Divestment demands expanding to US businesses

The mass protest movement currently engulfing dozens of U.S. college campuses has included calls for university endowments to divest from Israel, a demand that some activist organizations are broadening to U.S. companies that do business in Israel or are otherwise connected to the Israeli economy.

The demand that U.S. institutions withdraw their financial support from Israel is not a new one. It has been a central plank of an established protest movement known as "BDS," for Boycott, Divestment, Sanctions, for nearly two decades.

Supporters of divestment from Israel point to past instances in which divestment has helped effect change, most notably the global divestment from South Africa beginning in the 1980s, in protest of that country’s racially discriminatory laws. Many universities, they point out, joined in the divestment movement at the time.

However, the funds that protesters are targeting are, in many cases, enormous investment portfolios with interests spanning the globe. According to the Department of Education’s National Center for Education Statistics, the combined market value of the 20 largest university endowments in the country totaled more than $927 billion at the end of 2021.

The management of college endowments has also changed profoundly in recent decades. Universities hire investment professionals to manage the growth of their endowments, often placing funds with large investment managers and hedge funds, which are often empowered to buy and sell stocks independently. This is particularly true of the largest endowments.

According to a February 2024 study of university endowments by the National Association of College and University Business Officers, "Larger endowments had smaller allocations to the public equity markets and were more heavily weighted to private investment strategies with investment strategies that tend to be much less transparent.”