- [Narrator] Columbia's pro-Palestinian encampment

triggered similar student protests across the country

and renewed calls for universities to divest themselves

of investments in Israel

and companies profiting from the Israeli war in Gaza.

(protestors chanting)

- It's the most intense and contentious debate

that I've seen over how university endowments

should be invested.

- [Narrator] So, what would divestment look like?

How realistic is it?

And what are the challenges involved?

What began at Columbia University on April 17th

has swept college campuses across the country.

What unites many students is their demand for divestment,

which has its roots in a Palestinian movement known as BDS,

or Boycott, Divestment and Sanctions.

Divestment, simply put, means selling off an investment

or business interest, but in practice it's more complicated.

To begin with, the demands vary from school to school.

At Yale and Cornell,

students have called on the universities

to stop investing in weapons manufacturers

directly involved in Israel's campaign.

By contrast, Columbia protestors are demanding the sale

of holdings in funds and businesses

that activists say are profiting

from Israel's invasion of Gaza.

These include Google and Amazon,

which provide technology services

to Israel's military,

Airbnb because it allows rental listings

in Israeli settlements in the West Bank,

and Caterpillar whose tractors Israel's military uses.

The target of students' calls for divestment

are university endowments.

- In practical terms,

the way divestment could work depends some on the endowment.

Larger endowments invest a really large share

of their portfolio in private equity and hedge funds.

If you're a big endowment,

you might have to shift your investments

from one private equity fund to another

if your private equity fund manager isn't prepared

to follow the investment guidelines that you've provided.

- [Narrator] So far, universities have flatly refused

to adjust their holdings in response to student agitation.

On April 29th, Columbia said it will not divest from Israel.

Other universities that have refused to divest from Israel

include Yale, NYU, the University of Michigan,

and American University.

Calls for divestment have long been a feature

of student protests,

where perhaps the best known divestment campaign

was during the 1970s and '80s

when activists compelled universities

to cut ties to South Africa,

then under all white rule.

In 1985, Columbia said it would sell $39 million of stock

it held in companies including Coca-Cola, Ford,

and Mobil Oil.

Eventually more than 150 universities divested themselves

of companies doing business in South Africa.

- I think looking back

at the South African divestment demands,

the protestors draw a couple lessons.

One is that they see that South African apartheid

eventually did come to an end,

and whether that was because of direct economic pressure

or a change in narrative and symbolic isolation

of South Africa,

I think is probably less important

to the protestors than whether direct economic pressure

led to that change.

I think the other consideration for looking back

is that it was a very different economy.

Wall Street worked differently.

- [Narrator] Those calling for divestment

of investments in Israel say they are motivated

by what they see as a moral argument,

that Israel is committing genocide

and forcing Palestinians to live under a form of apartheid.

Israel has strongly denied allegations of genocide

and says its Gaza operations are justified

by its right of self-defense under international law.

More recently, colleges have heeded demands

to dump holdings in private prisons

and fossil fuel companies.

- And you can look at the University of California,

which back in 2020

announced that it had fully divested from fossil fuels.

- [Narrator] Today, many university endowments

are controlled by fund managers

who widely follow a diversified portfolio model.

They typically dedicate chunks of their portfolio

to asset classes such as stocks, real estate,

and private equity, including venture capital.

Ultimately, fund managers answer to the endowments'

trustees who have the final say on investment decisions.

- University endowments are like private equity

and hedge funds because they're managed

to maximize returns at the end of the day.

Our endowments today are bigger than at any time

in our history, and that means that universities

are connected to every corner of the global economy,

but they're connected through Wall Street.

- [Narrator] Critics opposed to dropping Israel investments

note that it could be difficult

because of the secretive nature of modern endowments.

Columbia, like many private schools,

keeps most of its financial information obscure.

Its trustees do publish annual financial reports,

but those reports don't detail specific investments.

- Those funds that schools invest in,

private equity and hedge funds, they value their secrecy

'cause what they're trying to do is beat the market.

They don't want their secret sauce

to be out in front of the entire market and community.

- [Narrator] Critics of divestment

point out that universities' investments

in Israeli-linked companies likely represent

only a small portion of an endowment's overall portfolio,

meaning that the impact of one university

or even many universities selling

their Israeli-linked assets could be negligible.

A 1998 study found that voluntary divestment

from South Africa had little discernible effect

and that the boycott primarily reallocated shares

and operations from socially responsible

to more indifferent investors and countries.

Similarly, a 2021 paper found that divesting

of dirty companies

that fail to meet ESG criteria is not nearly as impactful

as its practitioners might like to believe.

Another hurdle to divestment

is the nature of modern endowments.

Because universities tend to now invest

in more complicated financial vehicles,

disentangling those investments isn't as simple

as selling specific stocks.

If say a university is invested in an Israeli company

through an index fund, which is made up of many,

perhaps even hundreds of other companies,

it would require the selling of that entire fund,

which could mean an overhaul

of the endowment's investment strategy.

- I think it's disingenuous to suggest

that it's too complicated to divest

from a certain set of assets in the economy

because it shuts down debate.

There really are a lot

of investment managers out there whose businesses

is to help investors like endowments

to invest their assets according to criteria

that aren't just maximizing return on investment.

(light music)