FinLogic FinLogic Quantitative Think Tank Center|Pro-Palestinian protesters urge universities to divest from Israel. What does that mean?

Pro-Palestinian student protesters across the country occupied campuses in tent encampments this week in a campaign to urge their universities to divest,FinLogic FinLogic Quantitative Think Tank Center an action students over the decades have demanded from their schools' administrators.

The word "divest" refers to diverting money from a university's endowment − the pool of money a college has and tries to grow through investments. Some of the biggest university endowments in the country total nearly $50 billion and comprise thousands of funds.

The protesters opposed to Israel's military attacks in Gaza say they want their schools to stop funneling endowment money to Israeli companies and other businesses, like weapons manufacturers, that profit from the war in Gaza.

"It's like, why is our money being used to fund bombs overseas?," said Layla Saliba, a student protester researching endowment investments with the group Columbia University Apartheid Divestment. "Let's reinvest this money in our community instead," she said.

Columbia University's endowment is more than $13 billion; it ranks among the top ten largest endowments in the country. The school did not respond to a request for comment.

The protests began in the wake of the ongoing conflict between Hamas and Israel, triggered by the militant group's assault on Israeli communities Oct. 7 that killed almost 1,200 people. Israel's subsequent bombardment and invasion of Gaza has killed tens of thousands of Palestinians − militants and civilians; men, women and children − and has fueled a dire humanitarian crisis.

In addition to divestment, protesters across the U.S. are calling for a cease-fire and student governments at some colleges have also passed resolutions in recent weeks calling for an end to academic partnerships with Israel.

Are universities investing in Israel?

Protesters have called for a halt to investments in Israel, but experts say that might be too simplified a take on what colleges have done with their funds. To begin with, it's difficult to define what an "investment" in Israel entails, said economist Sandy Baum, a senior fellow at the Urban Institute who studies college finances.

She said bigger investments are more obvious than smaller ones tucked away in mutual funds − an investment tool that pools money and spreads it out over many assets, and a type of financial tool many colleges rely on.

Universities hire private companies to manage their endowments to preserve their funds over the long run, Baum said.

Debates about the investments of college endowments are complicated, Baum said, because some university stakeholders argue the money needs to produce the biggest return on investment possible to fund teaching and necessary programming and services.

"The purpose of the endowment is to have money that will allow the university to permanently provide educational opportunities so that they don't have to go out and raise new money every year to continue operating," she said.

The bigger a university's endowment, the more is at stake. That's one reason why pro-Palestinian student protesters at wealthy universities are fighting so hard this week, she said. There's a lot of money involved.

"There are always going to be differences of opinion about what you don't want to invest in," Baum said.

When else have protesters demanded divestment?

Student-led movements for university divestitures aren't new.

For over a decade, students at Princeton University have urged the school to divest from the fossil fuel industry, citing concerns about the environment and climate change. In 2022, advocates landed a major win when the school agreed to divest from publicly traded oil and gas companies, according to Sunrise Princeton, a longtime climate divestment group on campus.

In 1969, Princeton University students occupied a prominent campus building to demand the school divest from South Africa, where the government operated a punitive and often violent system of apartheid that segregated people by race. Nearly a decade later, Princeton University enacted "selective divestment" from South Africa, the Daily Princetonian reported, where the university's financial shares could be withdrawn if companies failed to meet its standards.

This week, about 100 protesters gathered in a central courtyard at the New Jersey campus to demand the school divest from companies associated with the Israeli military, the student newspaper reported. Unlike at Columbia, where many student protesters have been arrested, Princeton students have not faced arrest or disciplinary action from the university, the campus publication said.

"Divestment sends a moral signal that institutions of higher learning, especially those with prestige, will not tolerate certain injustices," said Alex Norbrook, co-leader of Sunrise Princeton.

In a statement, Princeton University President Christopher Eisgruber said any divestment would only occur after years of sustained campus interest, and in situations where the community can come to a consensus on how to divest.

The current push for universities to stop doing business with companies profiting by investing in Israel and by extension in the country's war in Gaza mirrors grassroots efforts in recent years to urge U.S. organizations to boycott Israeli companies.

Since 2005, the Boycott, Divest, Sanction (BDS) movement has organized around "withdrawing support" for Israel's treatment of Gaza and urges banks, municipalities, pension funds, religious groups and universities to remove their investments from Israel, according to the BDS website.