By Abby Schultz
Princeton University was among the last of the Ivy League schools to divest from publicly traded fossil fuel companies in its endowment.
But earlier this month, Vincent Tuohey, president of Princeton University Investment Co., withdrew that voluntary pledge.
In an update on the endowment's website, Tuohey, who took on his role in May 2024 -- after the divestment decision was made -- wrote the change allows for "greater flexibility in managing an endowment whose resources are critical for financial aid and scientific research -- including climate research -- at a time when our sector is under financial strain."
Princo, as the endowment manager is known, still won't invest in companies involved in thermal coal and tar sands, as directed by the university's Board of Trustees.
Tuohey's decision to walk back the voluntary decision to divest more broadly is at odds with other Ivy League schools, including Brown, Dartmouth, and Harvard. According to a database maintained by Stand.earth, an international environmental organization, 1,731 institutions with assets totaling about $41 trillion -- including universities across the globe -- have divested from fossil fuels in whole or in part.
But the decision isn't unusual among the larger universe of U.S. colleges and universities. Only 14.7% surveyed in 2025 had so-called negative screens of any type in place last year, down from 15.2% a year earlier, according to the latest report from the National Association of College and University Business Officers and Commonfund. Negative screens typically filter out companies in the business of fossil fuels, guns, and tobacco.
As Tuohey indicated, the policy change reflects financial strains affecting the endowment, which supports 65% of the university's operating budget. In his annual state of the university letter in February, Princeton University President Christopher Eisgruber noted that the endowment has adjusted its long-term return assumptions from 10.2% three years ago to 8% today.
Declining endowment returns, in addition to financial pressures caused by higher endowment taxes and cuts in federal funding, may have contributed to this decision. Also, returns for fossil fuel companies are on an upswing, Tim Yates, president and CEO of Commonfund OCIO said in an interview.
Energy companies had underperformed the broader equity markets for a long period -- up until the early 2020s. But then in 2022, after the pandemic, when the S&P 500 was down nearly 20% and bonds were down double-digits, the energy sector surged 60%. This year, the sector is on a roll again, driven in part by the war in Iran.
"I don't think anybody is going to change a policy on a year or two of performance, but the opportunity cost of not having that exposure in your portfolio has increased pretty significantly," Yates says.
Richard Brooks, climate finance director for Stand.earth, said universities facing pressure campaigns from students and other activists to divest beginning in about 2011 weren't persuaded by concerns about climate change, but by evidence that fossil fuel companies were underperforming the rest of the market.
"With the uptake of more climate policies around the world and the energy transition accelerating, the outlook for the sector was becoming worse and worse -- particularly for a long-term investor," Brooks says.
He points to a University of California report from 2024 on managing climate-change risks that showed screening out fossil-fuel companies allowed the university to manage climate-related transition risks while yielding higher returns over the MSCI All-Country World Investible Market Index over one-year, five-year, and 10-year time frames.
As Princo backs away from divestment, several U.K. universities appear to be strengthening their stance. The University of Cambridge, which pledged to divest from fossil fuels in 2020, is now reportedly pulling investment dollars out of banks that finance the fossil fuel industry, according to Bloomberg.
Cambridge and more than 80 other academic institutions in the U.K. have identified seven financial institutions that avoid contributing to the expansion of fossil fuels and are "suitable to hold billions in deposits, " according to a February statement from the university.
Princo's Tuohey maintains the endowment's goal remains achieving net-zero emissions by 2046, which is the university's target year to have a net-zero campus. This will be done by working with Princo's investment firms "on progress toward measurement and implementation of that goal," he said.
Nonetheless, Brooks worries Princo's decision sends the wrong signal to its peers.
"Major oil and gas firms are aggressively rolling back their own clean-energy capex targets, proving they are not viable partners in a net-zero transition," he said in an email. "It is a shortsighted approach to asset management that invites long-term risk -- a strategic failure that will ultimately be paid for by future generations of students and the long-term health of the endowment itself."
Princeton's director of media relations said the university didn't have anything to add beyond Tuohey's update and said he wasn't available for comment.
Yates doesn't believe Princeton's decision will have a ripple effect.
"The decision to do it in the first place, was very institution specific and I would suspect that any decision to reverse that type of a policy would be equally institution specific," he says.
Write to Abby Schultz at abby.schultz@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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June 10, 2026 16:00 ET (20:00 GMT)
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