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At $32.7 billion, Harvard's endowment is among the largest in the country. The strong returns of the assets owned within the endowment are the main reason it has grown so large. In fact, over the past two decades Harvard's endowment has returned 12% per year, with a portion of those gains fueled by the fossil fuel-related investments it has held. Some, however, have suggested that those fossil fuel investments ought not be held, as the emissions these create are what's driving climate change that has so many worried about our future.

Balancing investing with personal ethics
In considering its options, Harvard has come to the conclusion that fossil fuels are indispensable to its portfolio. That's why it has rejected calls to jettison these investments. It sees boycotting a whole class of companies that we rely on every day as being an inconsistent notion. Further, the performance of the portfolio is critically important to the university, as it contributed almost a third of the school's operating budget last year. So to limit its opportunities to fulfill its mission would be counterintuitive.

The debate does bring up an ethical point, and one with which many investors wrestle. For example, many investors have completely rejected investing in "sin stocks" such as tobacco or alcohol producers, while others have taken a stand to own only the companies pursuing a more socially responsible mission. It really comes down to a personal decision, as it can be very difficult to separate your investing from your beliefs.

However, when it specifically comes to fossil fuel-related investments, there is a way to have your cake and eat it, too. For example, the concern with fossil fuels centers on the carbon dioxide that's emitted. The problem really boils down to the cost of capturing and storing all of that carbon. This is where fossil fuels can work in harmony to utilize the carbon to produce more energy.

Putting carbon to work
For example, oil producer Denbury Resources (DNR) is using carbon dioxide captured at an Air Products (APD 1.17%) facility in Texas. Denbury will use about 1 million tons of carbon dioxide that's produced by the Air Products hydrogen plant for enhanced oil recovery. It transports the carbon dioxide via pipeline and injects it into its Hastings Field in Texas. Denbury sees the carbon dioxide injection helping it to produce another 1.6 million to 3.1 million barrels of oil each year. This is oil that we as a nation won't have to import from overseas, and it's carbon dioxide that won't be emitted into the atmosphere.

Denbury is also working with Southern (SO 1.15%) on a carbon capture and storage project at Southern's Kemper County plant. Starting next year, Denbury will receive about 115 million cubic feet per day of carbon dioxide to inject and store in a declining oil field. This will enable Southern to capture 65% of the carbon dioxide produced at its new coal power plant, while helping Denbury produce more oil. The result is a plant that rivals the emission's output of a similarly sized natural gas plant, while also reducing our needs for foreign oil imports.

Redeeming qualities
Keeping carbon dioxide from being emitted is just one of the many areas where fossil fuel-based companies are making a difference. Another greenhouse gas that's now being captured and used is methane. Clean Energy Fuels (CLNE -0.45%) is capturing methane gas from landfills and farms to turn it into a renewable natural gas. The resulting product made by Clean Energy is called Redeem. It's 90% cleaner than diesel, as well as being cheaper, domestic, and renewable.

Final thoughts
Fossil fuels will continue to be indispensable for investors who have no choice but to own one of these companies to remain diversified. The good news is that many of these companies are making great strides to become better stewards of the environment. The two don't have to be mutually exclusive, as Denbury Resources and Clean Energy Fuels are clearly demonstrating.