would end. A cease-fire? A two-state solution? The end of Israel as a Jewish state? Endowments "can't be in the moral adjudication business — and they should never have headed this way," Sernowitz writes in his guest essay. He argues: This does not mean that investing should be a returns-at-any-cost exercise. But it does mean that the real world does not always provide objective answers to how to balance benefits and consequences of companies providing products and services: Carbon emissions are bad, but energy consumption is necessary. Microsoft software for the Israeli government may displease you, but Microsoft saying it won't sell software to Israel would displease others — and probably get itself banned from working with New York State agencies. Graduation season is now upon us, and there's a chance that the protests may take a hiatus. But the questions they have raised will undoubtedly linger. Here's what we're focusing on today:
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Thursday, May 9, 2024
Opinion Today: Is divestment from Israel self-defeating?
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