Welcome to DivestmentFacts.com, a website brought to you by the Independent Petroleum Association of America (IPAA) dedicated to providing the facts about the real costs and impacts of fossil fuel divestment on universities and college students.
Schools and experts across the country agree that divestment is a flawed policy that is likely to threaten the financial health of educational institutions while having no tangible impact on the targeted companies or the environment. Just listen to Harvard University President Drew Faust, who stated in 2013 that such a campaign would “come at a substantial economic cost.”
In fact, as a recent groundbreaking report by University of Chicago Law School Professor Daniel Fischel highlights, institutions that choose to divest stand to lose funds that improve operations and facilities, enhance academic programs, and provide opportunities to low-income students. The report analyzed the performance of two investment portfolios over a 50-year period, including one that included energy-related stocks and another that did not. The result: Portfolios that included energy stocks generated average, absolute returns 0.7 percentage points greater than portfolios that excluded them — meaning the “divested” portfolio lost roughly 70 basis points relative to the optimal scenario for each and every year over the 50-year period in which the portfolios were active.
Apply that figure to the roughly $456 billion that constitutes total U.S. university endowment assets, and the collective impact of divestment on school endowment and investment funds has the potential to approach $3.2 billion per year – and that’s before even accounting for the hundreds of millions of dollars in additional management fees that schools will be required to pay in order to comply with divestment policies.
As Professor Fischel highlighted upon the release of the report:
“The costs of divestment are clearly substantial and stand to have real financial impacts on the returns generated by endowment funds. And since many of these schools rely on their endowments to finance significant portions of their student aid programs, divestment has the very real potential to adversely affect those who can least afford it.”
The reality is that the only entities punished by divestment are the schools that actually choose to divest. Nearly every institution that considered and rejected the divestment argument cited a range of reasons, from financial and academic freedom concerns to the fact that these institutions themselves continue to use fossil fuels. As Harvard President Drew Faust states:
“The endowment is a resource, not an instrument to impel social or political change. …I also find a troubling inconsistency in the notion that, as an investor, we should boycott a whole class of companies at the same time that, as individuals and as a community, we are extensively relying on those companies’ products and services for so much of what we do every day.”
It’s no wonder that nearly fifty of leading universities such as Harvard, Yale, the University of California, Middlebury and Duke have rejected the divestment campaign.
IPAA is proud to serve as a bridge that connects its members to the capital markets and investment communities. We encourage you to check out the About and What They’re Saying pages, and make sure to follow DivestmentFacts.com on Facebook and Twitter to learn more. These are the facts, after all, and we look forward to keeping you informed about why institutions are saying no to divestment.
All quotes featured by professors and school leaders on this website are public statements made by individuals and are not necessarily representative of the institution of which they are associated. Said schools and universities are also not affiliated with IPAA or DivestmentFacts.com.