Last month, climate change demonstrators stormed the field for almost an hour at the annual Harvard and Yale Universities football match.

Fossil fuel divestment organizations have coordinated the campaign, encouraging the two universities to stop investing in companies that manufacture fuels such as coal, oil and natural gas. They forced the game to end in dark conditions because the Yale Bowl doesn’t have any stadium lights.

Public attention was paid to the rally. It also addressed the problem of finance and governance: demands for divestment compel universities and colleges to negotiate a challenging space between studies and the fiduciary duty of managers to handle prudently.

It’s a difficult place, as there is no firm consensus that fossil fuel investment hurts higher education door returns. One 2015 report funded and sponsored by the American Independent Petroleum Association reports that Harvard will spend over $100 million a year on the disposal of fossil fuel.

In the 2018 Ecological Economics newspaper, on the other hand, a study analyzing divestment more generally found that fossil fuel stocks do not outperform other stocks and do not offer many advantages from a diversification point of view.

Today at the Association of American Law Schools ‘ annual meeting a new working paper is proposed to fill some of the gaps. This compares the results of hundreds of colleges and universities to equate those who did not dissipate from fossil fuels with those that did.

The key take-off is that university leaders were concerned that the dumping of fossil fuels could harm their returns on funds and would like to hold back the final verdict. Authors Christopher J. Ryan Jr. and Christopher R. Marsicano could not say that the divestment had an apparent effect on the returns on donations.

“It does not mean we could not find one using the tools we used,” Marsicano, an assistant professor at Davidson College in North Carolina. “Which means we can’t find one. But that’s a rather strong accusation of the idea that divestment could financially hurt an endowment.”

The associate professor of law at Roger Williams University, Ryan and Marsicano tried to explore the experience at college and university following the total or partial divestiture of fossil fuels. Two modeling methods, known as differences and synthetic regulation, were used.

Ryan and Marsicano combined data from the Unified Post-Secondary Education Program of the federal government with data received from the National Association of Business Officers and College and University for the fiscal year 2000 to 2017. The data sets included a total of 527 institutions.

According to the analysis of differences, full and partial divestment from fossil fuel caused negative consequences for the fair market values of university endowments. On the other hand, the synthesis control study indicated that there were no negative effects at medium and large endowments that could be over established in the short term and negative divestment effects.

The authors reiterate quickly that the paper is in the preliminary stages and has not been reviewed by peers. They are looking for feedback and want to carry out future robustness checks on their results.

Challenges include the fact that universities usually give their holdings little exposure. The writers follow organizations as they claim they divest. The colleges and universities that say they’re divesting may also already have divested somewhere in the past, which might skew the findings. Or the schools may in the first place have had very few fossil-fuel holdings in their endowments.

A relatively small number of universities were also transferred during the study period, making it difficult to draw broad conclusions. The writers included 16 US universities and colleges which were entirely split between 2011 and 2015, plus six more which were divested in part from fossil fuels. Between 2016 and 2018, 13 more institutions were divided. On four sites, the authors carried out the synthetic control review.

“It’s our best shot,” said Ryan. “We agree that this is a good start to solving a very timely issue. There are big alerts. We haven’t got the perfect data set. I don’t know if we’ll ever, but we truly try to get to the heart of the disinvestment effect.”

An external expert who examined the paper raised some questions.

Brad M. Barber, Chair of Finance of the University of California, Davis, Graduate School of Management, emailed: “The consequences of divestment at this level of analysis will be difficult to recover without further information on the scale of divestment in every portfolio. It is more useful to calculate how the risk-return portfolio of investor shifts if that investor invests in the business portfolio versus a portfolio that excludes fossil fuels.”

A group linked to the Independent Petroleum Association of America, which branded the disinvestment of fossil fuel as expensive for organizations, attacked the paper for several gaps.

“For the few schools which the authors describe as fully divested, many have never had investment or just sold their direct holdings without addressing commingled funds,” said Matt Dempsey, an IPAA project, in an email.

“The few who adopted a limited divestment program usually did so over a time horizon of between five and 15 years, so the negative impact of the divestment would not be noticed immediately. The paper does not take into account transaction fees and active management expenses incurred if an endowment were to be completely fossil-free. Simply put, our initial review reveals that this paper is incomplete and that other papers have not been made so far.”

The authors of the paper nonetheless hope that they help to discuss higher education funds and how institutions can weigh various factors when selecting their investments. Several different types of investors attract interest in financial, social and governance factors or ESG factors.

ESG considerations are also explored extensively in trust law, Ryan said.

While scientists can point to a consensus on climate change, there is no consensus about what fiduciary obligation organizations have when it comes to the disposal of fossil fuels.

“Which factors will they weigh when deciding?”Ryan said. “Does total investment-based return— the conventional portfolio theory model? Or should it be like total consciousness returns?”

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