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

20 Pages Posted: 4 Sep 2015  

Bradford Cornell

California Institute of Technology

Date Written: September 3, 2015

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

Suggested Citation

Cornell, Bradford, The Divestment Penalty: Estimating the Costs of Fossil Fuel Divestment to Select University Endowments (September 3, 2015). Available at SSRN: https://ssrn.com/abstract=2655603 or http://dx.doi.org/10.2139/ssrn.2655603

Bradford Cornell (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States
310-825-2922 (Phone)
310-206-5455 (Fax)

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