Lord Williams urged the University last month to divest its £5.9bn worth of investments in the industry in order to protect the planet from global warming, however the University has ruled that it would be better to keep them and instead engage with the companies themselves to invest in cleaner energy using their rights as shareholders.
The University of Cambridge has also ruled out further investment in tar sands oil and coal, which are some of the most polluting fossil fuels.
It's approach is similar to that of the Church of England's, where a significant portion of its seven billion pounds' worth of investments is in the fossil fuel industry.
It too has ruled out tar sands oil and coal, but has used its position as a shareholder to lobby energy companies like Shell for greener practices at shareholder AGMs.
The practice has been controversial with some saying it's better to work with energy companies to get them to adopt greener practices, but others saying the best way to enact change in the industry is to pull out the money they depend on to function, effectively boycotting it.
Lord Williams (above) said in a report calling from Cambridge to ditch its fossil fuel investments: "Environmental degradation of one kind and another is a life-and-death question for many communities around the world, especially for some of the most economically vulnerable.
"The cost of our slowness or indifference to these matters is immensely grave for the poorest in our world, and many of them are bewildered by our sluggish responses.
"Patterns of profit and investment are changing fast, as people recognise the impossibility of expecting limitless returns from limited resources in our world.
"To change our own patterns of investment may be, as the authors of this report contend so forcefully, the most realistic future to plan for."
A University of Cambridge spokeswoman said: "In a set of recommendations, the working group recommended continued engagement between the university and firms that invest on its behalf to ensure all are fully aware of our values."
