A new study is telling universities what should have been blindingly obvious: divesting fossil fuel holdings from college endowments can be a losing proposition. The New York Times reports:
“The economic evidence demonstrates that fossil fuel divestment is a bad idea,” the report says.The study created a series of stock indexes, compared their returns and found that funds without energy-sector stocks underperformed those with them — by as much as 0.7 percent, according to the analysis.Adding in transaction costs and reduced diversification, “the costs to investors of fossil fuel divestiture are highly likely and substantial, while the potential benefits — to the extent there are any — are ill-defined and uncertain at best,” wrote the lead author of the study, Daniel R. Fischel, who is president and chairman of an economic consulting company, Compass Lexecon.
People and institutions invest to make money. Sure, if you’re a Rockefeller, you may have the luxury of making investment decisions based on green idealism, but then few of us are accustomed to the kinds of luxuries that storied family might take for granted.The university divestment movement has never made sense, and this new report gives academic weight to what was already so apparent. The likes of Harvard University have snubbed this cause du jour, and other institutions would do well to follow suit.