UVA Board Shows No Interest in Israel Divestment

University of Virginia students this week voted two-to-one in favor of a referendum asking the University to "divest its stocks, funds, and endowment from companies that profit from any and all acts of human rights violations across the world." The referendum specifically asked for UVIMCO, which manages the university's $14 billion endowment, to audit its holdings and identify corporations financially "implicated" with Israel's "apartheid regime."

Thirty percent of the student body participated in the referendum in a process starting Monday and concluding Wednesday. The referendum generated significant publicity on Grounds.

The Board of Visitors had the perfect opportunity this morning to address the divestment issue when it met with UVIMCO's chief executive officer and chief operating officer. But the topic never came up.

UVIMCO officials reported on their 2023 investment results, and board members did inquire about the investment group's relationship with the university, its philosophy toward ESG (environmental, social, and governance), and its ability to pick specific stocks, bonds, and securities. The subject of Israeli divestment was never broached, but the dialogue made it clear that purging individual investments would be exceedingly different under UVIMCO's business model.

Update

In the afternoon session, President Jim Ryan said that it was his practice to stay neutral on student referenda, so he did not comment upon the Israel-divestment measure before the vote. The controversy "stirred a lot of passion," and he feels sympathy for both Israels and Gazans about lives lost, but if he had been a student, he can now say after the fact, he would have voted no. "I do not believe the university should use its endowment to weigh in" on such matters, he said. However, out of respect for students' freedom of speech and tradition of self-governance, he chose not to bias the outcome.

Ryan then let the matter drop, making no move to ask UVIMCO to comply with the referendum's demands.

UVIMCO is a free-standing nonprofit company legally separate from the University. UVA has no authority to dictate investment decisions to the company.

Under contract with the University, UVIMCO manages the assets of practically all university and university-affiliated endowment funds. UVIMCO itself invests only a nominal portion of the endowment funds, and those are cash accounts, not equities or securities. UVIMCO allocates resources between different investment categories and selects fund managers within those categories. It does not pick individual stocks, bonds, or private equity investments.

UVIMCO enters into long-term contracts with its managers, typically investing "committed capital" into funds with ten-year time horizons. Under these contracts, UVIMCO has no power to tell fund managers which investments to make, and it has no right to withdraw its investments.

For all practical purposes, UVIMCO has no ability to carry out the wishes of the student-endorsed referendum, even if it were inclined to do so.

The company has publicly stated its commitment to certain ESG goals, especially environmental sustainability. It maintains an Advisory Committee on Investor Responsibility comprised of UVIMCO management as well as UVA students, faculty, and staff to advise it on ESG goals.

"UVIMCO is dedicated to incorporating environmental, social, and governance best practices into its investment decisions while maintaining strong long-term returns for the University of Virginia and associated organizations," states the company's website.

How it implements those best practices is vague, however. CEO Robert Durden descibed its efforts as "engagement" with its managers.

The UVIMCO website hints at what "engagement" looks like:

UVIMCO is engaging with its managers around ESG issues, including emissions reduction and net-zero efforts. Directly engaging with external managers, participating in established sustainability initiatives, and investing in activist managers, is the most direct way to have an impact.

The company's main ESG concerns have been environmental, and it has steered some investments into sustainability-related projects. States the website:

We believe that investments in climate solutions that help to mitigate the systemic risks of climate change will generate long-term returns for UVIMCO. Between 2021 and 2023, UVIMCO committed $215 million to climate solutions investments, including renewable power, innovative climate technologies, reforestation, and carbon markets.

The website cites no instances of human-rights considerations driving investment decisions. Whether that posture changes as a result of the student referendum remains to be seen. But until someone on Wall Street cooks up an Israel-free fund that UVIMCO can invest in, there may be no practical way to carry out the referendum's demands, and even then, it would take many years to unwind its existing commitments.