When students at the California State University (CSU) approached the board of trustees with a proposal to divest from fossil fuels in 2021, they were not alone in their view that shares of gas, oil, and coal companies had no place in their university’s endowment.
Robert Eaton, who serves as CSU’s assistant vice chancellor for financing, treasury, and risk management, had been keeping a close eye on the performance of fossil fuel stocks for quite some time. He was beginning to arrive at a simple conclusion: “Fossil fuel-related investments have not done well,” especially over the past decade, he says. “From an investment perspective, it is something we were looking closely at.”
As a steward of public funds, Eaton was primarily concerned with financial performance. “We just can’t make decisions in a political or social vacuum, whatever the issue du jour might be,” he says.
So, when the board heard from a passionate group of students in February 2021, Eaton was pleasantly surprised by the argument they were making: We should not support companies that hurt the planet, but we should also not support investments that perform poorly. “They understood that balance as well,” Eaton says. “It can’t just be, ‘We need to get out of fossil fuels because it’s ethically wrong.’ We have a fiduciary obligation to manage these assets appropriately.”
By the fall, CSU’s board had officially decided to divest. The university’s $5.2 billion endowment reduced its fossil fuel exposure from 3 percent to less than 1 percent (the remainder, commingled in mutual funds, will take longer to divest). “We were looking at this very much through the lens of an investment decision: Is this a good investment for the foreseeable future, or is it not so good?” Eaton says. “We made the decision that we don’t think fossil fuels are a good investment right now.”
And Eaton certainly isn’t alone. Since the divestment movement started on US college campuses a decade ago, more than sixty institutions of higher education across the country have decided to rid their investments of fossil fuel companies. The latest dominoes are some of the biggest names in education, including Harvard and Yale. As the movement has become more mainstream, the dynamics have shifted significantly: Passionate student protests have evolved into sophisticated student negotiations; the longstanding moral argument has gained a new financial justification; and college administrators are finding fewer reasons to resist the calls to divest.
“It is definitely continuing to build momentum, despite the fact that we’re approaching ten years into it,” says Georges Dyer, cofounder and executive director of the Crane Institute of Sustainability, which works with organizations to develop strategies around sustainability efforts. “A lot of institutions that have been learning over those years, listening, some may have been wondering if it was going to be going away and learning that it’s not.”
Melik Khoury joined the administration of Unity College at a delicate moment: three months after the then five hundred–student liberal arts school in rural Maine voted to divest from fossil fuels—becoming the first college in the country to do so.
Khoury, who was then serving as chief financial officer and is now the college’s president, arrived when the excitement of the 2012 decision hit the roadblocks of reality. “There really wasn’t a divestment portfolio,” Khoury says. “So, how do we make this a reality?”
He started by partnering with an investment firm to identify the top two hundred fossil fuel companies, which would become the targets of divestment. But concerns about financial risk were strong; “fossil free” portfolios didn’t yet exist, and there was a fear that creating one could jeopardize financial returns. For a college whose $12.5 million endowment was composed almost entirely of a recent $10 million gift, losing even a small piece of that money would have been a big deal. At the same time, for a college with a long-standing commitment to the environment, divestment was nonnegotiable.
“It was a legitimate fear,” Khoury says. “But we felt we could not be this college and not make that decision.”
Unity gave itself a three-year timeline to figure out the balance between divestment and financial performance. The college took what Khoury called a cautious, conservative approach but managed to accomplish it in a year. A decade later, Unity’s portfolio is 99 percent fossil fuel–free and performs better than the S&P 500. “There’s a misconception that you’ve got to ruin your company in order to do this,” Khoury says. “I think they use that as an excuse why they can’t break.”
Dyer knows that dynamic well. He’s been working in the college divestment space since the beginning and now leads Crane’s Intentional Endowments Network initiative, a nonprofit learning network that supports institutions in divestment efforts. In the early days, Dyer says, “many of the [college] presidents were stuck between the students demanding this, and their investment committees having some concerns.”
That student pressure has remained steady through generations of students, Dyer says, but it has also evolved in a few ways. For one, students now have a more sophisticated understanding of the investment process and realize they need to make a financial argument alongside a moral one. And now that fossil fuel companies are becoming a financial liability—fossil fuel shares have lost nearly 20 percent of their value since 2012—some boards of trustees actually wish they had more student pressure to convince board members to move faster, Dyer says. “I do think it’s entering into a more mainstream moment,” Dyer says. “The conversation is still very much alive.”
While fierce student protest has often characterized the divestment movement, at least in the public imagination, some student groups have found college administrators to be exceedingly receptive in recent years.
Krishan Malhotra, the vice president of legislative affairs for the Cal State Student Association (CSSA), was part of the student team that wrote a resolution for divestment in 2021. The idea bubbled up from a student on the Monterey Bay campus who was involved in Divest the CSU, another student-run organization. CSSA quickly embraced it as a system-wide stance. “We know fossil fuels are finite, and we don’t have enough to sustain us forever. It doesn’t really make sense for us to invest in something that’s dying,” says Malhotra, a third-year business administration major.
The student association brought those concerns to the chancellor’s office—a place where Malhotra says his group is lucky to have a consistent relationship and seat at the table to voice all types of student concerns. “We didn’t have to protest,” Malhotra says. “We didn’t have to go out and talk about it. We wanted something done, we had the conversations, and we got it done.”
Eaton, CSU’s assistant vice chancellor for financing, treasury, and risk management, describes the experience in a similar way. While students brought plenty of passion to the discussion, they also brought a healthy dose of financial pragmatism. “The dialogue was very productive,” he says.
More than six hundred miles up the coast, students at Portland Community College also found themselves working with an administration that was eager to collaborate. Student climate activism runs deep at the community college, which has had a sustainability commitment since 2006 and employs students in sustainability staff positions, known as eco-social justice coordinators. The student who kicked off the divestment conversation in 2016 was Alex Bell-Johnson. He found inspiration in a sustainability course he took with a professor who was involved in 350.org, a climate-focused nonprofit founded by author Bill McKibben. Bell-Johnson got particularly excited about the idea of divestment and eventually connected with Briar Schoon, the college’s sustainability manager.
“This was a student-led effort,” she says. “Our students have been extremely active in sustainability and climate action.” She helped set up a meeting with the college’s bursar, who oversees investments. The goal, Schoon explains, was to avoid investing in any of the “publicly owned polluters” on the Carbon Underground 200 list, which ranks the top global one hundred coal and one hundred oil and gas publicly traded reserve holders.
PCC’s bursar ran an analysis and came back with a surprising result: The college’s investments were already free from any holdings on the list, according to Schoon. She said that was likely a product of the public institution’s risk-averse investment practices. But once they realized this, adopting a future-proofing divestment policy was not a hard sell. “It was really easy for us,” Schoon says.
The board of directors passed a resolution in 2017 ensuring that the college, whose portfolio was worth $220 million at the time, would not invest in “companies or funds that harm the planet or people,” according to a press release from the college. The treasury manager and student council review the portfolio holdings annually to make sure the college maintains that commitment.
Schoon realizes how rare it is, especially at community colleges, for student activists to have such an easy go of it. Many community colleges are under-resourced when it comes to sustainability, she points out, often relying on a single staff person to run an entire department. But the fact that PCC has a robust and long-standing sustainability staff made divestment a much smoother path. “We have more resources than a lot of other community colleges,” Schoon says. It also doesn’t hurt that the college is located in one of the most progressive, climate-minded cities in the country.
As it stands now, less than 1 percent of US colleges and universities—about sixty out of roughly four thousand—have divested from fossil fuels. (Though some 1,500 institutions globally, including foundations and pension funds, have also divested.) That means plenty of US institutions still are and could soon be grappling with decisions around divestment.
College leaders who have emerged successfully from the trenches have some advice about how, when, and why an institution should divest. Khoury, the Unity College president who has perhaps more hindsight on divestment than anyone, says it is key to start these discussions with a solid set of facts. “Make sure there are people in the room that understand this,” he says.
Much of the resistance to divestment is based in fear, he adds, but it can often be overcome when people understand that fossil fuel assets have performed poorly in recent years and that plenty of other institutions have successfully divested. “None of us have shut down. I don’t know what you’re afraid of,” he says.
In fact, Unity’s decision to divest has also helped strengthen its brand as an environmental college, which continues to attract new students. Maranda Boggs, an environmental science and climate change major at Unity, found herself drawn to a climate-focused education after the birth of her son five years ago. “When I had him, my climate anxiety skyrocketed,” Boggs says. “It makes you concerned about what your child’s future is going to be.”
She saw Unity as the perfect place to pursue a career in climate work, a sentiment that was only strengthened when she learned that the college was a leader in divestment. “It really reinforced my pride to go to school there,” Boggs says.
As much as Khoury believes in the urgent need for divestment, he doesn’t consider it a failure if a college takes its time—years, even—figuring out how to clean up its portfolio.
“You can create a multiyear plan, but you have to stop digging,” he says, “you have to stop reinvesting.” It’s a red herring to believe you must be completely divested the moment you make the decision to do so, Khoury says. In other words: Create a timeline that works for you.
Eaton, at CSU, agrees that each institution must chart a path that works for its specific situation. In his case, managing funds at a public university involved certain restraints but also a commitment to act in the interest of California’s residents. “We have a sizable impact on California’s economy [and] the national economy,” he says. “By being a leader in that respect, we’ll inspire others to take a hard look at this.”
Other institutions, however, have different goals, restraints, and values. That shapes how divestment should be pursued or whether it should be pursued at all. “Give it thought, make sure they make a decision that works well for them,” Eaton says. One of the biggest challenges in that process, he says, is “trying to make sure that it truly is a financial decision, and not one that is being swayed by social and political factors”—something that can be especially difficult in the face of passionate student protest and pressure.
From the student perspective, Malhotra’s advice is simple: “Don’t overcomplicate it.” The process can be as straightforward as setting up meetings with the investment committee and keeping the conversation alive over time. “Had we never started that conversation, had we never been consistent, and had we never followed up, nothing would have happened,” Malhotra says.
From the beginning, environmentalists and skeptics have debated whether the divestment movement makes a tangible financial difference to the fossil fuel industry. Divestment activists have acknowledged that the main goal was not to directly harm fossil fuel companies but rather to question these companies’ “social license to operate,” according to Dyer at Crane.
Even so, opponents to divestment have often argued that no single institution controls enough money to make a significant financial impact against fossil fuel companies. Indeed, even the institutions that support divestment often acknowledge this. “It’s not very much in the grand scheme of things,” Eaton says, but he argues that it has more of a symbolic, rather than practical, value. “Where I think it is important is where the CSU stands. . . . It’s consistent with our core values as an institution.”
But as more colleges and universities, as well as other organizations and companies divest from fossil fuel companies, the movement has had a practical impact few thought it could. When the world’s biggest private-sector coal company, Peabody Energy, announced bankruptcy plans in 2016, it cited divestment as a contributing factor that made it difficult to raise capital. In 2018, Shell said in its annual report that divestment represented a risk to its bottom line.
“It has had some impact,” Dyer says, “but I think it’s still true to say that’s not the main driver or what’s going to solve the climate crisis.” The divestment movement’s larger impact has been to drive policy conversations around climate solutions. “That is the most powerful, important piece of it,” he says.
Schoon, at PCC, agrees that divestment holds a lot of value in simply starting a conversation, especially for people who are more likely to be swayed by financial arguments. “The climate crisis is so huge and so multifaceted,” she says, “we have to tackle it from every angle, so divestment is one tool in the climate action toolbox.”
The tools that colleges and universities have at their disposal also continue to evolve. Yale, which at $31 billion has the second-largest university endowment in the country, is using its considerable leverage to work with, rather than against, fossil fuel companies. Yale’s board of trustees adopted a set of “ethical investment principles” in 2021 that will give fossil fuel companies a chance to “adopt more sustainable practices and advance the shift to a decarbonized energy future” or otherwise lose their place in Yale’s portfolio, according to a press release.
Dyer’s organization is now working with many institutions that have gone beyond divestment, toward “net zero” portfolio commitments. That means not simply avoiding fossil fuel investments but looking at the carbon footprint of all companies in a portfolio. The goal is to sell investments in high-emitting companies and shift toward firms that are actively reducing emissions.
A net-zero portfolio is a longer-term commitment. It would be virtually impossible to accomplish in today’s economy, and Dyer says many institutions are working on twenty- or thirty-year timelines. The important thing, Dyer says, is not to get too comfortable. Even after divestment, an institution should continue to evaluate the effect of its portfolio, not to mention other climate impacts on campus.
“If they do decide to divest,” he says, “that should not be the end game.”
Illustrations by Paul Spella