A $25 billion investment fund explains why it's not yet swapping ESG-friendly investments for oil and gas

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• Despite college students' calls for fossil fuel divestment, an executive at one major investment manager said endowments should avoid investing solely to renewable energy sources.
• Swapping solar and wind for oil and gas leads to lower returns, said Commonfund's Peter Burns.

College students are pressuring their schools to stop investing in fossil fuels, but one of the biggest managers of endowment money says that might not be such a good idea.

Commonfund, a Connecticut-based manager which $24.8 billion for nonprofits, continues to see oil and gas as an attractive investment opportunity, executives said at a Tuesday media roundtable.

See more: New York City is taking on the oil industry by selling off billions in fossil fuel investments and suing the top five oil companies

Some college students and faculty view moving away from oil, gas, and other investments as a moral and financial imperative for their endowments, arguing that fossil fuel companies contribute to climate change.

"What we like to say is: it's really hard to go cold turkey on natural resources, even though you might say to yourselves 'it would feel good to do it,'" said Peter Burns, the chief executive officer of Commonfund's subsidiary that invests in natural resources, among other asset classes. "Today, if you invested in solar and wind only, rates of returns in those areas have not been very good. You might be disappointed on that side."

Moving away from traditional investments can bring an unforeseen set of problems, Burns said. Consumers, for example, often view electric vehicles as better for the environment than gasoline cars. But Burns said electric vehicles have 10 times the amount of copper compared with traditional cars, and copper mining is considered environmentally destructive.

"We say to investors 'there will be opportunity,'" in sustainable energy, Burns said. "We view it again as a bridge, a transition to cleaner natural resource investing. As fiduciaries and users of traditional commodities [including] oil and gas, those are areas that are still useful and could help you generate the returns you need."

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Global activist group DivestInvest counts over a thousand organizations representing $8 trillion that have committed to moving away from fossil fuels, including US universities like Columbia University, Georgetown University, and Johns Hopkins.

Others, however, have resisted calls for divestment. In 2015, the Massachusetts Institute of Technology announced a five-year plan to fight climate change but said it wouldn't divest its $16.4 billion endowment from fossil fuels, despite advocacy from a student group.