REC's New Report Explores Students' Role in University Community Investing

Five years after the worst financial crisis in the US since the Great Depression, communities continue to suffer. Wealth inequality is at some of the highest levels since the founding of the country[1] and growing more rapidly than any other industrialized nation[2]. Increasingly, the effects of this inequality are recognized as going beyond social injustice to significantly imperiling American democracy and the potential for economic recovery[3].

At the root of this crisis is a powerful force: the idea that capital can only be invested to maximize financial return for a company's shareholders, regardless of the impact on the community. When those investments prove too risky or when the market takes a turn, everyday people pay the price. Today, while communities across the United States continue to suffer, huge pools of investment capital are often to be found sitting right next door, in community institutions such as hospitals, foundations, and universities.

Universities are some of the largest mission driven organizations and institutional investors, and can play a significant role in affecting the development of a community. They can challenge the role of capital as a solely self serving instrument. With over $400 billion in collective endowments and another $400 billion in annual spending, universities have the potential to be a counterweight and shift capital towards a model of investment that builds community economies which provide financial, social and environmental rewards.

To date, only a limited number of universities invest locally or in their communities. They could do much more.

In June 2012, the Responsible Endowments Coalition and the Democracy Collaborative launched a research project to explore student involvement in university-led community investment. We wanted to see how stakeholders - particularly students, faculty and alumni - could influence their colleges and ensure that community members are brought into conversations pertaining to community development & finance. In our study, we found that when these university stakeholders, community members, organizations, and college administrations come together, it is more likely that a long-term investment will occur with the community's needs prioritized. We found that colleges have the ability to make these kinds of investments at scale.

We are excited to announce the release of our new report, a result of our months-long research project, Raising Student Voices: Student Action for University Community Investment, a joint publication with The Democracy Collaborative. The study explores ways that university-community partnerships can deepen to help ensure that institutional investment policies benefit the communities in which US colleges are based.



The report profiles three administration-led initiatives and three student-led initiatives, as well as five potential future partnerships, where institutional investments are directed into local communities in a way that empowers low-income residents, develops small businesses, and generates sustainable economic development. Communities need investment capital to scale up local businesses that colleges hope to work with. They also need investment in housing, food, and jobs. Many of these needs can be met by investing in community development financial institutions (CDFIs), REC's preferred community investment vehicle.

Moving forward, the report recommends that student campaigns work in close collaboration with alumni groups, community organizations, college administrators, and national higher education networks to move university investing to scale and ensure long-term sustainable investment in the community. This kind of deep collaboration is vital to creating true accountability to the communities receiving investments. It is also vital to creating the types of partnerships and investments that meet the needs of all members of a community--not just an elite few.

REC is pleased for the launch of this paper and we extend our thanks to the research team at The Democracy Collaborative for all their hard work. We would also like to acknowledge and express our sincere thanks to all the students, faculty, community members, and others for taking time out of their busy schedules to engage with us on the issue of university community investing.

 

 




[1] Weissmann, Jordan. “US Income Inequality: It’s Worse Today Than it Was in 1774”. The Atlantic, 19 September 2012, http://www.theatlantic.com/business/archive/2012/09/us-income-inequality-its-worse-today-than-it-was-in-1774/262537/




[2] Gangl, Markus. “A longitudinal perspective on income inequality in the US and Europe”. Focus: Institute for Research on Poverty: Vol. 26, No. 1, Summer-Fall 2008.




[3] See Stiglitz, Joseph The price of Inequality (2012); and Noah, Timothy The Great Divergence (2013).


 

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