WASHINGTON, D.C. (May 1, 2017) – Numerous reports conclude that fossil fuel divestment is a costly and ineffective endeavor for universities and pension funds to undertake, but little research has calculated how this impact affects the people that matter most: students, faculty, and retirees. Released today, a new report for the first time quantifies the true price of divestment for these groups.
The Bessembinder report is an ongoing part of the Divestment Facts program, launched by IPAA in 2015 to provide data-driven research and facts on the ineffectiveness of fossil fuel divestment. This new report represents the fourth installment in a series of recent studies that have sought to quantify the true costs of the #DivestmentPenalty. The first study, authored by Prof. Fischel, a former dean of the Univ. of Chicago School of Law, found that divested equity portfolios would incur an annual loss of 70 basis points over a 50-year period, representing a 23 percent reduction in returns relative to a diversified portfolio. The second report, authored by Prof. Bradford Cornell of Caltech, quantified the impact of divestment on Harvard, Yale, MIT, NYU, and Columbia, with divestment-related losses for those institutions ranging up to $107.8 million per year. The third report, also authored by Prof. Bessembinder, found that transaction costs and other frictional costs associated with divestment could rob an endowment by as much as 12 percent of its value over a 20-year timeframe.