Previous studies have explored connections between environmental responsibility and the financial performance of business firms. Here, we explore connections between a particular form of environmental responsibility, divestment from fossil fuel, and the reputational status of a different form of organisation, universities. We find a strong and robust link between world university rankings and commitments to divest endowments from the fossil fuel industry, with higher-ranked universities divesting at higher rates compared to lower-ranked universities. Rates of divestment also differ significantly between countries, and according to the political orientations of provinces and states. We do not find evidence for links between divestment treated as a binary variable and a university’s number of students, size of endowment, or type of endowment. We use time lags to test whether the rank-divestment correlation may arise due to effects of rank on divestment and/or vice versa. These tests indicate influence in both directions. In light of these results, we predict universities that have not yet divested will face mounting peer pressure to do so. Social media summary. Higher-ranked universities divest more frequently, and divesting universities improve more in the rankings.

Gregory M. Mikkelson, Miron Avidan, Aleksandra Conevska, Dror Etzion

4 Aug 2021