March 23, 2022

Top US Schools’ Endowments Continue Investing in Fossil Fuel Companies

A recent Princeton University analysis shows that top U.S. schools continue holding fossil fuel assets despite the divestment movement’s claims that they have been victorious in getting these institutions to divest.

The analysis, presented on Monday, March 21^st at the Council of the Princeton University Community (CPUC) meeting, is part of the school’s efforts to adopt a climate-oriented investment policy in its endowment. It examines the investment status and recent policies of the top 20 U.S. School Endowments. However, the analysis contradicts the supposed “wins” that the divestment movement has championed over the last couple years. In fact, these schools have rarely adopted full divestment.

Harvard, Stanford and Princeton still hold fossil fuel-related assets

Three out of the top four universities with the largest endowment funds – a collective $127.4 billion in 2021 –continue holding fossil-fuel related assets, mostly via indirect funds:

• Harvard University – Has pledged not to make direct investments in companies that explore for or develop further reserves of fossil fuels in the future, yet this policy does not apply to its indirect assets.
• Stanford University – Has pledged divestment exclusively from thermal coal and oil sands companies, but this is only applicable to its direct holdings.
• Princeton University – Is determining its dissociation process from fossil fuel companies that spread so-called disinformation and fossil fuel companies in the thermal coal and tar sands segments of the fossil fuel industry.

For instance, of the $37.7 billion in Princeton’s endowment alone, $13 million is directly invested in fossil fuels. The remainder of Princeton’s fossil fuel assets are tied up with indirect exposure, some of which run through multi-sector funds.

In fact, the analysis suggests that holding assets via indirect investments is a model commonly implemented by the top 15 U.S. universities included in the analysis.

Indirect investments reflect the dynamics of the financial sector

The argument for divestment efficacy is further diluted as the analysis shows that endowments “overwhelmingly skew” towards indirect fossil fuel investments through sector-focused funds or broadly mandated investment funds. Fossil fuel exposure through broad “commingled funds” highlight the vital nature that they play today and in the foreseeable future, housing equally paramount sectors and companies under the same umbrellas.

In fact, only two out of the 20 universities in the analysis have pledged commitment to full divestment, both of which are accompanied with target dates to allow for re-balancing of indirect holdings that include fossil fuel assets.

The energy future is a transition, not divestment and disassociation.

As the world still heavily relies on traditional energy sources, it would be irresponsible to scalp fossil fuel-related assets for politically driven reasons. Instead, the responsible measure would be to work with institutions and energy companies alike to increase investment in the climate technologies of the future and establish appropriate phasing periods as capabilities change.

During the Princeton CPUC meeting, President Eisgruber expressed the competency that must be understood in order to ensure a successful energy transition that maintains reliability throughout:

“I think what I would do just once again, is to remind folks that the process that we have at the University of harboring questions around dissociation and divestment, that it’s a process that focuses on the long-term values of the University and decisions reached designed to be long term kinds of judgments.”

At a time when so many, regardless of political affiliation, are calling for increased oil and gas production to bring down high energy costs, stripping the oil and gas industry support by way of pressuring or banning investments would not only harm the well-being of the companies that produce energy, but the general public that counts on these sources in more ways than they even realize. This practice alone would be irresponsible, but conforming to divestment demands at the hand of unjust and unrealistic rationales would be reckless.