Even as climate activists celebrated Harvard University’s promise to cleanse its multibillion-dollar investment fund of holdings in fossil fuel companies last week, others dedicated to the fight against the climate crisis wondered if the real winner was the oil industry.

Harvard bowed to pressure from students and advocacy groups who likened their campaign to the push to divest from apartheid South Africa in the 1980s. The group, Fossil Fuel Divest Harvard, described the decision as a “massive victory” and “proof that activism works, plain and simple”.

That victory drew widespread praise from within the environmental movement, including from the former vice-president Al Gore.

But other major oil industry investors, who are also committed to addressing the climate crisis, regard the dumping of shares as a mistake. They say it removes a key area of leverage over fossil fuel companies.

“If big investors divest their holdings, we lose the base of ownership, which is going to be able to drive change,” said Anne Simpson, who leads the sustainable investment strategy for the $400bn California Public Employees’ Retirement System, CalPers. “If we sell our shares in oil and gas companies, we’re losing an opportunity to have an influence.”

The difference over strategies hinges on sharply opposing views of the future of oil and gas firms. The Harvard activists, alongside national environmental groups such as 350.org, want to see the fossil fuel companies put out of business as quickly as possible.

Simpson and other institutional investors say the oil and gas industry will remain essential to the US economy for some time and will probably contribute to the transition to green energy, and so it is more important to force the business to change the way it operates.

Morgen Whitten, an environmental science and public policy student at Harvard who was one of the organizers of the divestment campaign, is skeptical.

“There’s no evidence right now that fossil fuel companies can be changed. If engagement is an effective strategy, why hasn’t it already worked?” she said. “There are plenty of studies that show that no major fossil fuel company is aligned with the Paris climate accords. Investors like Harvard have had a seat at the table for decades, and companies have not changed course at all.”

CalPers, the combined pension and health scheme for 2 million public workers in California, is experimenting with new approaches toward changing oil and gas companies from within. In May, it was a key player in helping the activist investor fund Engine No 1 force three new directors on to the board of ExxonMobil to press the company to take the climate crisis seriously.

CalPers was also instrumental in bringing together hundreds of large investors to identify the worst polluters in their portfolios. Out of about 10,000 firms, the funds found about 100 responsible for about 85% of greenhouse emissions, ranging from from oil and gas to steelmakers, shipping and cement manufacturers.

The investors formed a group, Climate Action 100+, to press change on those companies. The group looked at where it had leverage, principally over elected members of the boards of directors, and set out to require that those boards take charge of addressing pollution instead of leaving it to managers.

Climate Action 100+ demanded that the worst carbon emitters commit to specific actions – about half agreed – and pressed for full disclosure of carbon emissions by each firm. Support for Climate Action 100+ has expanded from a few dozen institutional investors to more than 600, with combined holdings of $55tn.

“If we can team up with other investors who also have exposure to these companies, we can begin to not just request but require that companies do these things,” said Simpson. “If we sold our shares in order to comply with the divestment mandate, we wouldn’t be in a position to do this.”

Simpson said the group had won commitments to reduce emissions from Chevron and BP, among other changes. Even Exxon, which remains committed to increasing its oil output in the coming years, was forced to reveal its carbon emissions under the threat of a shareholder vote.

“You have to be in it to win it. Mitigating the risk of climate change driven by emissions requires that we drive business action to bring these down,” said Simpson.

Bill McKibben, a founder of 350.org, said this was all too little, too late and risked providing cover for the fossil fuel industry to appear to take the climate crisis seriously while dragging its heels. He said that shareholder engagement could be effective in getting a company to pay its workers more or adapt its business model – but that was not what was at stake with the oil and gas industry.

“The problem with fossil fuel is that it’s not like there’s a flaw in an excellent business plan. The business plan is that these are companies that essentially exist for one purpose, which is to dig stuff up and burn it. That’s all they know how to do,” he said. “Their track record, both as companies and as political actors over the last three decades, has been that they will do whatever they can maintain that business model, even in the case of the planet breaking.”

McKibben said that far from divestment relinquishing leverage, it had added to the pressure on fossil fuel companies.

“Shell oil announced that divestment had become a material risk to its business,” he said.

CalPers did stop investing in coal under pressure from the California state government and because it was hard to see any kind of future for coal companies. Simpson argues that oil and gas producers are different because, like it or not, they will remain important fuels for years to come.

Some institutional investors also fear that a rush to kill oil and gas risks collapsing parts of the economy if there are insufficient sources of green energy for large industries such as steel, with a knock-on effect for other manufacturers, such as car makers.

They want to see the fossil fuel firms pouring resources into solving the problem, not dying out. McKibben, like others, doubts that Exxon and Chevron will ever commit to that.

Whitten sees another benefit of divestment: stigma.

“It clearly points to who the villain is. Companies for decades have been trying to shape the narrative on climate change and make individuals feel like they’re responsible and the fossil fuel companies are honest actors in this fight. But they’re not,” she said.

“They were undermining science. Exxon was attacking scholars, including at Harvard. So when divestment makes clear who is perpetrating the harms, we think that there’s got to be a financial impact to them as well.”

This story is published as part of Covering Climate Now, a global collaboration of news outlets strengthening coverage of the climate story