Princeton Endowment Reverses Divestment Decision
Princeton University's endowment is backtracking on its 2022 pledge to divest from publicly traded oil and gas companies, a move that was intended to advance its net-zero portfolio goals. The reversal comes amid financial pressures and a reassessment of the strategy's effectiveness.
Background of the Decision
In 2022, the Princeton University Investment Company, known as Princo, voluntarily elected to divest from all publicly traded fossil fuel companies. However, Vincent Tuohey, President of Princo, announced on Monday that the endowment will no longer pursue this divestment. Tuohey stated that a trustee-mandated decision to divest from thermal coal and tar sands companies remains in effect.
Reasons for Reversal
Tuohey explained that it is not clear that Princo's initial approach has moved the endowment significantly closer to net-zero emissions. He emphasized that major energy companies may still be suitable investments for a net-zero endowment, as the sector plays a critical role in the clean-energy transition. The reversal grants Princo greater flexibility in managing its resources, which are vital for financial aid and scientific research, including climate research, especially during a period of financial strain in the higher education sector.
Financial Context
Princeton University boasts one of the largest endowments in the United States, valued at US$36.4 billion as of June 2025. The endowment generates approximately 65% of the college's operating revenue. However, recent returns have lagged behind peers, with a three-year annualized return of just 4.3% as of June 2025, the lowest among Ivy League schools. Its 20-year annualized return tied for second with Brown University. In February, Princeton's president warned of economic challenges, noting that the university can no longer rely on strong endowment returns amidst increasing political threats to its finances.
Market Performance
The S&P index of oil and gas production companies, which includes major players like Exxon Mobil Corp. and Chevron Corp., has surged 75% over the past five years. This strong performance may have influenced the decision to reverse the divestment pledge, as self-imposed constraints on investment strategy can have outsized impacts on the endowment's financial health.
Leadership Change
Tuohey took over the fund in 2024 following the retirement of Andrew Golden. The school newspaper, the Daily Princetonian, first reported the investment decision.
Conclusion
Princeton's reversal highlights the tension between environmental commitments and financial realities. While the endowment maintains its divestment from thermal coal and tar sands, it now has the flexibility to invest in oil and gas companies as part of a broader strategy to support the university's financial stability and research mission.
