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Divestment portfolio

The University's Board of Visitors decided Friday to divest from companies that put money in the pockets of the Sudanese government. The move sends a message against the genocide in Sudan, made easier by the fact that the University's investment situation means that the move will have little immediate impact.

Certainly any move to reduce the ability of the Sudanese government to wage war is a good one. The concern with many divestment initiatives, though, is that they will end up hurting the people they are meant to help by crippling the economy and infrastructure. Laura Harris, president of Students Taking Action Now: Darfur, explained the strategy presented to the Board of Visitors as "targeted divestment." She said "the board has divested from companies that are providing revenue to the government but not providing benefit to the citizens." This may be impossible to sort out, given that the two are not mutually exclusive. But the Sudan Divestment Task Force, a national group, has developed targeted divestment criteria to apply to companies in Sudan. First, do they "contribute to government revenue;" second, do they "impart minimal benefit to the country's underprivileged," and third, has the company "demonstrated no substantial corporate governance policy regarding the Darfur situation." These are well-formulated criteria and represent a worthwhile attempt to avoid the pitfalls of "blanket" divestment from South Africa in the 1980s, the effects of which ended up hitting the poor South Africans it was trying to help.

The debate over divestment is one over how the University invests the billions of dollars in its endowment managed by the University of Virginia Investment Management Company, or UVIMCO. As Harris explains it, there are a number of different ways the University manages that money, offering varying levels of control over how it is invested. Some of the funds in the endowment are part of a portfolio owned by the University, meaning that the University has full control over what companies are part of that portfolio.

However, many of the assets are held as actively-managed commingled funds. The companies in these funds are constantly being traded. In addition, they are held by number of different investors at the same time, making it impossible to sort out which investor is invested in which company. The University divested from all "direct" investments, according to the resolution adopted by the Board of Visitors, but it is virtually impossible to control actively-managed, commingled investments, and dropping them totally could be disastrous for the rate of return earned by the endowment.

Harris says that UVIMCO currently has no direct holdings that would be affected by the resolution, meaning the impact of the resolution on the Universty's investments will be negligible. Nevertheless, a resolution from the University's Board of Visitors sends an important message against the atrocities in the Sudan. Harris says she hopes that "managers will see the growing demand and create funds that are Sudan-free." Money managers may never be guided by the same sense of moral responsibility that the University should strive for, but responsible investment shows that responsibility while at the same time not crippling the potential rate of return for investments.