What’s the outlook for college fossil fuel divestment?

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When Harvard University announced last fall that it would be divesting its endowment from the fossil fuel industry, it was part of a deluge.

Roughly 20 colleges and universities announced last year that they would be divesting their endowments from the fossil fuel industry, according to a list maintained by environmental groups. Those included the California State University System, Dartmouth College, Amherst College and the University of Michigan.

This year, that momentum appeared to have slowed slightly — at least before a surprise legislative breakthrough this month upended conditions by clearing the path for a federal climate bill. Market changes might mean that colleges are more reluctant to go “fossil free” in the short term, experts say. But the general pressures to divest are not likely to go anywhere, and they may be getting stronger.

The stock market

One factor currently impacting willingness to divest is the stock market. When the market is high, colleges may find it easier to divest, said Christopher Marsicano, assistant professor of educational studies and public policy at Davidson College. That’s not only because colleges can get a better return on fossil fuel stocks if they sell when the market is high, but because it may be easier to get buy-in from constituents, such as alumni.

In other words, the high stock market in 2021 likely contributed to the flood of divestment announcements.

“It’s really easy in good financial years to announce big changes to your endowment portfolio,” Marsicano said. “When your endowment value has increased at a high rate, you can divest and even if you have a loss in some areas, the growth of the market will offset that loss, such that it becomes easier to sell to your alumni or people who are concerned about it.”

Fears of a recession and the growing demand for fuel may in turn disincentivize institutions from divesting, especially those with above-average investments in fossil fuels, said CJ Ryan, associate professor at the University of Louisville’s law school.

“I would predict that those universities that are on the fence about divestment may stay there to ride out the present inflationary curve and the (very likely) coming recession,” he said via email.

Political pressure

Some institutions may have already chosen to divest but are keeping that fact close to the chest to avoid political confrontation, Marsicano said. As sustainable investing has grown, there has been a conservative backlash against it. West Virginia and Texas, for example, have passed laws restricting state agencies from doing business with financial firms that have pledged to divest from fossil fuels. University donors may react negatively to divestment, especially at institutions in states with large energy sectors. 

Financial managers often aren’t interested in engaging in hot-button political issues, Marsicano said. If they want to, they can divest quietly, without drawing attention to themselves.

“It’s a relatively easy thing to do over time without an announcement.” Marsicano said. “We just don’t actually know how many schools have actually divested.”

But the pressure to divest is probably not going away for colleges and universities. For one thing, student enthusiasm and activism seems unlikely to subside. And campaigns are now armed with a growing body of data to show that divestment is a safe, fiduciary choice.

The financial track record

Amy Gray, senior climate finance strategist at, a nonprofit advocating for divestment, said that campaigns are increasingly making use of financial data and studies, because they’ve learned that’s what money managers and decision-makers will respond to.

“We hope that they would move on a moral imperative, but a lot of times they move more on economic arguments,” she said. “Once you start talking money to them, that’s when they start listening, and that’s when they start changing their ways.”

A 2020 study Ryan and Marsicano co-wrote found that divestment did not negatively impact endowment value for higher ed institutions. And last year, a report by the financial firm BlackRock, commissioned by the New York City teachers’ pension system, concluded that several strategies would be a “suitable divestment approach” for the fund. 

“The energy sector is the only one that faces serious questions about its long-term existence.”

What’s the outlook for college fossil fuel divestment?

Dan Cohn

Global energy transition researcher at the Institute for Energy Economics and Financial Analysis

The growing number of financial firms and pension funds that have chosen to divest may also add pressure to colleges. Though higher ed may not see those institutions as peers, the actions of big-name firms and funds may undercut colleges’ ability to use fiduciary duty as a reason to continue investing in fossil fuel.

“We’ve now passed an inflection point where the actions taken by some very serious investors show that divestment from fossil fuels is perfectly consistent with meeting divestment targets and fulfilling fiduciary duty,” said Dan Cohn, global energy transition researcher at the Institute for Energy Economics and Financial Analysis, which has advocated for divestment. “The financial logic that underpinned divestment from the get-go has been endorsed to some degree by people who are not driven by a moral concern about climate change.” 

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