Examining the Impact of Divestment from Fossil Fuels on University Endowments

43 Pages Posted: 18 Dec 2019

See all articles by CJ Ryan

CJ Ryan

Roger Williams University School of Law; American Bar Foundation

Christopher Marsicano

Davidson College

Date Written: December 9, 2019


Between 2011 and 2018, 35 American universities and colleges divested, either partially or completely, their endowments from fossil-fuel holdings, marking a shift toward sustainability in university endowment investment. However, the decision by these universities to divest their endowments from fossil-fuel holdings was often marked by controversy, owing to conflicts between student- and faculty-led coalitions and the university board, and conflicting interpretations of fiduciary law – both of which are addressed in this Article.

To date, the academic study of the effect of divestment on endowment values has focused on the top university endowments and has produced mixed results. With respect to mixed results, our study is no different. However, our study is different from the extant but limited literature in this area in that we examine holistically the impact of total or partial divestment on endowment values for all universities as well as a select group of institutions that are illustrative of their peers by endowment size.

Results from our difference-in-differences analyses of the effect of full and partial divestment suggest that either form of divestment yields negative consequences for endowment values. We urge the reader to interpret these preliminary results with caution, in part because our second method of analysis, using the synthetic control method for four universities (Pitzer College, Stanford University, University of Dayton, and Syracuse University), suggests that the negative consequences of divestment may be overstated in the near-term. Specifically, these results suggest that there is not a negative effect associated with divestment for mid-sized and large endowments. We hope that this study both grounds and advances the debate about endowment divestment with empirical evidence and a reasoned discussion of its costs and benefits.

Keywords: endowments, divestment, difference-in-differences, synthetic control, universities, higher education, trust law, fiduciary duties, portfolio, sustainability, fossil fuels

JEL Classification: G11, G23, I23, K22, K29, K32, K39, Q56

Suggested Citation

Ryan, Christopher and Marsicano, Christopher, Examining the Impact of Divestment from Fossil Fuels on University Endowments (December 9, 2019). Roger Williams Univ. Legal Studies Paper No. 195. Available at SSRN: https://ssrn.com/abstract=3501231 or http://dx.doi.org/10.2139/ssrn.3501231

Christopher Ryan (Contact Author)

Roger Williams University School of Law ( email )

10 Metacom Avenue
Bristol, RI 02809
United States

American Bar Foundation ( email )

750 N. Lake Shore Drive
4th Floor
Chicago, IL 60611
United States

Christopher Marsicano

Davidson College ( email )

Davidson College
Box 7124
Davidson, NC 28035-7124
United States
28035-7124 (Fax)

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