Two weeks ago I opened up my email to find a message from a student at Smith. She had found my name through Responsible Endowments Coalition’s website and thought that I might have some information about one of Smith’s endowment managers, Investure. She was interested to learn more about socially responsible investment options available through Investure, of which both Middlebury and Smith are clients. Having worked with one such initiative for over a year now, I was able to share my experience with her, and she was able to apply it to her work at Smith.
This cross-campus connection made me think. Since Middlebury and Smith are both clients of the same fund managers, we are able to organize jointly in a new way. Traditionally, socially responsible investing has been understood to include divestment campaigns (such as those from South Africa and Darfur), proxy voting and filing shareholder resolutions. However, as more and more colleges are renouncing their direct holdings and instead outsourcing endowment management to off-site managers, such as Investure, some of these shareholder rights are lost. Some campus committees on Socially Responsible Investment have even dissolved because they were primarily set up to vote on proxies and no longer have that ability.
Here at Middlebury, a new kind of organizing has arisen in this proxy-voting vacuum. When Middlebury students realized that we were not going to be able to vote on shareholder resolutions anymore because Middlebury no longer directly held stock, we turned our efforts toward fund manager engagement. Over the past two years we have been able to meet in person with a representative from our primary fund manager and have participated in the establishment of Investure’s Sustainable Investment Initiative, a separately managed fund that is directed by careful guidelines focusing on sustainability and environmental impact. Both Dickinson College and the Rockefeller Brothers Foundation are also invested in this initiative.
While the establishment of the Sustainable Investments Initiative certainly signifies the great potential of manager engagement, we have also encountered many challenges. Working with endowment managers means interacting with people who are one step removed from our campus activities. Unlike our Board of Trustees and campus administration, they are not as familiar with the culture and operations of our campus community. In this process it has proven extremely important to maintain regular communication with our campus administration since they have more direct connections to our fund manager. This two-step communication process is a bit more tedious, but by no means impossible.
A second challenge is in the reporting process. Since our fund manager chooses the contents of the portfolio, it can be hard to learn exactly what the investments are. At Middlebury we are working on setting up a process where by we can have access to some level of transparency and create our own campus report of the Sustainable Investment Initiative. However, the confidential nature of the investing process makes this process difficult at times.
In the face of these challenges, I was especially excited when I read the email from the Smith student. I think each of these challenges could be addressed through cross-campus organizing of colleges who share endowment managers. Through collective engagement, we might have a greater voice with our fund managers. However, as I begin to explore this possibility, I realize that I am extremely naive as to the feasibility of this kind of organizing. I don’t know if other campus committees are interested in manager engagement, if committees know who their managers are, if managers and Boards of Trustees would be willing to facilitate the communication from committees to managers, or if we—as a national movement—have the capacity to facilitate these cross-campus connections. But I’d like to explore the idea. So please see this as an open invitation to dialogue and share your thoughts. Hopefully together we can shape a new and viable form of organizing that continues to further our work in socially responsible investing.
On Tuesday, The Harvard Crimson published an article titled "Putting the Green in Green" which nicely encapsulates Harvard's "green" image and that to be truly sustainable, Harvard should disclose it's investments, make more responsible investment choices, and support the Higher Education Transparency Act, introduced by Rep. Michael Moran in the Massachusetts State Legislature. Author Sandra Korn writes:
With such a large endowment, Harvard has the potential to put enormous pressure on unsustainable corporations to improve their environmental practices and support companies committed to sustainability. But due to the Harvard Management Corporation’s lack of transparency, donors to the University and students like me have absolutely no idea if Harvard is investing in environmentally friendly companies.
And further explains why Harvard University should support the bill:
Fortunately, the Higher Education Transparency Act , a bill introduced recently to the Massachusetts State Legislature, would require that Harvard and other private universities in the state make information about their investments available to the public. This increased transparency will allow more critical discussion about the ethics of Harvard’s investments and hopefully lead to a more socially just endowment. Students, faculty, and administrators alike should support and encourage increased transparency not only as a means to financial accountability, but as the only way for Harvard to become a true green University.
Check the rest of the article out here.
REC just released a companion guide to the Sustainability Tracking Assessment and Rating System (STARS) sustainable investment section. REC is a partner on the rating system and wants to ensure that all universities understand how to answer the questions and learn from the process. This guide is available in the “Additional Resources” Section of the STARS Reporting Tool website as well as in the Handbooks section of the REC website. In addition to the guide there is a Worksheet tool that helps schools arrive at the answers needed for the survey. The list of STARS institutions is available here.
According to the STARS Technical Manual the point of the investment section is to:
This subcategory seeks to recognize institutions that make investment decisions that promote sustainability. Most institutions invest some of their assets in order to generate income. Together, colleges and universities invest hundreds of billions of dollars. Schools with transparent and democratic investment processes promote accountability and engagement by the campus and community. Furthermore, institutions can support sustainability by investing in companies and funds that, in addition to providing a strong rate of return, are committed to social and environmental responsibility. Investing in these companies also supports the development of sustainable products and services. Finally, campuses can engage with the businesses in which they are invested in order to promote sustainable practices. (STARS Technical Manual, Investment section)
The introduction to the guide states:
As a member of the STARS Technical Advisor Work Group on investments and the executive director of a group that works with colleges and universities on responsible investment, I’ve seen a variety of concerns expressed by people at different institutions about how to best answer the questions in the Investment section of STARS, both being honest and scoring the points that they deserve. This section has confused people for different reasons, from difficulty evaluating investments to lack of understanding of a Committee on Socially Responsible Investment or as we call it, a Committee on Investor Responsibility (CIR).
In this document I hope to answer many of the questions that people have and clarify the scoring system.
Check it out!
In May 2010, Middlebury College announced that it has designated a portion of the endowment to be actively invested in environmentally responsible companies. “The Sustainable Investments Initiative” was created with $4 million from Middlebury and an additional $35-70 million from The Rockefeller Brothers Fund.
For Middlebury, the Initiative reflects an effort to have the college’s investment strategies be consistent with its institutional values. The college’s mission statement refers to a commitment to integrate “environmental stewardship” in both curriculum and practices. Though the school’s on-campus efforts—carbon neutrality by 2016, biomass plant, recycling center, organic garden—have gained it a national reputation for environmental responsibility, as of the start of 2010, the endowment had not yet incorporated these values.
The Sustainable Investments Initiative represents a significant shift in college’s investment strategy. For the first time in the college’s history, rather than judging the success of an investment exclusively by its financial performance, this fund will be monitored for environmental impact as well. This shift is inspired by a hope that investing in environmentally sustainable initiatives will eventually become a standard investment practice. Some predict that investing this way in the future will actually yield higher returns as environmental issues continue to become more salient across the globe.
In the official press release for the fund, Middlebury College’s President Ron Liebowitz is quoted, “We are pleased to be involved in this new initiative. We’re excited at the prospect of an initiative whose performance can further our educational mission while providing social and environmental value.”
While the creation of the fund is certainly a significant first step, there are still many questions left unanswered. What kind of criteria should be used to evaluate companies in the fund, what the returns from the fund will be spent on, and how the fund will be monitored are just a few of these.
The students at Middlebury College hope that this Initiative will serve as a model for the rest of the endowment, providing an opportunity to test this investment strategy. It is also their hope that this fund will serve as inspiration to other education institutions to evaluate how their own values are reflected in their endowment investments.
For the Responsible Endowments Coalition, this fund hopefully represents the beginning of a trend—school communities coming together to determine the values they hold in common and then applying those a their endowment, a vehicle for change with incredible amounts of untapped potential.