Frictional Costs of Fossil Fuel Divestment

November 2, 2020

“Fossil fuel divestment advocates are not unanimous with respect to identifying which assets should be divested, and there is no objective scorecard of which I am aware to determine this question. Further, as company policies and technologies evolve, the individual investments that comprise an appropriately divested portfolio will likely change. As a consequence, investment managers would need to undertake ongoing research and management costs to maintain compliance with divestment goals. This introduces a costly element of active management into endowment portfolios”.