Drop The Stock

The Harvard Management Corporation (HMC) has not divested from PetroChina and Sinopec. Despite declaring in April, 2005 its intentions to withdraw investments from PetroChina due to “the unique pattern of circumstances relating PetroChina to the crisis in Sudan,” and shortly thereafter promising to cut ties with oil giant Sinopec as well, Harvard’s stake in the two companies has actually increased from $10.1 million to $15.7 million. The current holdings come as a result of Harvard’s investments in two index funds managed by the British investment bank Barclay’s. If Harvard wishes to live up to its promise of divestment, it should sever even indirect ties to corrupt firms like Sinopec and PetroChina and remain vigilant to avoid future investments in these companies.

To be sure, in today’s interconnected, global marketplace, it would be virtually impossible to avoid all contacts with major firms like the two in question. By playing “six degrees of PetroChina,” one could no doubt find Harvard-backed companies that invested in companies that invested in companies that invested in PetroChina. But in this particular case, there is little ambiguity; investments in the Chinese firms comprised a sizable 12.6 percent of one of the Harvard-owned funds. This, in our view, does not represent a good faith attempt to keep Harvard’s hands clean in light of its commitment to ethical investing.

In fairness to HMC, Harvard’s questionable investments do not necessarily signify a moral lapse. The HMC maintains no direct control over the Barclay’s holdings, which, like those of any mutual fund, change over time in response to market fluctuations. However, the University’s financial gurus cannot ignore what is in plain sight. Now that it is clear to Harvard and the world that a sizable portion of Harvard’s endowment is supporting the actions of Sinopec and PetroChina, the HMC should find a way to dispose of the shares.

Eliminating investments by proxy in morally reprehensible firms may prove challenging, but if divestment came without sacrifice, the symbolic gesture would be meaningless. By refusing to support corporations that underwrite death even if it comes at a cost, Harvard makes an important statement about acting for a greater good than simply maximizing endowment returns. As long as Harvard continues to hold clearly traceable investments in PetroChina and Sinopec, that statement is robbed of its validity. We hope Harvard sticks to its word and makes divestment a reality.