In a big win for environmental activists and renewable energy advocates, the University of California investment management team announced this week that it will divest from fossil fuels this month. We think this is terrific news!

While the announcement is seen as a victory for those lobbying against the UC system’s support of fossil fuels, Jagdeep Singh Bachher, University of California’s chief investment officer and Richard Sherman, chairman of the UC Board of Regents’ investment committee, made it clear that the divestment was not a political statement or environmental stand, but rather a purely financial decision. The UC system believes renewable power sources will dominate in energy and transportation going forward, and they see the declining futures of the fossil fuel industry as a high-risk investment. It will invest it’s $84 billion of pension and endowment funds elsewhere for financial security. 

While the divestment will not break the fossil field industry, large scale divestment does have a significant impact on oil and gas companies. Peabody Energy, which declared bankruptcy in 2016, listed major divestment as a primary reason for their demise. Additionally, growing skepticism about the financial security of investing in fossil fuels shows a significant shift in society’s outlook on oil and gas. 

This financial shift does align with the UC system’s 2013 pledge to become carbon neutral by 2025. If nothing else, divestment by a large and widely respected system of research universities will prompt other institutions to rethink their investment strategies and support a faster transition away from polluting power sources.