“We must act now as citizens, as scholars, and as an institution to address this crisis on as many fronts as we have at our disposal,” Harvard President Larry S. Bacow said Thursday in a statement to the university community.
Bacow said the university has ended all direct investment in companies that explore for fossil fuels or develop them, and will not reenter that sector.
“Given the need to decarbonize the economy and our responsibility as fiduciaries to make long-term investment decisions that support our teaching and research mission, we do not believe such investments are prudent,” Bacow said.
Harvard also plans to allow its remaining indirect investments in the fossil fuel industry — through private equity funds — to lapse without renewal. Those indirect investments account for less than 2 percent of the endowment and are shrinking, Bacow said.
Bacow set no date for when the indirect investments would end, and he did not use the words “divest” or “divestment.” But together, the actions amount to a major reversal for a university that had not taken a definitive, zero-investment stand on fossil fuels up until this point.
Activists hailed the development as a hard-won victory.
“Harvard is really a very potent symbol of the status quo,” said Richard Brooks, climate finance director for Stand.earth, an environmental organization based in San Francisco. “With this move, they have shifted the status quo. That’s where the power of this announcement and this change really lies. The bar has shifted. The mainstream has moved further toward climate action.”
The American Petroleum Institute, which represents the oil and natural-gas industry, made the case for institutions to not follow Harvard’s lead.
“Natural gas and oil power our global economy, which is why most investors and banks are focused on working with our industry to achieve ambitious climate goals together,” API spokeswoman Bethany Aronhalt said in a statement. “We will continue to partner with the financial community on a diverse and broad set of energy solutions that will require new approaches, new policies and continuous innovation.”
The industry supports “tackling the climate challenge,” Aronhalt said, through actions such as “reducing emissions, advancing cleaner fuels, investing in groundbreaking technologies and advancing the direct regulation of methane as well as economywide carbon pricing.”
Harvard students involved in the climate fight rejoiced at Bacow’s announcement.
“This is a massive victory for the divestment movement,” said Ilana Cohen, 20, a junior from New York who is active in Fossil Fuel Divest Harvard. She said activists would push Harvard to finish divestment as quickly as possible. “We are going to hold their feet to the fire.”
Like other universities, Harvard wants to use its endowment to support the development of a “green economy” and accelerate the reduction of carbon emissions in myriad ways. But its investment policy on fossil fuels has generated the most public attention — and controversy.
Other powerful institutions around the world have also taken steps to jettison fossil fuel holdings in recent years, a cultural shift that resembles campaigns against tobacco companies in the 1990s.
Pope Francis has pushed Catholics and the Catholic Church to shift money away from fossil fuels, giving a speech last year that called for divesting from companies “that do not meet the parameters of integral ecology.” The British royal family has significantly pared back its fossil fuel portfolio as well. And Norway’s sovereign wealth fund, which was built on money from the oil and gas industry, sold off its last investments in the sector this year.
Not all climate advocates think divestment is the best way to protect the environment. Some argue that it might be better to shape the behavior of the oil and gas companies from the inside, as shareholders who can push for greener decisions because they are part-owners of the businesses.
That was Harvard’s previous position. In 2013, Drew Gilpin Faust, then the university’s president, said that she wanted to use the endowment as a resource for Harvard’s academic mission, not as a tool to advance social change — and that she preferred to “favor engagement over withdrawal.”
Fossil Free, a website that tracks institutional investment policies on the issue, lists Cornell and Brown universities as committed to full divestment from fossil fuels and Yale University as committed to “partial” divestment. Stanford University moved in 2014 to divest from coal companies. The University of California declared in 2020 that its investment portfolios are “fossil free.”
Princeton University said in May that it has “established an administrative process” to dissociate itself from certain fossil fuel companies involved with thermal coal and tar sands. For Princeton, disassociation means eliminating investments and reevaluating purchases, gifts and other activities.
With the energy sector ranking as one of the worst-performing arenas for investment over the past decade, divestment campaigns have the wind of the stock market at their back.
Although Harvard’s decision carries powerful symbolism, it is far from the first significant U.S. institution to divest. One investment bank, Raymond James, totaled up full or partial divestments from the fossil fuel industry in recent years and found that investors had announced plans to shift more than $17 trillion out of the sector, mostly since 2015.
“This is a broad-based trend, and it is very large in scale,” said Pavel Molchanov, an analyst with Raymond James. “These fossil fuel divestments mean there’s a smaller pool of investors to choose from, and that raises the cost of capital for fossil fuel businesses. That’s the impact.”