The Responsible Endowments Coalition defines a responsible endowment as one that:

1. Integrates the community’s values, institutional policies, and beliefs that emanate from the school’s mission statement into its investing;
   and
2. Demonstrates intergenerational equity and responsibility to stable, sustainable returns, not generated through gambling on destructive, risky, or socially or environmentally unsustainable investments — by fully fulfilling its fiduciary duty. (See “What is fiduciary responsibility?”).

Colleges and universities invest a combined total of over $400 billion in the United States, and as constituents of these institutions, REC believes that stakeholders in higher education hold a unique power, privilege, and responsibility to ensure that the ramifications of these investments are as responsible and sustainable as possible.

The Responsible Endowments Coalition (REC) is a 501(c)3 non-profit organization that works to foster social change and corporate accountability by building and unifying the college and university-based responsible investment movement. We empower students and other university members to challenge their institutions of higher education to invest responsibly and proactively, in ways that confront corporate abuses—such as sweatshop labor and environmental destruction—and encourage accountability to their communities. REC provides the tools, resources, and networks to help students lead successful responsible investment campaigns on their campuses.

We’re here to help in a variety of ways:

• Visiting schools to present about responsible investment, help engage with decision-makers, or share ideas
• Hosting national conferences led by students and professionals from around the country
• Proposing edits to proposals, letters, and other documents to help frame the issues
• Assisting in brainstorming strategies for individual campaigns
• Providing access to template documents based on successes at other schools
• Mediating or assisting in conversations between students and administrators, if necessary
• Coordinating joint actions between campuses
• Connecting students with responsible investment professionals
• Introducing students to their peers who work on responsible investment at other schools
• Providing information, technical assistance, and connections to ally organizations and student activist networks
• Engaging with students after they’ve graduated to keep them engaged with responsible investment activism

We see responsible investment in higher education as an inevitability. From a moral, financial, and practical standpoint, it makes far more sense for our institutions to invest in alignment with our values, and we are continuously inspired by the successes we have seen since REC’s founding in 2003.

However,  responsible investment is a relatively new concept. Surprisingly, many financial professionals have a very narrow understanding of what it can mean, if they have any familiarity at all. Often, this ignorance can lead to fear — fear that responsible investment will cause controversy, will “politicize” the school’s image, or that by doing so they will fail to uphold their fiduciary duty, or their obligation to preserve the finances of the institution to the best of their abilities. (These fears are understandable, but refutable.)

Because of this, many administrations see responsible investment as either impossible, unrealistic, or something that they don’t have the capacity to address. At many schools, REC has witnessed administrations try to wait out proposals for structural change until students graduate. Another outcome we have witnessed over the past decade is the setting up of nearly two dozen committees on investor responsibility nationwide, which at best can be powerful infrastructure for change, but at worst can just hold up all impetus for change in bureaucratic limbo.¹

Campaigns for responsible investment require both pressure and persuasion, with students leading the way in most successes that we have witnessed.² Many well-intentioned university administrators agree — although often off the record! — that concerted student pressure is, at times, the only way to create enough of a demand for the administration to adapt or evolve. At worst, student organizing can be ill-informed, too quick to seek confrontation, and can hold unrealistic goals.³ But at best, it can be a powerful force for change that school communities can come to agreement on — from the creation of many women’s’ studies departments, to the South Africa divestment movement, to the creation of fair labor practices in manufacturing school apparel, and much more.

It isn’t always easy to build the skill set necessary to build these campaigns on campus, and the movement on a national level. That’s why one of REC’s primary focuses is supporting and building student leaders across the country to continue organizing at universities for more meaningful and lasting responsible investment.

An endowment is a large amount of money from which the school draws financial health. We say it’s sort of like a school’s “savings account”, as you can see below.

However, an endowment is not exactly like a savings account. For one, as humans, we like to spend our savings now and then, where as the endowment model is based on more or less infinite growth. As more and more donations and investment returns build the endowment, the returns from its investments continue to grow, supplying the school with more and more operating funds.

Most of the endowment gets invested to continue to make returns, both to grow the endowment, and to supply the school’s operating budget with new funds. (See “What is an endowment?”, above.) A bit will get set aside as cash assets — sort of like if you had $100, invested $90, and kept $10 in your wallet. But most of it is invested to maximize returns and to grow it as much as possible. Unfortunately, choosing to maximize returns without considering a broader context of factors can lead to conflicts of values (investing in things that contradict an institution’s own values), volatile, short-term strategies (university endowments were heavily exposed to the ‘gambling’ that caused the financial crisis), and a number of other problems.

That depends on whom you ask!

As the highest decision-making body of a not-for-profit institution, the Board of Trustees (or Board of Regents, etc.) sets the broadest-level policy for the institution. That’s why they’re trustees — they are entrusted with the success of the institution. The board’s investment (sub-)committee makes most of the larger decisions, with the investment office or finance office handling more of the day-to-day.

However, this is distinct from the question of who owns the endowment.

As both beneficiaries of and potentially donors to the endowment, the broader campus community, especially students and alumni, must also have a say on some level in how the endowment is managed. A school would not exist without both its students’ academic participation and the financial support of alumni. This creates links of accountability which can, and should, be exercised by concerned members of the community.

In addition, as not-for-profit institutions, colleges and universities do not pay taxes on their activities, and therefore are supported by the taxpayers. Schools must recognize that their taxpayer-subsidized activities require a level of accountability to the outside world, just as they must be accountable to their communities as good neighbors. In short, while the trustees and investment professionals can and will continue to make most of the decisions, we must all be empowered to speak up and foster a dialogue.

Fiduciary responsibility, or fiduciary duty, is a legal term meaning that the trustees must act in the best interest of the institution. At many schools, this means maximizing short-term returns at the expense of all other factors. Many administrators justify this policy by stating that any other course of action would be breaking their legal responsibility. Fortunately, this interpretation of fiduciary duty is a fallacy, as evidenced by the leaps and bounds that many schools and other institutional investors have taken to align investment and values, whether it be in low-carbon index funds, engaging in shareholder activism, community investing, and more. There are many success stories we have seen that cross different communities, belief structures, asset allocations, and none have violated fiduciary duty.

There is no one single definition or interpretation of fiduciary responsibility (the legal responsibility of managing the school’s money), but should not mean maximizing profits at the expense of the environment, human rights, and the community’s own policies or values. The fiduciary responsibility to act in the interests of stakeholders, for example, makes little sense without a commitment to inter-generational equity – a cornerstone of sustainable investment. Your school has both the opportunity and the obligation to recognize that responsibility means looking beyond immediate, short-term, unsustainable and morally untenable ways of generating profits and returns.

It’s important to recognize a few facts about responsible investment and returns to address this question:

“Responsible investment” is a broad umbrella term encompassing a huge variety of investment strategies (community investment, low-carbon index funds, investors engaged in governance, etc.) that can perform, on average, at above-market rate returns, below, or on par. To say “responsible investment loses money” is a massive oversimplification.

In addition, there is a difference between “making less in returns” and “losing money.” For example, many institutions have made investments in their community, some of which have been at market rate, some of which have been below — but they still have done them anyway — as a fulfillment of their mission and as a smart investment to benefit both the school and its surroundings. They may have made 2% instead of 4% off of these investments, but they still have acted as stewards in good faith without exposing themselves to risk, loss, or controversy. Actors in higher education should take note of the successful institutions already integrating responsible investment, from Columbia to Macalester to the University of Wisconsin, and more.

Furthermore, many socially or environmentally responsible investments address risk — a key investment concept — in a much more comprehensive way that short-term ways of thinking may not. For example, by reviewing the governance practices of their investments, many socially responsible investors recognized the failures of oil giant BP long before the 2010 oil spill, and divested. By doing so, they may have missed out on huge profits leading up to the spill — but they also dodged huge losses. Likewise, by choosing to focus on sustainable investment, environmentally conscious investors are trying to avoid the biggest risk of all — that of climate catastrophe.

The Forum for Sustainable and Responsible Investment has compiled a good amount of data on responsible investment and returns, if you would like to dig deeper.

Schools invest not in just one kind of asset (say stocks in a company) but in a variety of different assets. Within each asset class there are a variety of existing irresponsible investments, such as banking with a Wall Street bank that broke the law and got bailed out by taxpayers, or investing in a plot of land that actually belongs to someone else. So instead of envisioning a list of companies, it’s better to imagine a breakdown of different types of assets — also known as an asset allocation.

Almost all colleges, by default, put social and environmental considerations below the desire to maximize returns to the endowment. The culture of Wall Street money managers and investment consultants has made its way to our own campuses over the past few decades, and so we find our schools investing just like any other aggressive investor would — in virtually every sector of society, in increasingly complex, high-risk, high-return investments, and with very little transparency.

What this means is that almost all of our colleges are invested in almost all of the worst environmental and social offenders — from private equity funds that invest in private prisons, to hedge funds that invest in ‘land grabs’ in Africa, to coal and oil companies that poison front-line communities and cause climate change. You can get an asset allocation by doing some research, but little else.

For more information, check out chapter 3 of our Student Handbook, which goes into detail about each asset allocation.

A transparent endowment isn’t as simple as pulling out a list of companies in which your college invests (see “How is my college investing its endowment now?”, above.) There are a number of ways we can be more transparent investors, though, such as:

• Releasing information about what direct holdings the school has (whatever assets haven’t been outsourced to other money managers.) This could be information about what stocks the university is invested in, or what banks the school is putting its cash in.
• Sharing with the community in a more public and transparent fashion the asset allocation of the endowment, and what each piece means.
• Going public about investment policies (responsible or otherwise) the school uses to guide its decision-making.
• Releasing information about the external fund managers that the school outsources much of its money management to, the nature of their investments, and what, if any, their responsible investment policies are.

You probably won’t find much through a quick Google search or looking through your school’s annual report (just try searching for your school’s name + “annual report”) except, perhaps, the amount of money and the different kinds of assets the school is invested in.

We suggest that the next step is engaging your finance or investment office about responsible investment practices, and raising awareness with the community about the importance of being a responsible investor. Some schools may be willing to listen and change their practices, while at others, some administrators may not be willing to discuss the endowment at all. At that point we recommend organizing a campaign for responsible investment so that the issue can no longer be ignored or pushed off the table.

We believe that any and all members of a higher education community have the right and the responsibility to speak up to stop the rampant environmental abuses and social wrongdoings that our endowments are inadvertently investing in. We frown on the practice of financial professionals asking students to “prove” that investing in line with the school’s values is feasible. We have seen a number of institutional investors including foundations and universities to move towards a much more socially and environmentally responsible approach, including schools with very limited resources, and we are confident that almost all higher education institutions have the resources at their disposal to at least begin the research and dialogue process that precipitates a change in policy and behavior.

We believe that both persuasion and pressure are important steps to winning most campaigns for responsible investment. People who seek to either persuade university administrators that responsible investment is important or attempt to demonstrate it using separate funds are often disappointed when schools don’t immediately change their policies.

Sometimes, persuasion fails, and it can be difficult to overcome the inertia of the status quo. If this happens, we give students the resources to understand that by approaching their school with a power analysis and building power with other students, community members, alumni, and faculty to demand change is one of the most successful, meaningful, and lasting ways of creating change.

If you’re a student, check out the resources for students section. If you want to learn more, dig into our Student Handbook, get in touch with REC about starting a campaign (or connecting with others at your school that have already started working on this issue), and join us for an event or training in the near future.

If you’re an alumnus/a/i, check out the for alumni page. You can write to your school’s giving office, engage with students at your alma mater, host an awareness event, talk to your local alumni network, or donate to REC to support change.

If you’re an administrator or faculty member, check out the for administrators page. Both faculty and administrators can be important players to support change at their institutions and can raise awareness with peers,  students, and decision-makers about the importance of supporting our values in our investments.

To learn more about experiences at schools across the country, we encourage you to read our Success Stories page.

REC believes that our schools can and must model the society that they wish to create — one of informed citizens living in peace and prosperity with each other and in harmony with our environment. We do not endorse investments in specific companies or money managers. We believe in real environmental sustainability, not green-washing; local control and sovereignty over land and resources, not neo-colonialism; and the power of poor and marginalized communities to seek justice, autonomy, and prosperity. We reject the philosophy of multinational corporate neoliberalism as an unsustainable and unjust economic vision for our society and our planet. Above all, we believe that integrating the values of our higher education institutions and their communities into investing can be an important step to the society we wish to see.