NorthStar Investors Have Their Heads in the Clouds


Refusing to adopt alternatives to divestment, Swarthmore’s Mountain Justice (MJ) members have latched-on to a report issued by a Boston area firm, NorthStar Asset Management. In brief, the report argues that the Swarthmore Board’s calculations, which led its members to reject the divestment scheme, are based on faulty financial assumptions; “the cost of divestment,” they say, “is grossly exaggerated.” Beyond the obvious humor of MJ’s ragtag environmentalists posing as investment experts, the sheer randomness of this report is striking.

NorthStar Asset Management is a small firm that specializes in “socially-conscious” investing. A look at NorthStar’s staff reveals many of its investors to have an avowed activism streak, which brings up questions of confirmation bias. It seems that they’ve recognized a niche clientele for highly politicized, activist-driven wealth management. To capitalize on that market, NorthStar has weighed-in on the college divestment movement. Good for them. In a free market, there’s room for these kinds of PR stunts. We’re sure NorthStar’s 65 clients sleep better at night knowing that their analysts are busy scrutinizing Home Depot’s political donations to non-PC candidates.

But NorthStar’s analysis of Swarthmore’s endowment is off base and irrelevant. Julie Goodridge, president and founder of NorthStar, admits that her company only oversees $160 million in wealth. To put that in perspective, $160 million is less than 11% of Swarthmore’s $1.5 billion endowment. While it might be relatively easy for NorthStar to exclude the oil industry from the S&P 500 and see very small loses, Swarthmore’s endowment cannot afford a passive approach. The Board has made clear that it does not use index funds but, instead, relies on separately managed accounts or comingled funds. This strategy has outperformed index funds by 1.7 to 1.8 percent per year.

NorthStar’s report continues to assume that Swarthmore mimics the market diversification, which the Board has already refuted. Further, the analysis entirely ignores private equity firms and hedge funds, which tend to invest in a handful of promising companies. Divestment would mean abandoning those opportunities, since very few hedge funds exclude the energy sector. Whether or not they believe in hedge funds, NorthStar certainly likes to hedge terms. In the report, they state, “[I]n the real world, there could be a premium for a socially responsible strategy that divested fossil fuel stocks—not a cost.” But in the real world, a premium is still a cost.

Earlier this year, Christine Jantz, an investment analyst at NorthStar, told Inside Higher Ed, “My view of the Swarthmore paper is that it’s asking, ‘What’s the worst possible case of what it’s going to cost to divest?’” She makes out as if that’s an unreasonable question. We can think of many clear consequences to divesting, including cuts to financial aid, less funding for professorships (especially in the humanities), less support for student programming, and less willingness on the part of alums to contribute to a politicized endowment.

Board chairman Gil Kemp ’72 would not have released the Board’s decision rejecting divestment without widespread agreement from members. One student who has repeatedly discussed business matters with members of the Board tells us that the Board strives for Quaker-inspired consensus, especially on controversial issues like divestment. Swarthmore’s Board is composed of a diverse group of individuals who are extremely willing to exert shareholder activism and hold some of America’s most profitable companies to high standards. They certainly don’t need to be lectured about “socially-conscious” investing from an unknown Boston firm or MJ rabble-rousers.



  1. Well, actually, lots of people know about us! Ask PepsiCo who created their human right to water policy. Or maybe the LGBT employees of FedEx whose families now receive the heath benefits they deserve. Or you could read about the Massachusetts case offering equal marriage to all citizens of the Commonwealth. But given your obvious fiscal responsibility, you could simply speak with our 65 clients, with assets now in excess of 180 million. They are very happy to have kickass financial returns without holding onto Exxon. We are outperforming the S&P by a couple percentage points in this quarter alone! Oh, and we don’t buy defense contractors either.

  2. As one of those 65 investors, I can say I do not have my head in the clouds. I love making money and find it very easy to do, via Northstar’s excellent investment style, without dragging down the planet.

    Ask Christopher Loeak, the President of the Marshall Islands, who wrote an editorial in the NYTimes today about climate change. He’s watching his country disappear. Does he think it’s too much risk to divest? Look at the lake that appears on the North Pole now, every summer, and ask yourself if it’s too much risk to divest. If Swarthmore can’t figure out how to manage their money and be positive citizens of the planet? Then perhaps it’s time for new management.

    Was divestment in South Africa a bad idea? It helped end Apartheid. Did Swarthmore participate in that? If not, luckily, enough people had the intelligence to find better investments. There are plenty of opportunities in the investing world that are sustainable and high return. The lack of understanding of the impact of investments makes me wonder what you are teaching. Clearly, not economics.

    1.5 billion and you have no idea how to invest without adding to existing problems? You really do need to talk to Julie Goodridge. The defensive nature of your response is telling: You have a lot to learn.

  3. “PR stunts”, “avowed activist”, “MJ rabble rousers”? why such silly personal attacks? Very childish writing. Would have been far more interesting to note that Quakers were among the first ethical investors over a hundred years ago. And that the Church of England is considering divesting from fossil fuels – just a little over $10 billion. Many issues to consider, none illuminated by this piece.

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