By Mary Sketch.
Mary Sketch is a junior at Brown University concentrating in Environmental Studies with a focus in Law and Policy. She is a North Carolina native and has worked with the EFC as an undergraduate intern for the past three months.
The Environmental Finance Center generally analyzes and looks into various environmental fees particularly within governmental units, for example analysis of water rates and fees and solid waste fees and expenses. However, my work with the EFC has focused on researching examples of environmentally and socially responsible investing at colleges and universities around the country.
The EFC recently contributed to an evaluation of options for the University of North Carolina to increase the sustainability of their investments. Throughout the country, many schools are stepping up to increase socially responsible and sustainable investment choices and options. This project is particularly interesting for the EFC because instead of looking at charges for environmental services, it looks at how money can be used to increase environmental actions. Also, with the EFC’s connection to UNC and the School of Government, it can play a large role in the financial decisions of the University.
Although UNC received a high grade through the College Sustainability Report Card, as a large state research university it can still take many steps to increase both transparency and sustainability in investments. UNC received a failing grade for investment transparency, making this a priority area the institution needs to address. Further, within the AASHE STAR reporting system, a self-reporting framework for colleges and universities to gauge progress towards sustainability, UNC Chapel Hill received zero points towards investment sustainability.
As UNC strives towards sustainable investments, it can look towards the progress of many other colleges and universities that have worked to thoroughly screen investment choices to be more socially responsible. Leading institutions are looking into options such as Social Choice Funds, student run socially responsible investment programs, improved investment disclosures, and growth of positive sustainability investments. The focus of my research was on the Social Choice Fund, a relatively new form of sustainable investment. Social Choice Funds give those making donations to a university’s endowment an option to choose if they want their donation to be invested in a socially responsible manner. More details of these funds and other strategies towards sustainable investment are explained in the examples below.
In 2007, Brown University approved the formation of the Social Choice Fund, an investment fund managed by the ACCRIP (Advisory Committee on Corporate Responsibility in Investment Policies). The Social Choice Fund, one of the first of its kind among universities, allows large donors to the endowment to specify socially responsible investment of their money. As a result, donors can feel more a part of financial investments, increasing transparency and donor involvement. However, since its formation in 2007, the Social Choice Fund at Brown University has only recorded one donation. One of the primary challenges to growing the current Social Choice fund is that donations must be a minimum of $25,000 dollars. Many younger donors who are interested and aware of the fund and option to choose where funds are invested are not able to make such large contributions. The question has also been raised of the transparency of the Fund and investment options for donors. Although the Social Choice Fund was initiated with the primary goal of raising transparency, donors may not know the availability of such an option.
Just down the road from UNC Chapel Hill, Duke University is taking strides in investment options and policies, particularly in the fall of 2013. Duke expanded their Advisory Committee on Investment Responsibility to include one trustee, one more faculty member, and an additional undergraduate and graduate student. Many key steps towards increasing sustainability within endowment investments comes from within student organizations such as the DukeOpen Committee. This student-led group raised the idea for a Social Choice Fund through the University; however, as is the case at Brown University, the popularity of such an option is questionable as only a small fraction of the investment community is contributing through the fund. Even with potential lack of interest of donors towards the Social Choice Fund, such a step forward by Duke is pivotal for overall increased investment sustainability as it also increases the overall role of the ACIR (Advisory Committee on Investment Responsibility). Duke also worked to maximize the role student interests in investments with established guidelines since 2004. This step plays a critical role in the sustainability and transparency of investments. According to President Richard Brodhead, “The catalyst for this action has been consistent advocacy by our students.”
Univesity of California Berkeley
The University of California Berkeley is also working to increase transparency and sustainability in investments and act as a model for other institutions. The entire UC system is working to adopt socially responsible investing guidelines. Most notably, UC Berkeley has formed the Haas Socially Responsible Investment Fund. The fund is the only student-led fund of its size ($1.7 million+). Many schools are increasing student involvement in funds as a step towards socially responsible investing. The Haas Fund follows strict social and environmental values with the goal of balancing those values with financial performance.
Like many of its peers, Harvard implemented a Social Choice Fund and considers student opinions and proposals in investment decisions. In May of 2013, the University, with much input from student voices, decided to invest through Parnassus Equity Income Fund. However, Harvard’s Social Choice Fund is unlike many others because it will have no minimum donation amount, which the University hopes will increase popularity of the option for donors. The new fund was launched in July of 2013. The Harvard Management Company is working closely with the University as an advisor or counselor for investment choices, while direct management and control of these mutual funds falls under the Corporation Committee on Shareholder Responsibility of the Harvard Corporation.
Williams College in Massachusetts is an early example of the initiation of a Social Choice Fund. Williams initiated its Fund in 2002, much before many other institutions. As with many other schools, the formation was largely pushed by students. Mike Levion, a key force behind the Social Choice Fund, explains, “The Social Choice Fund gives alumni who are not comfortable with some of the college’s regular investments a way to give to the college without indirectly contributing to activities they do not support.” According to Williams College, Socially Responsible Investing consists of three primary aspects: “voting on companies’ shareholder resolutions that deal with social, ethical, or environmental issues; screening from a portfolio companies thought to do harm; and seeking investments in companies and organizations believed to produce social good.”
The University of Utah has recently formed a fund similar to the Social Choice Fund at Brown, Harvard, and other universities. Donors to the University can choose for their money to be invested in the Social Choice Pool. The Social Choice Pool strictly regulates where money is invested, avoiding companies in the industries of tobacco, alcohol, firearms, gambling, military weapons, and nuclear power industries. However, in addition to excluding certain industries based on these specific criteria, they also evaluate industries for aspects such as community relations, corporate governance, workforce diversity, employee relations, environmental stewardship, human rights, and product safety.
From our research of actions other colleges and universities are taking to grow socially responsible investing, we can offer recommendations for UNC to step forward and follow in their footsteps. The research emphasizes that UNC could benefit from a Social Choice Fund: giving donors the option to choose how their money is invested not only increases socially responsible investments, but also greatly increases the transparency of investments. However, if UNC were to adopt such a fund, it is key that they learn from the practices of other Universities, especially in the importance of attracting donors and maximizing publicity. Other opportunities for increased sustainable investing are available for UNC. Many schools are increasing student-power in investment decisions through student-led SRI funds. Whatever route UNC takes, it will be important for UNC to continue to evaluate models offered by its peers to achieve meaningful progress in socially responsible and sustainable investing.
Sustainable Investment Options for Colleges and Universities http://t.co/OzAyxdfcjF
— Envr. Finance Center (@EFCatUNC) January 28, 2014
One Response to “Sustainable Investment Options for Colleges and Universities”
An interesting article which made me question, why NC State consider selling the managed forest property they owned to gain capital so they could invest into other sources? I know that their decision is based on rate of return and the ability to gain greater growth (more money in lean times) to support the institution overall, but will this not be a case with all the specialty “social funds” created. Is this simply a marketing tool used by those in the fund raising business to gain additional support to the institution by developing an appealing landing zone for large cash donations?