New Report: Divestment Would Cost Harvard, Yale, Columbia, MIT, and NYU More than $195 Million per Year

WASHINGTON, Sept. 8, 2015 /PRNewswire-USNewswire/ -- As leading universities continue to reject demands from activists to drop their investments in oil and natural gas firms, new research commissioned by the Independent Petroleum Association of America (IPAA) and authored by a researcher from Caltech quantifies for the first time the actual, real-world costs that individual, select schools could expect by divesting. 

Led by Dr. Bradford Cornell, a visiting professor of financial economics at Caltech and a senior consultant at Compass Lexecon, the study team analyzed the impacts of divestment on the endowments of five distinguished universities – Harvard, Yale, MIT, Columbia, and NYU. The report finds that the schools collectively could lose more than $195 million by divesting from fossil-fuel related equities – $195 million for each and every year the portfolios are active in the market.

"The fact that divestment has the potential to generate lower returns for schools and other institutions isn't particularly earthshattering news," said Dr. Cornell. "But the fact that the projected shortfalls associated with divestment are this significant, and this universal – that is the real critical finding here, and one that schools would be smart to evaluate as part of any discussion on divestment moving forward."

Drawing on publicly available data and modeling thousands of different proxy portfolios for each school studied, Dr. Cornell and his team were able to approximate the composition of each school's investment fund, and then analyze those portfolios' performance under both divested and diversified scenarios. Among the schools evaluated, Cornell and his team found that Harvard would experience the most significant loss if it decided to divest – roughly $107 million per year. Yale's losses are projected to exceed $51 million year per year. MIT would lose $17.75 million; Columbia would lose $14.43; and NYU would see a reduction of $4.16 million.

"This report adds to the growing body of research and real-world evidence out there showing that divestment is a bad policy based on a bad premise, with the potential to produce really bad outcomes for the schools and institutions that adopt it," said Jeff Eshelman, senior vice president for operations and public affairs at IPAA.  

For more information, please visit DivestmentFacts.com.

SOURCE Independent Petroleum Association of America

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