Fossil fuel divestment finances fact sheet, Prepared by Swarthmore Mountain Justice

0) Background on the endowment and terminology

In May 2013, Chris Niemczewski released a report arguing that divestment could reduce the endowment’s growth by $10-15 million a year. He argued that:

  1. If we divest, we would need to move our investments from commingled funds to index funds, which they said would hurt our endowment’s returns.
  2. If we divest our separately-managed funds (which are customized for us), they would underperform.

In 2013, this report was flawed. As a result of a surge in availability of fossil fuel free investment options and a growing concern about the stability of fossil fuel investments within the financial community, today, this report is egregiously erroneous and outdated. Even studies funded by the fossil fuel industry about the alleged costs of divestment do not argue divestment would cost nearly this much. This fact sheet outlines major flaws in the report’s 4 central assumptions.

1) The report assumes fossil fuel shares will perform at or above the market average. This isn’t true now and if the world prevents catastrophic climate change, it cannot be true.

2) The report assumes that index funds underperform commingled funds, which is hotly debated, and that we cannot move our investments to divested commingled funds, which is unequivocally false.

3) It assumes that divesting from fossil fuels will increase risk and decrease returns

4) The report is relies in part on cost estimates from a deeply flawed and discredited report.

In addition to the the report’s dubious assumptions, it was authored by Chris Niemczewski, the Board’s Investment Committee Chair, and who’s conflict of interest the Phoenix exposed last fall. Niemczewski is the President and Founder of Marshfield Associates, which was Swarthmore’s highest-paid investment manager in 2011, costing us $191,381. According to Marshfield’s SEC file, he owns between 25 and 50 percent of the company, meaning he indirectly receives between $46,000 and $95,000 from Swarthmore each year. Niemczewski’s firm specialized in a specific type of investment (they invest in just 18 companies) that makes it highly difficult for them to divest. Therefore, Niemczewski would stand to personally lose $46,000 and $95,000 a year if Swarthmore divested and moved to other managers. While we hope this did not affect his judgement, it clearly is not in his personal interest for Swarthmore to divest.