Saturday, January 7, 2012

The Hampshire College Policy on Environmental, Social and Governance Investing: A Closer Look

• College unveils most ambitious socially responsible investing policy in the country
• Board reaffirms: College never divested itself of holdings in Israel, rejects parallel between South African apartheid and Israel

I. Overview

Last month, Hampshire College presented its new draft investment policy to the community for comment, with the expectation that the Trustees would approve the statement of principles by the end of 2011 and take up the full document at their quarterly Board meeting in February.

The policy is distinctive in two regards:  First, following the best practices in this evolving field, it emphasizes investments that actively do good rather than merely avoid harm. For that reason, the old phrase, "socially responsible investing," has yielded to "Environmental, Social and Governance Investing," or (because that is an unwieldy mouthful) "ESG," for short (1, 2).  (Both the old version and the new mandate what is to be encouraged as well as what is to be avoided—and in largely the same terms—but the new one frames the whole in a more comprehensive, positive, and up-to-date way.)

Second, it is an unusually vigorous attempt to implement these principles. As past President Marlene Fried explained, the consultants said that, "as far as they knew, our policy was the strongest and the most all-encompassing" in the country. Given that only about 15 percent of American institutions of higher education explicitly pursue socially responsible investing, Hampshire College thus again positions itself at the cutting edge  ( 1, 2, 3) of academia.

Interest in the policy, both on and beyond the Hampshire campus, was clearly heightened by the recent history of controversy over the College's investments in Israel. In 2009, anti-Israel student activists associated with the so-called "BDS" (Boycott, Sanctions, and Divestment) movement falsely claimed that they had forced the College to divest from "the Israeli Occupation of Palestine" (an overview here; more detailed coverage here). It was an assessment of the overall investment policy at that time that prompted the review whose results are now before us. The current document, let it be said at the outset, contains nothing that singles out Israel, or any country, for that matter. Indeed, one of the most significant things to come out of the presentation was an unusually clear statement to the effect that the Board had not in any way or fashion divested from Israel, and what is more, explicitly rejected the analogy to South African apartheid that the activists here and elsewhere have repeatedly sought to draw.

 * * *

As promised, then, here is a closer look at the presentation and the document. The approximately 80-minute information session on December 13 consisted of an overview of the review committee’s approach and a walk through the document (with highlights and excerpts in PowerPoint), followed by a question-and-answer session. Although the full text of the new document was distributed in hard copy midway through the event, there was of course no way for all those in attendance to explore and fully assess the details off the cuff. (Note: For the sake of greater clarity and coherence, I have rearranged some portions of the presentation.)

Because of the intrinsic importance of the issue and the interest that it is already beginning to arouse outside the College, I have attempted to provide as much detail as possible. Readers may thus pursue this description as selectively or extensively as they wish: The above (I) conveys the essence of the plan. The middle and longest portions (II-V) elaborate on the details. The final portion (VI) takes up the question of investment involving Israel, which had garnered national attention but surfaced here explicitly only in the question-and-answer session.

(l-r:) Jonathan Scott, Marlene Fried, Beth Ward, Stan Warner, Ken Rosenthal

II. Personae and Process

Secretary of the College Beth Ward moderated the event and introduced the participants: Jonathan Scott (an alumnus, from the College’s first entering class, now member of the Board of Trustees and head of the Investment Committee), Ken Rosenthal (first Treasurer of the College, now Vice Chair of the Board of Trustees), Stan Warner (professor emeritus of economics, and long the faculty representative on the investment committee), and professor of philosophy Marlene Fried, who served as Interim President last year, while we conducted the search for a full-time president). Not present were the student and staff members of the committee: in the meantime, the former graduated, and the second took a position elsewhere.

Jonathan Scott began by attempting, as he put it, to frame the discussion at a high level of generalization. The baseline fact is that Hampshire’s endowment today stands at only about $ 31 million (about 26 million of that in liquid securities). This combination of low total and limited liquidity, he explained, “puts some constraints on this portfolio.” The College therefore has to invest chiefly in existing funds; i.e. adapting to or modifying their selection rather than creating its own from scratch. (On the other hand, by implication, I suppose one could discern an advantage in not facing the dilemma of substantial investments in more traditional fields and firms, more likely to violate rigorous ESG standards.)

He further emphasized that, although the College had suspended the old policy and investment committee during the review process, “we never suspended how we invest.” (Translation: Board members did not run out and suddenly begin investing in sweatshops and armament manufacturers in 2009.)

Hampshire’s socially responsible investment stance dates from 1977, when the College divested itself of holdings in South Africa. The unwieldy document governing investments, revised for the ninth time in 1994, combined the overall policy statement, the specific investing guidelines, and the rules and regulations governing CHOIR, which stands for the awkwardly named Committee at Hampshire On Investment Responsibility (Ironically, it takes a clumsy and infelicitous name to generate a convenient acronym. Talk about the tail wagging the dog. But in was the '70s, after all. Maybe administrators will one day just create names that make sense. One may hope.)

III. The Document

As Scott put it, the document was thus “more than out of date, it was absolutely confusing.”

Indeed, anyone who attempts to read through the old policy—even though, at 2083 words, it is about one-third shorter than the new one—would be hard-pressed to avoid that conclusion. Some portions are clearly no longer relevant. Some are more detailed than they need to be. Others lack sufficient detail or clarity. And above all, the structure of the whole, mixing principles and procedures, was less than user-friendly, as we say nowadays.

The first task of the review committee had therefore been to break it into its constituent elements, each of which has now been rewritten and can stand on its own and be modified according to appropriately differentiated procedures. Ken Rosenthal explained:

(1) The intention was, first, to generate a short general statement for trustee approval by the end of the calendar year. This “Policy on Environmental, Social and Governance Investing” (3 pages) possesses the highest degree of authority and will remain fixed for the foreseeable future. (Note: in what follows, upper-case “Policy” refers to this document, as opposed to the investment “policy” [lower-case] as a whole.)

(2) The “Investment Committee’s Working Guidelines for ESG Investing,” by contrast, are more detailed and thus likely to be “more fluid,” with a lower threshold for modification and approval. As Scott later put it, ““a policy is something you don’t want to take back to the board every three or four months.” He cited an example from his own experience in Pennsylvania: a generation ago, in the wake of Three Mile Island disaster, “no one, even conservatives, wanted to invest in nuclear power” but today, when weighed against coal in the age of global warming, that choice may look different. Thus, a general principle (appropriate to the “Policy” document) might be upholding fair labor practices. However, the more flexible, amendable working “Guidelines” would explain how to achieve that. (This is of course, a common principle, which was crucial to our recent work on the College’s Governance Task Force: organizations apply it every day when distinguishing between authoritative and relatively stable “bylaws,” on the one hand, and more flexible policy manuals and the like, on the other.)

(3) Finally, there is “CHOIR Composition and Procedures (2 pages),” which as the title implies, addresses the operations of the investment committee rather than substance.

IV. Dilemmas and Decisions

The overall challenge or dilemma is that the Board of Trustees, in the words of the Policy (p. 1) has a “fiduciary obligation” “to optimize the financial return to the college, both currently and in the future, in order to advance the long-term financial interests of the College and support its mission.” “At the same time, “It is a core value of Hampshire College, and consistent with its historical practice, that the College invest in a socially responsible way.”

(The introduction to the old policy, perhaps because it was then breaking new ground, spoke of ethical investing first, and fiduciary responsibility only after that. Whereas the new policy allots four paragraphs to the introduction, the old one confined it to a single one, distributing some of the issues among the guidelines, e.g. III.A-C.)

As Scott observed, even though “we care greatly about both those issues,” they “don’t necessarily go hand in hand.” Attempting to balance the two “generated—I won’t say, some friction—energy.” There were “some bumps on the road at first,” but thanks to good will and a common sense of purpose, the members of the team were soon able to come up with the proper approach, and then everything moved along as if “on a superhighway.” (The document [p. 1] does make the plausible but slightly strained argument that investments in firms with sound environmental and human rights practices can be best even judged on purely financial grounds: such enterprises ultimately have the best prospects for long-term survival and growth, and whereas those that shun these values “pose reputational, financial, operational and legal risks to the College’s investments” and thus its “future financial security.”)

He cautioned, “there is no such thing as a straight line down the middle,” there is no such thing as perfection—or purity.” Or, the words of the Policy:

“investing in a responsible way does not always offer self-evident decisions. In an investment world that is ever more complex and global in scope, it is not possible to be informed of every activity that a business undertakes. There are likely to be products and services that can be used in ways that are both responsible and contrary to a shared notion of responsibility.” (p.1)

For that reason, Scott explained, it is essential at the outset not just to create clear rules and criteria, but also to indicate how they can be pragmatically applied in real life. He illustrated dilemmas and choices from other cases. The Quakers, he noted, are famously against war. They could therefore have chosen not to invest in US Treasuries, given that some of this money supports the military. In the end, however, they concluded that their mission was more jeopardized by having securities at risk, and so they decided to keep their liquidity in Treasuries.

The College’s answer to the challenge of making such decisions is a “threshold” policy. The mere fact that a corporation is involved in some activity prohibited under the investment policy is not a red line. Rather than imposing an absolute ban, which, given the complexity and diversity of economic enterprises in the contemporary world could well prove crippling, the committee chose to “create thresholds for things that are quantifiable.” For example, the College would not invest in a major defense contractor, but there would be no obstacle to investing in a consumer-electronics firm whose production of a component for the military constitutes a minuscule part of its overall activity, measured as a share of revenues: in this case, five percent.

(The old policy was both more vague and more specific [ III.C.3 ]. It framed the issue with reference to the desire "to invest in a way that reduces this country's dependency on military spending." On the one hand, it spoke of military investment in reverse terms, promising to "favor companies not heavily dependent on the sale of weapons and those which are taking active steps toward converting from production for military purposes"; it provided no quantitative or other practical measure. On the other hand, it went into considerable detail in defining nuclear and biological weapons: presumably a reflection of the debates over Cold War arms control and the relative newness of regulating other non-conventional weapons; the treaty on biological and chemical weapons cited there dated only from 1973 [III.C.4 and Definitions and Notes].)

We are at the leading edge of a trend, Scott explained: “The whole idea of ESG investing is becoming more popular, with individuals,” but it is just taking off at the institutional level. That is due in part to the complexity and limitations that might cause large investors to shy away. Given the relatively small size of its endowment, Hampshire is perhaps well able to pursue such a policy. At the same time, most investments will necessarily be in standard, pre-packaged funds, i.e. given to a fund manager, with appropriate instructions. “If we had billions,” he said, “we could hire that manager” to create a customized fund. Instead, “the best we can do is to find a fund that approximates” our desires and then customize it by employing various screens to filter out particular investments that do not fit our policy. “I’ll stress that this policy is to give guidance to our managers.” The fund mangers then give their recommendations to the investment committee, which makes the ultimate decision.

“A big constraint,” he added, “is in the emerging markets, it’s extremely difficult to invest in emerging markets in ESG, especially when you have to be in a fund.” He further clarified: “the screening is of individual companies; we do not invest in countries, as such.” (This seemed quite a clear allusion to the controversy over Israel and divestment as well as an elaboration on the general geographical question.)

Scott conceded that the thought of trying to implement what is arguably the strictest policy in the US while maximizing revenues made even him a bit nervous. The consultants, however, are confident that it is practicable.

V. The New Policy and its Implementation

Stan Warner presented the substance of the new plan and its rationale. He started with some history: “It began with one issue, and I was there, marching with 400 students around the Red Barn [building housing financial administration offices, and in earlier years, the site of Trustee meetings; JW]. We were, he said, “a place that cared about social issues beyond the borders of the College. We were trying to end the Vietnam War, trying to impeach Richard Nixon, trying to end apartheid.” The “trustees listened to this and were responsive, with a bit of nudging”

Much has changed not only since 1977, but also since 1994, when the old governing document was adopted. The world has become more complex, and the notion of ethical investing has matured, as well. In keeping with the broader notion of social responsibility represented by the ESG concept, the study committee agreed, “we will not make substantive changes in the areas that we do not invest in.” The current task, Warner said, was thus not to dilute the old system, and rather, “to expand” it. That requires some effort, as no off-the-shelf package is likely to fit the bill. “We then have the challenge of finding funds that satisfy these [standards], we can’t invest in just one fund. We need some diversity in the portfolio.”

(1) The Policy is divided into positives and negatives: those activities that the College wishes to support and those in which it chooses not to invest.
The College will favor investments in businesses that emphasize one or more of the following characteristics:
  1. Provide beneficial goods and services such as food, clothing, housing, health, education, transportation and energy. 
  2. Pursue research and development programs that hold promise for new products of social benefit and for increased employment prospects. 
  3. Maintain fair labor practices including exemplary management policies in such areas as non-discriminatory hiring and promotion, Worker participation and education, and in policies affecting their quality of work life. 
  4. Maintain a safe and healthy work environment including full disclosure to workers of potential work hazards. 
  5. Demonstrate innovation in relation to environmental protection, especially with respect to policies, organizational structures, and/or product development; give evidence of superior performance with respect to waste utilization, pollution control, and efforts to mitigate climate change risk. 
  6. Use their power to enhance the quality of life for the underserved segments of our society and encourage local community reinvestment. 
  7. Have a record of sustained support for higher education.
The College will not favor investments in businesses whose products, services, or business practices are inconsistent with the above characteristics, in particular avoiding businesses that:
  • A. Make nuclear, biological, or conventional weapons. 
  • B. Have significant operations in countries with serious human rights violations. 
  • C. Engage in unfair labor practices.
  • D. Discriminate by race, gender, ethnic origin, sexual preference, or disability. 
  • E. Demonstrate substantially harmful environmental practices. 
  • F. Market abroad products that are banned in the United States because of their impact on health or the environment. 
  • G. Have markedly inferior occupational health and safety records. 
  • H. Manufacture or market products that in normal use are unsafe. 
  • I. Refuse to make their performance records concerning Guidelines 1 - 7 and A-H available upon reasonable request.

Elaborating on the negative, he made clear that the decision not to invest in a given field should not necessarily be taken to mean that the relevant activity is illegal or immoral. For example, although this is nowhere specified in the Guidelines, the College chooses not to invest in firms a major portion of whose business involves alcoholic beverages or so-called adult entertainment (pornography). The investment policy is a voluntary statement of values and resource-allocation preferences.

(2) The Guidelines, following the same structure and numbering as the Policy, in essence go on to explain some of the metrics and evaluation procedures. For example, on the positive side, workplace conditions can be measured by a combination of “policies,” “certifications” (OSHA and equivalents), “programs,” and “performance (e.g. statistics on employee injuries and fatalities measured against industry averages, etc.) (pp. 1-2: Point 4). On the negative side, a pattern of discrimination might be measured (p. 4: Point D) by such factors as fines, penalties, and legal settlements, or individual or class-action lawsuits involving the Equal Employment Opportunity Commission.

Echoing Scott’s earlier remark, Warner affirmed, “we don’t divest from countries, we divest from firms.” “In some cases, with human rights violations, the process begins with countries and moves to funds. Closer scrutiny of investments in a particular country could be triggered if the latter had a particularly egregious human rights record might. He cited the examples of South Africa in the past, and countries practicing genocide, such as Sudan, today. Still, the point again was the firms and their practices. Thus, the prevalence of sweatshops in Indonesia might trigger a close review of firms there, but the outcome might be a decision not to invest in Nike and Gap—not a ban on investment in Indonesia.

Ken Rosenthal briefly explained proxy voting (Policy, p. 3), which adheres to the same principles as the old, namely supporting propositions that seek to eliminate or reduce "ESG injury," and opposing the reverse. The difference lies in the context: the old policy [III.D] envisioned the trustees as "voting their shares at meetings of stockholders by proxy." The new one explains that, "The College generally invests in funds, rather than individual companies, and usually has no opportunity to exercise the voting rights of shareholders because they are delegated to the manager(s)." The College simply instructs the manager(s) to cast any votes in accordance with its policy.

(The old policy [III.E], unlike the new one, contains a specific clause on "Divestment," authorizing sale "for other than financial reasons" if the "exercise of shareholders' rights . . . will not, within a reasonable period of time, succeed in changing a company's attitude toward a moral or social problem." Clearly, this is a political action, which pertains to an extreme and rare situation, such as the South African case. For example, one would not, generally speaking, seek to change the overall production of an arms manufacturer; one would instead simply determine that investment in this area was inconsistent with the policy and "delete" the company from the "master list of acceptable investment opportunities" [III.C.5]. Now that the College is invested chiefly in funds, most of which have moreover received a thorough screening in accordance with ESG policy, "divestment" in the former sense is typically not an option.)

(3) CHOIR, a subcommittee of the Investment Committee, is tasked with an advisory and reporting role concerning investment policy: chiefly, making recommendations to the former on the maintenance, revision, and application of the Guidelines; and keeping Board and community informed of its doings. (CHOIR, p. 1: Points A-B)

The committee decided to retain CHOIR as a separate standing body with the same membership (two representatives each from trustees, faculty, students, and staff, with the Vice President of Finance ex officio), but modified its procedures in a few important ways aimed at enhancing efficiency, transparency, and accountability: First, rather than coming together on an ad hoc basis, as in the past (II.E: "normally three or four times a year") CHOIR will have a regular annual meeting as a baseline (others taking place as necessary) and will report on a quarterly basis to the Board. Second, and as a corollary: now, as before, CHOIR “may initiate its own actions” but is explicitly required to solicit, take into account, and report on the full range of community information and advice when making its recommendations to the Investment Committee (old: II.B.4; J.1,3); new: Points B, F-H). The policy, appropriately enough, requires solicitation of "information and advice from individuals and groups" beyond the campus during the research and deliberation phase, but once a judgment has been rendered, focuses on "opinion" within the College walls.

What is distinctive today is the commitment to strengthen the role of CHOIR as a standing committee, with the expectation of regular and substantive dialogue with both Trustees and campus community.

Secretary of the College Beth Ward wrapped up the formal presentation by again reminding the audience that the College had never halted its socially responsible investing, and she closed by inviting public comment in the coming week. The question-and-answer session took up the final 25 minutes or so.

VI. The Israeli "Elephant in the Room"

Most of the questions, predictably, included details of implementation, some of which (also predictably) had in effect been answered in the course of the presentation.

A subsidiary concern, or at least, observation, involved the small size of the audience, and in particular, the low turnout; there were only three students, though they asked most of the questions. Given the attendance figure and the late date in the semester, the possibility of extending the comment period beyond the next week arose. The Committee showed itself open to suggestions but also offered the very logical response: what the Trustees wanted to approve now was the Policy document, which was brief, general, straightforward, and presumably uncontroversial. There would always be time for further comment on the other elements before the official February Board meeting, particularly because the process for revising them was simpler, given the lower threshold.

It was only now that the question of economic ties to Israel arose. In a way, that was only natural. The topic is nowhere to be found in the document, for reasons that should be obvious and were clearly indicated in the presentation: the College’s policies pertain to firms, and not to countries or particular political issues. There was, nominally, no need to speak of it. That said, everyone was aware of it as a subtext or background issue. As in the case of the original controversy, it is in some ways a “damned if you do, and damned if you don’t” dilemma: mentioning it risks giving disproportionate attention to a non-issue and thus detracting from the real topic. On the other hand, not mentioning it allows the impassioned advocates to imply (however implausibly) that the issue is being ignored for nefarious reasons.

An activist from Students for Justice in Palestine therefore clearly and politely raised the issue of what he called the “elephant in the room.” He had several related questions, beginning with process and procedures.

• He wanted to know, first, whether the transparency of the investment process would be retained? For example, would CHOIR still have access to lists of all investments?
-The answer from Mr. Scott: yes. (it is in fact found on p. 2: Point E)

• In particular, though, he noted that CHOIR had in 2009 had "voted on divestment" from six companies involved in "making weapons and selling them to the Israeli army and being used in the West Bank and Gaza": "did that happen?" Could the ad hoc committee tell us the status of those investments?
-Answer from Mr. Scott: not off the top of his head, especially as the composition of funds continually changes.

• Students on campus and activists elsewhere were frustrated that the College, allegedly because it came under intense outside pressure, had not made a statement affirming the change in policy and holdings. The activists believed that divestment had occurred, “whether or not the administration of Hampshire, or everyone at Hampshire feels that that was what happened.” Among other things, the questioner was therefore curious as to whether the issue has been discussed as part of the review process.

There followed several oblique and rather deferential responses, the common theme of which was: apart from the substance of the issue (which none of them deigned—or dared—to address), the incident had revealed how flawed the old policy and system was, and why clearer procedures and better communication were badly needed.

Finally, former President Marlene Fried (video below) jumped in to address the issue head-on: “I want to speak to the elephant. [ . . . ] I sort of came into this late, I was not the best informed or paying attention in 2008, but last year, I was paying a lot of attention [i.e. when, as interim President, she had to address the deteriorating climate on campus following the harassment of an Israeli student ( 1, 2) and the disruption of talk by an Israeli soldier; JW], so it is very clear that there is a real divide between what the ‘buzz’ out there is about what Hampshire did or didn’t do, and about what the Board of Trustees of Hampshire College believes that it did, and there is clarity and unanimity on the Board that it did not make a decision to divest from the State of Israel, that it did not decide that Israel was in the same camp as South Africa.”

Student: “But it did say: Israel [sic] occupation, and the students on the Board did [use?] Israeli occupation, which is very different than Israel [ . . . ].”
They had been hoping that the Board would state that it broke the College's alleged ties to the occupation (or words to that effect).

Fried: “The Board does not believe that. . . ."

(I have reserved a fuller account of the exchange for a separate post.)

With that, the matter should be settled. Still, it remains of some relevance, to the extent that it bears on both the substance  and practicality of the new document.

On the whole, the policy is bold and admirable. However, one clause—on its own terms and in light of the foregoing controversy—may give some readers pause. It pertains to what are called "Countries of concern." (Policy, p. 2: Point B) Among the investments that "The College will not favor" (Guidelines, pp. 2-3) are those in "businesses that":
· B. Have significant operations in countries with serious human rights violations. Countries of concern are those where there is substantial evidence of complicity in clear violations of civil and political human rights by the government in power, as evidenced by:

• Allegations or convictions resulting from serious impacts on the civil and political rights of any group of people.

a) This includes violations of the Universal Declaration of Human Rights, such as government-sponsored killings, torture and abuse, forced labor, forced displacement, abuse from the local military or police services, abuse of freedom of expression, and child labor.

• Controversies substantial enough to have become an international issue or to have international repercussions. A substantial international controversy can be gauged by whether there is:

a) An international divestment or boycott campaign by two or more major human rights groups;

b) Involvement by one or more governments (outside the host country government) or United Nations (UN) agencies publicly expressing concern about the state of human rights in a country of concern;
c) Widespread and/or prolonged coverage in the international press; or
d) Some form of intervention by UN or other regional/international human rights authorities.

Typically the majority of these factors should be met in order to identify a country of concern, and then an assessment of the company's activities in these countries performed. In most cases, retail or distribution of company products or humanitarian aid in a country of concern will not be problematic, however, grounds for restriction may include the presence of company-owned facilities- in a country of concern, contractual arrangements with government entities, or operations that clearly benefit the government (most frequently via revenue generation and often entailing infrastructural investments or natural resource extraction).
Clearly, this screen is intended to flag countries that are gross violators of human rights, such as Sudan or Myanmar. And there are many sensible and reassuring specifics. Language matters. Frequently, the document includes key qualifying terms signaling a high standard to be met; thus, for example: "serious human rights violations," "substantial evidence of complicity," "clear violations," "serious impacts," "two or more major human rights groups." There is reference to foundational documents such as the Universal Declaration of Human Rights. Finally, it is reassuring to see that this is not a casual menu for the fickle: the presumed need for a country to meet "the majority of these factors" before becoming a target of concern sets an appropriately high bar. It is a prudent safeguard.

To put this all in context: the old policy (III.C.4.d) defined countries of concern simply as those "engaged in serious human rights violations" and described the prohibited corporate activities there as those that "serve to perpetuate, promote, and finance these conditions, as identified through a factual case by CHOIR." Lacking is any precision or granularity, indeed, any real definition at all. The new policy is thus vastly clearer than and superior to the old one. It cannot be properly judged without reference to the former.

Obviously, any policy document is subject to both innocent misinterpretation and misuse. It is worthwhile to ask whether there is anything we can do to limit those possibilities. The text, unlike human nature, lies within our control. One hopes that the Board, when taking up this document in February, will give that issue due consideration.

To return to the "elephant in the room," one could easily imagine anti-Israel divestment advocates putting together a case that was on the surface plausible even if it in fact lacked merit:
• "Convictions" in criminal courts for violations of human rights are lacking, but "allegations," whether substantiated or not, are legion. Just how, then, would this standard be applied?

• International divestment and boycotts? It would be difficult to claim that "two or more major human rights groups" [emphasis added] are spearheading such measures—clearly, the authors of the policy have in mind something like the coordinated boycott of Sudan or the equivalent—but anti-Israel advocates would no doubt produce the usual list of bit-players, which, to the uninformed, might at first seem persuasive. We may ask: what defines "major"? And even then, how do we judge their judgments? Even undeniably "major" human rights groups have of late come under sharp criticism for bias (1, 2).
• Widespread or prolonged press coverage: is mere quantity or duration sufficient? What about the merits of that coverage? The watchdog group CiFWatch documents, on a daily basis, the distortions and bigotry in the treatment of Israel and Jews in the once-respected Guardian: a flaw that the latter has finally and grudgingly begun to acknowledge (1, 2). And a recent scholarly study discovered evidence of extensive and systematic bias by Reuters—in violation of the news organization's own explicit norms.

• Expressions of concern by UN agencies? That is a rather low moral as well as practical bar these days. To cite but two examples: The UN General Assembly, in its 61st session (2006-7), condemned Israel 22 times, yet somehow never mentioned the genocide in Sudan (between 1950 and 2007, the entire Arab-Israeli conflict, including all-out international wars, cost 51,000 lives; the Sudanese civil wars, 1.9 million; source). As for the UN Human Rights Council, it has devoted 80 percent of its censures to Israel alone, which is ironic, given that its current members include China, Russia, Saudi Arabia, Cuba, and Pakistan, not exactly paradises for human rights. Adding to the irony: Libya actually chaired the Council until its suspension in March of last year.
I offer the above merely as food for thought. (And I note that several of those standards or categories also appear elsewhere in the document, e.g. "significant controversies" as defined by legal actions, "criticism by NGOs," and "extensive media coverage" in the case of products injurious to human health or the environment [p. 4: Point F; see also p. 5: Point H].)

Naturally, any such document must strike the difficult balance between the specificity required for clarity and the breadth required for practicability. Much inevitably depends on the hypothetical "reasonable person" who will apply the standards.

The original divestment case was empty because divestment is an explicitly political act: The activists sought to win a symbolic victory by targeting primarily items of military production, which are, however, neutral in nature: they can be used for legitimate purposes (every state has the right of self-defense) or for illegitimate ones. The socially responsible investment policy does not distinguish between the two. Therefore, even the selling off of shares in every firm that has military dealings with Israel would objectively make no statement whatsoever regarding the legitimacy of the state or its policies, within the Green Line or in the territories. This is what so frustrates and infuriates the BDS activists: they want the College to admit to something that it by definition did not and could not do.

(To show you just how preposterous the whole business was: In 2009, the  anti-Israel divestment activists targeted ITT and Motorola because they supplied equipment to the Israel Defense Forces (IDF). Well, as it turns out, both firms also provided equipment or other assistance for Hurricane Katrina relief efforts—and, to complete the irony, the violent Jihadis on board the "Mavi Marmara" used Motorola devices to coordinate their attack on the IDF troops attempting to enforce the blockade of Gaza in 2010. These things are just not as simple as the activists would have one believe.)

My bet is that, if the new policy is implemented fairly and rigorously in the spirit in which it is intended, another anti-Israel divestment attempt would likewise fail.

-First, the new policy, even taking the aforementioned questions into account, arguably implements far clearer standards and sets a higher overall bar.

-Second, the more rigorous approach allows for a salutary and even clearer separation of human rights from narrowly political goals: Is your aim to apply socially responsible investment principles in general or to attain a specific political end? If the former, then the refusal to invest in all military production solves the problem. It makes no difference which country is involved; you can rejoice and move on. If the latter, however, then you've got a fairly tough case to make.

-Finally, the demands of transparency and communication would force the argument into the open. Last time, divestment advocates sought to achieve their victory behind the closed doors of committee and board meetings. This time, opposing views would be required to receive a full and fair hearing in the bright light of public opinion. It would be a compelling debate, I am sure.

The statements made at the presentation of the new policy make it clear, once and for all, that divestment never took place. The new policy makes it highly unlikely that it could occur in the future.

That policy will be a test of maturity for all parties concerned.

If SJP is wise, it will devote its efforts to more productive and less destructive activities. The issue of Palestine and Palestinian rights is a serious one, about which a serious conversation would be welcome. Attempting to draw attention to it through divestment is both a moral and a strategic error. Exploiting the resources and name of Hampshire College in order to do so is cynical and selfish. If, as in the past, the divestment advocates put their desires first and attempt to highjack the institution and its agenda by treating the College merely as a means to their narrow ends, that will be as revealing as it will be regrettable.

The College has registered a significant achievement by producing the most ambitious and rigorous ethical investment policy in the country. That is something that we should all applaud and support. That is where the spotlight should be focused and remain.

* * *


• "Hampshire College Policy on Environmental, Social and Governance Investing" (draft of 25 October 2011): the College has made it available here, but in the event that the draft is later replaced with another version, I have also uploaded the former here as both a Word document and a pdf.

• Hampshire College "Policy on Socially Responsible Investing" (version of 12 September 1994): as Word document and as pdf.

• Hampshire College information sheet: "Q&A: Draft Policy on Environmental, Social and Governance Investing," 13 December 2011

• Kevin Kiley, "Making Green by Going Green" [report on the new Hampshire policy], Inside Higher Ed, 16 Dec. 2011

• Chad Cain, "Hampshire College seeks socially responsible investing," Daily Hampshire Gazette, 19 Dec. 2011

• Hampshire College press release: "Hampshire College Adopts Environmental, Social and Governance (ESG) Investing Guidelines," 3 January 2012

[updated links]

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