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University divestment report summary

Wednesday, September 30, 2020

Divestment: Advantages and Disadvantages for the University of Cambridge (Ellen Quigley, Emily Bugden, and Anthony Odgers)

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The report was set up to explore the advantages and disadvantages of a policy of fossil fuel divestment, and to provide costings for the various divestment scenarios that the University might consider. The report is based on a survey of the existing academic literature, interviews with interested parties on all sides of the debate, written submissions, and a number of conferences and symposia.

You can find the full report here.

Section 1 

Sets out the threat of climate breakdown and the need for rapid decarbonisation, and emphasises the success of the Cambridge University Endowment Fund, which returns £88 million per annum to the University.

Section 2

Sets out the framework of the report, pointing out that :

  • There is widespread agreement over the problem to be addressed;
  • Supporters of divestment do not think it is the only solution to the problem;
  • The financial duties of trustees of the University are no barrier to divestment;
  • Most financing for fossil fuel extraction comes from bank lending and bond issuance, not equity;
  • There has been some impact of divestment on fossil fuel companies’, in terms of raising the cost of capital and decreasing investor confidence in this sector;
  • Divestment may have a positive effect on green start-ups, by redirecting funds to them;
  • Neither divestment nor shareholder engagement have yet seriously afflicted the oil and gas majors;
  • All of the big five companies are currently members of consortia that lobby against environmental legislation;
  • State-owned companies pose a particular problem since they are to some extent insulated from effects of divestment;
  • Extractors will at some point have to be forced to leave reserves in the ground, creating a high risk of ‘stranded assets’ for investors;
  • Despite recent announcements, no major fossil fuel extractor is currently compliant with the Paris Agreement goals;
  • Investments in renewable energy by such companies average less than 1% of their total spending;
  • A move to renewables might be profitable for oil and gas majors (see the example of Ørsted which moved from fossil fuel extraction to 100% renewables and which now outperforms rival oil and gas majors);
  • We need supply-side curbs on extraction to avoid the ‘green paradox’ whereby decreasing prices increase usage and therefore emissions; and to avoid the political instability that follows from rapidly decreasing oil prices;
  • Oil and gas companies are still incentivising growth through their executive reward packages and are not taking climate into account;
  • Renewables are approaching the point where they will be cheaper than fossil fuels;
  • This is a cost-effective moment to decarbonise the economy through major changes to the operating conditions of oil and gas companies.

Section 3

Considers moral arguments for and against divestment. On one side are those who link the divestment campaign to the campaigns against slavery and Apartheid; who think the University should take a moral lead and should not profit from harmful acts; and who emphasise that the impact of fossil fuel extraction is disproportionately felt by the most vulnerable. On the other side are those who think divestment is an empty gesture, or that it would harm students and harm research (including research into renewable energy and carbon capture technologies) by decreasing funding; or that it is hypocritical because the University continues to rely on fossil fuels.

This section also reviews the social and political debate around divestment, with opponents saying that only legislative change can reduce emissions, and proponents suggesting that divestment creates the social environment within which legislative change becomes possible. There is considerable support for divestment within the Cambridge community, with the exception of those who believe that research collaborations might be threatened by this move. Some reports have suggested that the stigmatisation process triggered by divestment represents the most far-reaching threat faced by fossil fuel producers; and some contributors to the report pointed out that symbolic actions and political statements are by no means ‘empty gestures’. The concept of the Overton window (the window of public acceptability of ideas) helps to explain how such interventions might work.

The idea that engagement with fossil fuel companies might have some effect without the threat or reality of divestment is shown to be false. The divestment movement has revitalised the environmental movement and has created recruitment difficulties for fossil fuel companies that may have a powerful effect on their behaviour. Furthermore, in identifying a villain, the divestment movement helps to cut the climate problem down to size and to make it something that we can act on. Divestment is often cited as a factor in the fall of Apartheid in South Africa; and while a direct link between divestment and legislative change is not easy to draw, there are numerous ways in which changing attitudes might lead to changes in legislation. This section also airs some critical views, such as the view that the fossil fuel industry lost its social licence long ago; or that selling shares in fossil fuels leaves them to be bought by other less principled parties; or that we should be collaborating with extractors to hasten a decarbonised future; or that a ‘market’ action like divestment distracts from the need for government action.

The report goes on to review the possible reputational risk to the University from continued fossil fuel investment, balancing this with the risk that a divested University might forfeit donations or research partnerships. In terms of financial risk, there is no evidence that divested portfolios do worse than non-divested portfolios. But it would be difficult to continue with the University’s ‘fund of funds’ model, in which investment is delegated to trusted third-party fund managers, when many of those fund managers are not willing to tailor their operations for particular clients.


  • Appendix 1 reproduces the Grace that authorised the production of the report. 
  • Appendix 2 explores the University’s current indirect fossil fuel exposure, as shown in the graph below.
  • Appendix 3 offers a history of the divestment movement, globally and in Cambridge, where it began in 2012-13. ‘The proliferation of open letters, petitions, Graces, resolutions, protests, marches, occupations, and banner drops – even a hunger strike – speaks to the importance of this issue in the university community’.
  • Appendix 4 explores the impact of divestment on the fossil fuel sector, emphasising the importance of bank lending and bond issuance in keeping oil and gas majors in business, and the importance of banks’ restrictions on debt in ending Apartheid. 
  • Appendix 5 shows via an extensive review of the scholarly literature that shareholder engagement has had a negligible effect in changing the behaviour of fossil fuel companies.
  • Appendix 6 shows that fossil fuel divested funds do not underperform and can outperform those that are not similarly constrained.

The report concludes with timelines of the divestment campaigns in relation to Apartheid and fossil fuels.