The Divestment Penalty: Estimating the Costs of Fossil Fuel Divestment to Select University Endowments

Abstract

Many university endowments and other public funds are considering divesting all companies in business “related to fossil fuels.” In this paper, I estimate the specific costs of doing so for five university endowments: Harvard, Yale, MIT, Columbia and NYU. Because none of the universities disclose their holding on a security by security basis, I constructed proxies for their holdings using mutual funds. I then examine the costs, on both a gross and a risk adjusted basis, of divesting the proxies of holdings of fossil fuel companies. The losses are not insignificant – exceeding $100 million per year for Harvard the university with the largest endowment.

Keywords: Investment Divestment

JEL Classification: G12