One of the most encouraging developments to come out of the recent rise in climate-related activism is the student-led movement to divest from fossil fuels. There is a level of engagement on campuses across the United States that we haven’t seen since the 1980s fight against apartheid. This student activism has turned the spotlight on divestment as an issue, and led to high-profile decisions to divest from fossil fuels by the likes of the Rockefeller Brothers Fund and the Church of Sweden. The massive mobilization for the recent Great March for Climate Action likely also would not have happened without student activism and the college divestment movement.

And yet the actual results, in terms of colleges divesting from fossil fuels and investing in clean energy, has been somewhat muted. The consultancy firm, Arabella Advisors, which drafted the first summary of divestment commitments, lists just 14 educational institutions that have taken the divestment pledge, and most of these are fairly small universities and colleges. The notable exception is Stanford, whose $18 billion endowment is one of the largest in the world. But when one looks more closely at Stanford’s divestment statement it is rather weak: “Stanford University will not make direct investments of endowment funds in publicly traded companies whose principal business is the mining of coal for use in energy generation.” Or put another way: “Stanford will continue to invest indirectly in coal mining stocks, invest directly in mining conglomerates or coal-mining firms that service the steel industry, and invest directly or indirectly in all sectors of the oil and gas industry.” The response from other major institutions has been even worse: The biggest endowments in the United States—Harvard, Yale, University of Texas, Princeton—have all responded with a point blank no.

So while campus activism has helped grow a vibrant and genuine worldwide divestment movement with notable support from faith-based investors and charitable foundations, it has not done such a good job in persuading the educational institutions that gave birth to the movement. This lack of uptake from higher education institutions is deeply regrettable, and one would hope that their trustees are asking themselves serious questions about the message they are sending to the world at a time when vested interest groups are fighting a rear-guard action to cast doubt on the science of climate change. The universities’ reluctance to put their money where their mouth is and finance the necessary low-carbon future must have lobbyists rubbing their hands in glee.

And yet it is not totally unsurprising either. If I were to spend a weekend in Norway, and while I am there contact the Norwegian government and ask them to stop investing in fossil fuels, their answer would be short and sweet. There is unfortunately something of a parallel with the campus divestment movement: Students are like tourists, and the endowment is like a foreign government’s budget. The students did not put the money in the endowment, and any decision to change investment policy will affect a subsequent generation of students, not those demanding the change. Seen in this light, the refusal of most of these institutions to listen to the arguments of the divestment movement is, while disappointing, more understandable. The students are pushing against a door that will likely never open.

Perhaps the dialogue would be more fruitful if donors—the people paying into the endowment pool—initiated it, rather than students. Unlike taxpayers, donors don’t have to contribute; if a few existing donors made it clear that they wouldn’t be signing any new checks unless their alma maters started divesting from fossil fuels, it might get things moving. But pecunia non olet, as the Romans used to say—money doesn’t smell, and the board of trustees might not want to risk alienating donors who made money in fossil fuels by ceding to the demands of green-minded benefactors.

Another potential way to harness the energy of the student divestment movement is to try and redirect it toward what has historically been one of the most conservative and cumbersome players in the financial sector: pension funds. Many students that graduate and start working will start paying into a fund, and here the dynamic changes—you are no longer a tourist in a strange land, but the equivalent of a resident taxpayer giving over part of your earnings on the understanding that you and your peers will get something back in return. And if your money is held in trust, you are certainly entitled to ask that fund managers do not invest it in such a way that it will be detrimental to your future well-being. A recent review published by the law commission in the UK underlined this point, stating that there is no legal impediment to trustees incorporating environmental, social, and governance criteria into their decision-making process, provided that they have good reason to think that scheme members share the concern.

Then there are private markets. Up until now the focus of divestment has been on publicly listed companies—and for good reason, since they are highly visible and this is where the bulk of institutional investment activity occurs. But that very bulk means it is exceedingly difficult to move the dial. You would have to convince a sizeable portion of the total investment pool to move at the same time to have any effect, and if you did, the price of those securities would plummet, and all the responsible investors would suffer.

Private markets operate differently. For a start, the number of participants is much smaller. This means you don’t need to persuade as many people to take the pledge to have an impact. Private markets also tend to be primary rather than secondary markets; these are projects or companies seeking to raise funds, rather than third parties trading shares. This means that any decision not to invest will be felt. If an oil and gas exploration project needs to raise $1 billion, there are a limited number of investors it can approach—the entry ticket for such private placements is high and essentially off limits to all but the largest investors. So if a group of those potential investors all say no, it will damage that project’s chances of success. A decision not to invest in any private offerings in the fossil fuel sector is qualitatively different to a decision to sell existing stocks to someone else. It is the difference between refusing to buy products from a certain shop and selling products you already own via eBay. One will directly impact on the shop’s profitability, one will not.

If even a handful of institutional investors said that they would no longer make any new investments in privately traded fossil fuel projects, the effect would be tangible and immediate. If they also said that they would invest in renewables or other green infrastructure, the impact would be double—$100 million less going in a bad direction, $100 million more going the right way.

Additionally, if a group of large investors made it clear that they were actively looking for environmentally friendly private placements, it would be far easier for those projects to attract top talent. As things stand, there is often a chicken-and-egg situation where institutional investors are reluctant to invest in “green funds,” because they lack a sufficiently experienced management team. A simple statement of intent from the asset owners would help create investable opportunities that the market currently lacks.

And ultimately, any progress in the private markets will feed back into public markets.  If oil and gas exploration projects are unable to find funding on the private markets, it is the listed oil and gas companies that will suffer, because they will be forced to finance such projects off their own balance sheet. Likewise, if green projects find it easier to raise funds, then it is the listed green companies that will benefit. Moreover, since many of the large energy firms do a bit of both, and since the mix tends to be a lot of dirty and a smidgen of clean, anything that brings down the cost of clean energy or pushes up the cost of fossil fuel energy will incentivize those firms to shift their priorities in a way that is beneficial to society as a whole.

The student divestment movement has achieved a remarkable amount, remarkably quickly; that it has done so from what is an inherently weak bargaining position is doubly impressive. Divestment is the necessary first step to building the new economy and turning off the fossil fuel tap. But it is only a first step, and it is up to all of us to find ways to carry this fight forward.

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