The global divestment movement chalked up another major victory this week as Oxford University announced it would divest its multi-billion pound endowment from fossil fuel assets and enact a new investment policy that would call on companies to provide evidence of their net zero business plans.

Following a lengthy campaign from students, academics, and alumni, the University announced yesterday that it had instructed the Oxford University Endowment Management (OUem) to adopt a new investment framework known as the Oxford Martin Principles for Climate-Conscious Investment, which has been developed by the University's Oxford Martin School.

It also confirmed a new member would be appointed to the University's Investment Committee, with "experience of both endowment management [and] an additional focus on climate-conscious investment".

"Oxford is a global pioneer in many areas of environmental research and science, from climate economics to biodiversity, energy use, and climate change modelling," said Professor Louise Richardson, Vice-Chancellor of Oxford University. "I am very grateful to all the staff and students who came together to develop this new and exciting agreement on investment which I warmly welcome. Coupled with our research strengths, our new approach will enhance our position as a world leader in reducing carbon emissions and tackling climate change before it is too late."

The decision was agreed by stakeholders across the University, including the Student Union, other student-led organisations, academic researchers, and OUem.

The University said OUem had already made considerable progress reducing the exposure of the £3bn Oxford Endowment Fund to fossil fuel assets, noting that since 2007 OUem investment in the energy sector has declined from an estimated 8.5 per cent of the endowment to 2.6 per cent. As such, just 0.6 per cent of the endowment is now in fossil fuel extractors, while OUem has increased its holdings in clean energy and green business assets.

"OUem has been actively managing the Oxford Endowment Fund over the past decade to ensure that, as an investor, we are part of the solution to climate change and sustainability," said Sandra Robertson, CEO and CIO of OUem. "The Fund is a globally diversified portfolio of investments, chosen to make returns over the long term in a sustainable manner. We will continue our deep engagement with the investment groups in the Fund, and further encourage them to move to a Net Zero world across their portfolios of companies."

However, the University's continued investment in a number of high profile fossil fuel firms saw it become a target for protests from divestment campaigners who have repeatedly called on Oxford to emulate a growing band of academic institutions around the world and divest fully from fossil fuels.

Professor Cameron Hepburn, Director of the Smith School of Enterprise and Environment, welcomed the move and highlighted how the new strategy moved beyond "mere divestment". "This is a commitment to divestment plus engagement, according to the Oxford Martin Principles, to help accelerate progress towards net zero emissions," he said. "It is right that Oxford's leadership on the science, economics and finance of the transition to net zero emissions should be consistent with how we invest our endowment."

The Principles require investors to support the goals of the Paris Agreement on climate change, by engaging with assets to deliver net zero plans for their business activities, develop net zero business models, and set out quantitative mid-term targets compatible with their net zero goal.

"In applying the Oxford Martin Principles to their investments, the University is taking a rigorous, science-based approach which requires the companies in which they invest to be aligned with the Paris Agreement," said Rupert Stuart-Smith, doctoral student on the Oxford Martin Programme on the Post-Carbon Transition, who developed an investment strategy based on the Oxford Martin Principles with St Hilda's College as an undergraduate - the first strategy to adopt the principles. "This new policy ensures that Oxford will divest from the fossil fuel industry and, crucially, will engage robustly with all other companies unless they bring forward a plausible plan to eliminate their net emissions of carbon dioxide by around 2050."

The University also today confirmed that work is continuing on an ambitious new environmental sustainability strategy, which is due to be published later in the year.