The University of Glasgow has become the first European university to commit to disinvesting fully from companies in the fossil fuel industry.
The decision was taken by the university’s governing body, the University Court.
It follows a consultation process by an independent working group taking evidence from the Glasgow University Climate Action Society (GUCAS) and the university investment committee.
Full divestment will mean the reallocation of around £18m (€12.7m) worth of current investments over a 10-year period.
This represents 12% of the university’s endowment funds, worth around £153.9m as at 31 July 2013, the date of the last published accounts.
The campaign to persuade the university to divest from fossil fuels has been led by GUCAS, and has lasted around a year.
The university already bans directly held tobacco stocks from its portfolio, as these investments run entirely counter to its direct interests in research.
David Newall, secretary of the University of Glasgow Court, said: “The university recognises the devastating impact climate change may have on our planet, and the need for the world to reduce its dependence on fossil fuels.
“Over the coming years, we will steadily reduce our investment in the fossil fuel extraction industry, while also taking steps to reduce our carbon consumption.”
Directly held stocks in the endowment fund portfolio as at 31 July 2013 included Shell, BP, Chevron, Statoil Holdings and BHP Billiton.
Portfolio management is split between Schroders and Newton.
The commitment to divest is subject to reassurance that the financial impact for the university will be acceptable, the detail of which will be monitored by the University Court.
The decision to divest does not extend to the University of Glasgow Pension Scheme, run by separate pension fund trustees.
Other UK universities are reportedly considering the issue of fossil fuel divestment within their endowment funds.
Oxford University’s executive governing body is set to make a decision early next year.
In the US, 13 universities, including Stanford, have now pledged to divest from the fossil fuel industry.
Last month, the Rockefeller Brothers Fund, whose endowment is worth $868m (€682m), announced its decision to divest from the industry.
Meanwhile, a low-carbon energy system could free up trillions of dollars over the next 20 years to invest in better economic growth, according to two new reports from the Climate Policy Initiative.
The reports found that moving to a low-carbon electricity system would bring the global economy around $1.8trn in financial savings between 2015 and 2035 because of significantly reduced operational costs associated with extracting and transporting coal and gas outweigh increased financing costs for renewable energy and losses in the value of existing fossil fuel assets.
And changing from oil to low-carbon transport could increase global investment capacity by trillions or result in net costs, depending on policy choices.
Governments own 50-70% of global oil, gas and coal resources, and collect taxes and royalties on the portion they do not own.
However, governments also control much of the policy that could lead either to asset stranding (losses in the financial value of fossil fuel assets) or financial savings.
And, says CPI, the right policies can maximise the financial benefits of a low-carbon transition.