Your College's Endowment Is Probably Supporting Shady Businesses
A generation ago American college students successfully pressured their schools to divest their multimillion-dollar endowments from apartheid South Africa, which helped bring an official end to the racist policies and proved to the world that economic sanctions work. However, despite being pioneers in socially responsible investing, a new report from the Investor Responsibility Research Center Institute and the Tellus Institute reveals that when it comes to investing based on environmental, social, and corporate-governance goals, the nation's colleges and universities are no longer leading the way.
The study which analyzed "existing data within present limits of disclosure" found that the number of schools that say they have some socially conscious criteria for their endowment investments was just 18 percent in 2011, a drop from 21 percent in 2009. IRRCI’s executive director Jon Lukomnik says that they "find a general lack of transparency" around investment practices at the nation's colleges and universities, including at state schools.
Perhaps most troubling, however is that despite these schools having $400 billion in endowment assets, "not a single endowment is amongst the 900 signatories of the United Nations Principles for Responsible Investment, and only one is a member of the Council of Institutional Investors, the leading U.S. association of institutional investors," Lukomnik says.
And, when it comes to socially conscious investing, the report notes many schools tend to set a pretty low bar by touting that they don't invest in tobacco or divesting "selectively from Chinese companies doing business in the Sudan in order to register concerns about the genocide in Darfur."
Although "several prominent endowments including Brown University, the University of Pennsylvania, and Yale University" agreed not to invest in Darfur-related funds, says the report, "they do not appear to have redeemed their existing investments or sold their existing holdings in the private-equity secondary markets." Even Harvard, which announced plans to divest from the Sudan in response to a massive student campaign in 2005, was later discovered to have "approximately $16 million worth of investments in those same blacklisted companies through passively managed index funds." Indeed, the study found that several "colleges and universities claim to be making sustainable investments when those investments do not meet the standard definitions of such investments."
The report recommends that schools "be more forthcoming and transparent about their activities in the space, particularly with the many groups that have a stake in them." Just as a generation of coeds before drove the South African divestment, that will only happen if students demand it.