Dive Brief:

• Colleges should be ready to take a financial hit if they divest from fossil fuel companies, according to a report paid for by the Independent Petroleum Association of America.
• The report, publicized in a Wall Street Journal op-ed piece, says a portfolio with energy-related stocks would have outperformed one without the stocks over a 50-year period.
• The average annual returns for the hypothetical energy-inclusive portfolio were 0.7% higher than the returns for the portfolio without energy stocks, according to the WSJ piece.

Dive Insight:

The author of the report, Daniel Fischel, an emeritus professor at the University of Chicago Law School, isn’t exactly breaking new ground here. Many investment managers will argue that a so-called “sin” portfolio — coal-fired generation companies, for example, along with companies that profit from tobacco, alcohol, guns, military sales, pornography, and dicey environmental and social practices — will yield better returns than the so-called socially responsible investments. But there’s also a countervailing ethical investment argument, growing in popularity, that says avoiding investments in companies with questionable environmental, social, and governance practices will reward investors over the long term.