Examining the Impact of Divestment from Fossil Fuels on University Endowments

58 Pages Posted: 18 Dec 2019 Last revised: 16 Feb 2021

See all articles by CJ Ryan

CJ Ryan

Indiana University Maurer School of Law; American Bar Foundation

Christopher Marsicano

Davidson College; The College Crisis Initiative (C2i) at Davidson College

Date Written: January 27, 2020


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 was often marred by controversy, owing to conflicts between student- and faculty-led coalitions and the university board. Principally, endowment fiduciaries are averse to divestment decisions because they think that it will hurt the endowment's value, but this concern, motivated by a narrow interpretation of fiduciary law, can be empirically examined.

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. 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. More importantly, we evaluate the assumption that divestment does injury to endowment values through legal and empirical lenses.

Results from our difference-in-differences analyses of the effect of full and partial divestment suggest that either form of divestment does not yield discernible consequences--either positive or negative--for endowment values, at statistically significant levels. However, we do find evidence that divestment improved the value for three of four universities that we examined through synthetic control analysis, with the greatest increase in value at a university with a very large endowment (Stanford University) and modest increases at two universities with mid-sized and large endowments, respectively (University of Dayton and Syracuse University). Thus, the negative consequences of divestment may be overstated in the near-term. This challenges the assumption that divestment yields negative returns to endowments and cracks open the door for endowment fiduciaries to divest without violating duties of loyalty and prudence. 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 (January 27, 2020). New York University Journal of Law and Business, Vol. 17, 95-152 (2020)., 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)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

American Bar Foundation ( email )

750 N. Lake Shore Drive
4th Floor
Chicago, IL 60611
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Christopher Marsicano

Davidson College ( email )

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

The College Crisis Initiative (C2i) at Davidson College ( email )

Davidson College
Box 7124
Davidson, NC 28035-7124
United States

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