A new study from the Commonfund Institute and the National Association of College and University Business Officers (NACUBO) has some bad news for the divestment movement: schools have almost no interest in divesting from fossil fuels.
The study surveys 200 colleges and universities in the United States to discover their attitudes and policies on a range of “responsible investing” strategies, including socially responsible investing (SRI), environmental, social and governance investing (ESG), impact investing, and divestment of fossil fuels. According to the study, 53 schools, or 26.5 percent of the participant group, report adopting at least one form of responsible investment strategy, including half of the faith-based schools included in the survey. Only 3 schools, 1.5 percent of total participants, reported divesting from fossil fuels – a minute slice of the college community. From the report:
“Divestment of fossil fuels, notwithstanding its prominent position in the debate surrounding responsible investing, was reported by only three institutions – two private and one public – representing 1.5 percent of the total respondent group and 5.7 percent of the adopters. Of this group, one institution reported having divested between 1 and 20 percent of total endowment assets, one between 66 and 99 percent, and one responded that they did not know or were uncertain as to the amount divested. Of the two institutions that did know, one said that they had switched their investment to actively-managed long-only strategies that specifically exclude investment in fossil fuel or carbon related companies and one said that they had switched to index funds that specifically exclude such companies.” (emphasis added)
In addition to finding that divestment is a “negligible” responsible investing technique, the report also highlights that no respondents had bought into the divestment campaign’s claim that fossil fuel assets will eventually become “stranded” or a liability to portfolios. According to the report:
“In this regard, the majority of the full group of respondents, including both adopters and non-adopters, reported that they were not concerned or only slightly concerned about exposure to a future collapse in fossil fuel companies’ value due to potential carbon regulations. Also among the full group, just two percent of both adopters and non-adopters said that their institution had decided to reduce their portfolio’s exposure to fossil fuel companies. Seventy-nine percent had not made this decision; the remainder did not know, were uncertain, or did not answer.” (emphasis added)
As Director of research and policy at NACUBO Ken Redd discusses in Morning Consult, this decision not to divest is not just one of morality, as the pro-divestment movement suggests, but rather of a school’s financial responsibility. From Morning Consult:
“As Redd put it, for universities and colleges, investment is about ‘balancing your moral obligations with your financial fiduciary responsibilities. And usually the financial fiduciary responsibilities win.’ Redd said this doesn’t mean, as many student organizations and divestment campaigns argue, that institutions that fail to divest are morally bankrupt. ‘It’s that the school and their endowment managers have fiduciary responsibility not to divest,’ he said. ‘If they think divesting would hurt endowment performance, it’s their legal responsibility to say no. It’s not really a choice.” (emphasis added)
This new report is one more example of the ineffectiveness of the divestment movement. Whether based on financial responsibilities and the high costs of divestment, a desire to engage rather than divest, or “a troubling inconsistency” to divest from companies that provide power and products schools and universities rely upon every day, many colleges and universities have rejected the divestment movement. And as Bloomberg Business recently reported, even those rare schools that do choose to divest “have few, if any, such investments to sell in the first place” or have made only “limited pledges.” Bottom line: the divestment movement may be gaining headlines, but its actual impacts are slim to none.