THE FINANCIAL CASE 
FOR DIVESTMENT

Divestment is the best guarantee for Princeton to maintain its financial health and thus vital for university initiatives such as financial aid. It is Princeton's fiduciary responsibility to divest. 

  • Two major financial management firms, BlackRock and Meketa, have separately concluded that investment funds have experienced no negative financial impacts from divesting from fossil fuels (March 2021). In fact, they found evidence of modest improvement in fund returns.

  • Large funds have started to divest. In January 2021, NYC divested 3 pension funds worth $4 billion from fossil fuels. In September 2021 the Caisse de dépôt et placement du Québec — Canada’s second-biggest pension fund at $310 billion — announced it was divesting all of its oil production investments by 2022. 

  • Divestment actions by hundreds of funds worldwide have passed the prudence tests required of fiduciaries.

  • Fossil fuel stocks have underperformed for the last five years and forward-looking analysis shows they are exposed to significant regulatory, technological and market risks.

  • According to a report from the Commodity Futures Trading Commission, "Climate change poses a major risk to the stability of the U.S. financial system and to its ability to sustain the American economy."

  • The fossil fuel industry is facing a future full of financial risk because of looming liability. States and cities are suing fossil fuel companies for knowingly misleading the public about the dangers of fossil fuels and for causing climate change, which is now costing governments billions in mitigation and adaptation. 

  • The fossil fuel industry is facing a future full of financial risk because their assets will be stranded. According to coverage of a report on oil from the equity research firm Redburn in 2019, "the danger for oil companies and their shareholders is that billions of dollars’ worth of investments are tied up in projects that may ultimately be abruptly cut off or otherwise rendered uneconomical."  Also see coverage of the report in the Financial Times. 

  • Crucially, refusing to divest has not helped PRINCO’s returns. In fact, PRINCO has underperformed recently, coming in 5th amongst Ivy endowments for the last 2 years.  Meanwhile, Brown has fully divested and leads in Ivy endowment returns with 12.4% in 2019 and 12.1% in 2020.

PRINCO's returns without any divestment for the last 5 years:

2020   5.6%        2019   6.2%         2018   14.2%       2017   12.5%       2016   0.8%

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Videos

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Articles

Major investment advisors BlackRock and Meketa provide a fiduciary path through the energy transition IEEFA 2021

 

The Financial Case for Fossil Fuel Divestment, IEEFA 2018

The Powerful New Financial Argument for Fossil-Fuel Divestment, 2021New Yorker

Science Based Targets -The Science Based Targets initiative (SBTi) drives ambitious climate action in the private sector by enabling companies to set science-based emissions reduction targets.

Partnership for Carbon Accounting Financials - An industry-led partnership to facilitate transparency and accountability of the financial industry to the Paris Agreement