Case study
February 10, 2015

Study Makes Case for Endowments to Stick With Fossil Fuels

A new report on fossil-fuel stocks' performance asserts that colleges and universities could damage their endowments by heeding the growing call to divest from coal, oil, and gas, The New York Times reports. Comparing long-term returns from hypothetical stock indexes, the study estimated that portfolios without energy-sector stocks underperformed those with them by as much as 0.7 percent.

Translated to the roughly $456-billion collectively held in university endowments, that would cost schools $3.2-billion a year, Daniel R. Fischel, head of the economic consulting firm Compass Lexecon and the study's lead author, says in a Wall Street Journal opinion column detailing the findings. "A reduction in wealth of this magnitude could have a substantial impact on the ability of universities to achieve their goals, such as the research, services and scholarships that they offer," he writes.

The report was commissioned and funded by the Independent Petroleum Association of America. Mr. Fischel told the Times the industry organization did not influence the study's results. Prior research touted by divestment advocates predicted a negligible economic impact from abandoning fossil-fuel stocks.