July 24, 2024
Investment

A review of UW System’s investments amid demands for divestment


During the University of Wisconsin-Madison Students for Justice in Palestine (SJP) and Young Democratic Socialists of America encampment, organizers demanded divestment from companies selling war-related products to Israel on Monday. This includes investments in the UW System Trust Fund controlled by the UW Board of Regents. 

A December 2023 report from the regents Business & Finance Committee totaled the long-term fund at $556 million in assets split between private markets and public market investments. Private market investments — managed by StepStone — total $68 million in J.P. Morgan, Adams Street Partners and TRG Forestry Fund.

The public market investments total $487 million and consist of six Exchange-Traded Funds (ETF) managed by multinational investment company BlackRock. ETFs are pooled investments that can be composed of individual companies’ stocks or other ETFs, according to the report. 

One ETF, in which the UW System Trust Fund holds $32 million as of 2023, is a hedged U.S. dollar index which tracks the U.S. dollar’s value relative to the United States’ most significant trading partners. The Israeli new shekel makes up approximately 0.4% of the fund as of July 2023.

Three of the ETFs have no direct investment in Israel and are primarily invested in real estate and government and corporate bonds. Another ETF is invested in diversified emerging markets with no direct investment in Israel.

What ETF do protesters want the UW System Trust Fund to divest from?

Encampment organizer Abby Smith told The Daily Cardinal the movement is calling for divestment from BlackRock’s ACWI Index, not all Blackrock ETFs the UW System is invested in. 

“Divestment is important because [it’s] the most direct way that the student body can show that we can attack the U.S. war machine,” Smith said. “We do not support the university’s continued support of the genocide in Gaza.”

The UW System Trust Fund is most heavily invested in BlackRock’s ACWI Index, holding over $249 million as of their December report. Encampment organizers said they want UW-Madison to divest from this ETF due to its investment in defense contractors and other companies profiting from the conflict in Gaza. 

The top 10 U.S. defense contractors make up approximately 1.1% of the BlackRock ACWI Index as of April 29, 2024, according to a financial review by the Cardinal. This includes Lockheed Martin, General  Dynamics, Northup Grummann and others. 

MSCI ESG, a screening service for institutional investors in managing environmental, social and governance standards, found that 0.49% of companies in the ETF have involvement with controversial weapons. This could include cluster munitions, landmines, depleted uranium weapons, biological or chemical weapons and incendiary weapons.

Encampment demands include divestment in companies identified by American Friends Service Committee (AFSC) that have provided Israel with weapons and other military equipment used in its attacks on Gaza, the West Bank, Lebanon and Syria since October 2023.  Companies identified by the AFSC make up 4.56% of the ETF, according to a financial review by the Cardinal, 

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The total investment by the UW System Trust Fund in AFSC list companies is approximately $11.3 million. If the protesters have their demands met the UW System would have to sell all $249 million invested in BlackRock’s ACWI Index.  

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