At the May 21 Convocation, climate action leader Ayana Elizabeth Johnson wasted no time. “Has Carleton divested its endowment from fossil fuels?” she asked with a knowing smile. “Not completely yet, no,” came the response from Kerry Raadt, Director of Events and moderator of the discussion. 

Carleton’s endowment, currently valued at $1.1 billion, is supposed to be the “lifeblood of Carleton’s mission,” per a December 2019 Inside Carleton article. But the extent to which the endowment—both in its placement in the market and its use on campus—supports that mission and the values of the community remains in question for many students who see the endowment as an amorphous sum of money that supposedly exists but can never be seen. 

Endowments of wealthy private schools across the country have come under fire in recent years for prioritizing the accumulation of wealth over enhancing financial aid and other resources to make an elite education more broadly accessible. In his 2015 New York Times article “Stop Universities from Hoarding Money,” University of San Diego law professor Victor Fleisher contended that wealthy institutions spend a disproportionate amount of their endowments on compensation for hedge fund managers whose job is to make the institution indefinitely wealthier. 

Fleisher wrote, “We’ve lost sight of the idea that students, not fund managers, should be the primary beneficiaries of a university’s endowment. The private-equity folks get cash; students take out loans.” In a subsequent interview with NPR, Fleisher said, “It’s striking that in those circumstances where you would expect the universities to tap into the endowment for a lot of support, they didn’t. Instead, the focus was on growing the endowment back to the previous size.” He was referring to the 2008 financial crisis, though the COVID-19 pandemic produced similar effects. 

As far as numbers go, Carleton’s endowment seems to be no different. In the past decade, it has grown from $653 million to $1.1 billion as of April 2021. According to Carleton’s Chief Investment Officer Kelsey Deshler, when the COVID-19 pandemic started to affect U.S. stock markets in February and March of 2020, the endowment experienced the largest drawdown in value since 2008 and 2009. However, it did not take long to not only rebound from the financial effects of the pandemic but surpass the previous benchmark. “We’re up about 31% since [March]. So we are well beyond where we were, in terms of our performance before COVID,” she said. 

In spring 2020, as the pandemic hit the United States, Carleton students looked to their institution for financial support as they purchased emergency tickets home, boosted their technology resources for a term online and supported family members. 

In response to the lack of immediate resources, some students took matters of aid into their own hands. Several Carleton students launched a GoFundMe fundraiser with the explicit purpose of providing financial support to peers “at a time where the college will not loosen its spring break work policies nor provide immediate relief to students disproportionately impacted by this crisis and the college’s decisions,” according to the fundraiser’s website. Students’ frustration was compounded as they looked at the hundreds of millions that Carleton had and seemed to be hiding from them.

According to Carleton’s 2020 Financial Statement, “endowment funds include donor-restricted net assets and funds designated by the Board of Trustees for the long-term support of the College.” The key word “donor-restricted” thwarted students’ efforts to access some of Carleton’s standing wealth in a time of immediate need: 64% of the endowment in 2020 was marked by donors to be granted to members of the Carleton community for pre-specified purposes.

Eric Runestad, Vice President and Treasurer since June 2020, said, “We talk about the endowment as if it is one fund, but it is actually made up of more than 800 different funds, each of which has a particular purpose and a written agreement between the donor and the college for how we will use the fund. We are obligated by this legally binding agreement to only spend according to our policy and only for the agreed-upon purpose.” 

The spending policy of the endowment—about 5% of the total, adjusted for inflation—is a fixed calculation that does not allow for emergency expenditures. According to Deshler, about a quarter of the college’s yearly operating budget comes from the endowment—roughly $44 million per year. Tuition revenue supports the majority of the rest of the budget. 

Runestad continued, “The notion of pulling money out of the endowment to cover one-time expenses flies in the face of one of the core principles of any endowment, which is referred to as intergenerational equity. This means that if we pull money out for today’s needs, we sacrifice what we can do for the next generation with those same dollars. We feel an obligation to future generations of Carls to be disciplined in our decision-making today so that the endowment can continue to grow and provide support for tomorrow’s students as well.” 

While $1.1 billion is no small sum, Carleton’s endowment lags behind those of many peer liberal arts colleges. The Carletonian reported in 2019 that Carleton was one of a few such colleges with endowments under $1 billion at the time, with many close to $3 billion. As these colleges continue to up the offerings to students and faculty in the form of better facilities, research opportunities and student experiences, Carleton feels pressure to keep up. 

President Steven Poskanzer warned in a recent interview with the Carletonian, “My worry is that lots of liberal arts colleges may not survive the coming decades. I think you may see a lot of closures and mergers. I’m a hundred percent certain that there’s going to be a continued robust desire for a set of great liberal arts colleges, and we need to be one of those.” Deshler confirmed Poskanzer’s outlook for the college’s future. She said, “I would personally be very surprised if Carleton had to go through any kind of shift like that.”

When asked whether the primary purpose of Carleton’s endowment is to make money on itself, Runestad said that “the purpose of the endowment is to support the mission of the college in perpetuity” through practices that will ensure that future Carleton students and faculty have the same or better resources available to them as we do today. If supporting the college means growing the endowment indefinitely, it seems that enough will never quite be enough.

The investment policies that allow the endowment to grow so rapidly are determined by the Investment Committee, a subset of the Board of Trustees, which is a 32-member council of alumni and parents. However, a variety of student groups work to make Carleton’s investments better match the values of the campus those investments are supposed to represent and benefit. 

One of those groups is the Carleton Responsible Investment Committee (CRIC), a committee of nine student and faculty members formed in 2010. CRIC’s primary function is to compile an annual report of recommendations for the Board of Trustees of demands to make on the companies it supports. The recommendations span a variety of ethical concerns, including those related to the environment, corporate transparency and labor rights.  

CRIC’s major project over the past few years was helping the college transition into an Environmental, Social, and Corporate Governance (ESG) investing policy, which Carleton officially adopted in 2020. As Alison Block ’22, chair of CRIC, puts it, ESG means “looking at whether it’s economically beneficial for those companies to engage in that activity, but also what environmental impact looks like. The Investment Office has made it part of their official policy for hiring managers.”

In 2020, 76.8% of respondents to a CRIC survey of students, alumni, faculty and staff said that they felt it is “extremely important” or “very important” that “environmental and social considerations should be incorporated into investment decisions.” In 2015, CRIC recommended full divestment from fossil fuels to the Board of Trustees, only to be met with a resounding “no.” Since then, according to Block and her fellow CRIC member Waleed Iftikhar ’21, CRIC wants to use Carleton’s status as a shareholder in large companies to pressure them into better ethical practices.

Such a slow approach to social change is not enough for Divest Carleton, which advocates for the removal of Carleton’s funds from companies that directly or indirectly—as through their loans, for example—perpetuate the fossil fuel industry. 

Part of the difficulty for organizations such as Divest—and the reason Raadt’s response to Johnson’s question was a shaky “not entirely”—is that the public equity holdings, the investments that are available for the public to view, are not invested in any fossil fuel companies. As of June 2020, 35% of the endowment was in public equity. The rest of the endowment is stretched across hedge funds, privately-owned companies, real estate, and “real assets,” which, according to the 2020 Financial Report, are “oil and gas partnerships, alternative energy partnerships, and mineral holdings.” These holdings are not required to be publicly reported. 

Aashu Lele ’23, a member of both Divest and CRIC, explains private equity as “a chunk of stock that is not traded openly on the stock market. It’s basically a backroom deal between the investor and the investee. The reason it’s private is that it’s a way to beat the market by not telling everyone what you’re doing so people don’t immediately catch on to what the good investments are.” 

Since these investments are so highly confidential, organizations like Divest and CRIC only look at the public portion of the endowment. Lele said, “CRIC doesn’t have any purview over where the rest is invested in. We have no idea where it is, or in which companies, or anything about it.”

Block added, “There’s this sense of distrust, like, are they investing in all these sketchy companies behind our back? We don’t know. And I don’t think that’s necessarily the case, but I think we’ve always advocated for transparency and accountability as part of CRIC.”

Deshler said the ESG policies apply to private equity holdings as well. She added that the transition to divestment from fossil fuels will be more gradual than organizations like CRIC and Divest might envision. Part of the motivation, she said, is that the fossil fuel industry is fizzling out and is no longer a wise investment for a long-term fund like the Carleton endowment.

“The risk reward [of ESG investments] is so much better than in traditional oil and gas. The market is not for those assets. So while we don’t have divestment, you can see through our portfolio that we’ve just been de-emphasizing traditional energy as a source of return potential and opting for more clean sources,” Deshler said. 

Block added that while she would personally prefer the divestment strategy, “ESG is almost getting there in the sense that it recognizes that the actions of these companies are detrimental and have long-term economic and social and environmental consequences.”

Even if the going is slow and the Board of Trustees seems resistant to divestment advocacy at every turn, Lele said that the campaign to divest from fossil fuels needs to continue. He said, “I don’t think it’s an option to believe that Carleton won’t ever divest, mainly because if I do believe that, then we just have to pack up and go home. I think we still have a chance. Especially with the new president coming in, I have some hope.”

Lele clearly had Johnson’s support. Her message to the students listening to her discussion is that  “[divestment advocacy] is a very important use of your energy. Your voices matter hugely in that regard.”