Live GOC VIII: Responsible Investing
This morning, Laura Matson, AASHE's STARS Technical Developer, and I attended the Plenary Investment Panel. It was quite a wake up call for 8am in the morning, and we'd like to share the information we learned as well as some helpful resources on how colleges and universities can transition to more sustainable investments.
Panelists included Dr. Sheri Tonn, Vice-President for Finance & Operations at Pacific Lutheran University (WA); Francis Janes, Vice President for ShoreBank Pacific in Seattle, WA; Morgan Simon, the Co-Founder of the Responsible Endowments Coalition; Steven Godeke, an Independent Financial Advisor; and Atlee McFellin, a grad student at the New School for Social Research (NY).
Moderator Sheri Tonn began the panel with a comment on how most colleges’ mission statements include something about their roles in their communities and many even mention sustainability. Colleges across the country are pushing forward with operations changes and incorporating sustainability in the curriculum. Investments haven’t received as much attention. There’s often a disconnect between the endowment, which are funds set aside in perpetuity and whose interest provides money for the institution, and an institution’s commitment to sustainability. This panel is focused on how to put the endowment to work in ways that support universities’ goals.
Every school invests its endowment differently. Generally, universities have diverse portfolios and invest in many different asset classes.
Higher Education endowments represent a large pool of money. The NACUBO survey valued endowments at $267 billion in FY ’04 and $413 billion in FY ‘08. A 25 percent decline is expected for FY ’09 (~$310 billion value).
As Rahm Emanuel said, "You never want a serious crisis to go to waste." The crisis that investment and endowment managers are dealing with presents a great opportunity for an institution to begin aligning its investment activities with its public service mission.
The first panelist, Steve Godeke, re-framed this issue by describing “Impact investing” which “seeks to generate social and environmental impacts in addition to financial returns.” Quoting author Jim Collins (Built to Last), Godeke encouraged attendees to “move from the tyranny of OR to the genius of AND.” Earning a healthy rate of return shouldn’t come at the expense of ignoring social and environmental considerations. Pursuing sustainability within investments doesn’t have to come at the expense of earning money.
The next panelist, Francis Janes, spoke of the work that the community development bank – ShoreBank Pacific – has done to infuse sustainability into their operations and to use their bank to support sustainability projects in the community. ShoreBank used the Natural Step principles to establish sustainability protocols. The company has been successful in reducing company greenhouse gas emissions and other impacts significantly. ShoreBank has used its capital to provide financing for two inspirational businesses in the Pacific Northwest: Full Circle Farm (the largest CSA farm in the country) and Farm Power NW (which uses manure to generate renewable electricity).
Morgan Simon suggested three steps for how campuses can begin incorporating sustainability into their endowment activities.
- Step 1: Raise awareness and energize the student body around investment activites
- Step 2: Develop a committee on responsible investment. About 37 U.S. colleges have them, including 16 of the top 20 US News & World Report ranked schools.
- Step 3: Look at the portfolio and identify opportunities to continue making money and improve sustainability performance.
Two exciting examples of what institutions have done.
- Bard College filed shareholder resolution with McDonald’s, which led them to create a pesticide use reduction program for all of their potato growers. If you have at least $2,000 in a company, you can file a shareholder resolution.
- Macalester College shifted some money from a traditional bank to a community development bank, which provides the same market rate as a conventional bank, but shares the college’s commitment to supporting the local community. This led to a robust partnership; the college has implemented service learning internships with the bank, and added an ATM from this bank on campus.
Both of these success stories were the result of the efforts of a few dedicated individuals over the course of a year.
Morgan’s Top 3 reasons to move in this direction:
- Moving in to proactive direction means you’ll earn the same amount of money. You’re able to stay invested in the same companies and make the same returns you would have made; you can help the company improve its performance.
- It helps make you look good both in sustainability ratings and to your alumni and potential donors.
- Impact – higher education has $330 billion of potential leverage.
Atlee McFellin spoke about making the case for responsible investment activities and how to frame the issue for different audiences. For administrators and trustees, it’s helpful to speak in terms of risk-management, performance, and reputation. Faculty can be approached using the opportunity for curriculum development as a lens. Students become interested when it’s framed in terms of job opportunities in a growing field and shared governance at the university.
After a question about curriculum development, Morgan Simon described a service-learning course at Columbia University. The University’s committee on investor responsibility was the client of the course. Half of the course was dedicated to developing proxy voting guidelines and the other half was devoted to investigating community development banks.
Resources:
Responsible Endowments Coalition homepage
REC Handbooks - REC's student handbook provides an extensive introduction to responsible investment. REC's administrator and trustee handbook, published in partnership with Amnesty International, is a great resource to hand to your school’s treasurer, president, or investment committee so they can see the financial and reputational benefits to starting a responsible investment program.
SRI Studies Wiki - This wiki is a project of the Moskowitz Research Program, which is affiliated with the Center for Responsible Business at the University of California, Berkeley's Haas School of Business. Here's a direct link to a list of key studies.
SRI International - SRI International is an independent, nonprofit research institute conducting client-sponsored research and development for government agencies, commercial businesses, foundations, and other organizations.
AASHE Resources:
Responsible Investment Policies (AASHE Members Only) - This resource highlights colleges and universities that have adopted formal policies or guidelines on responsible investment. Such policies can help institutions ensure that their investment practices align with and advance their commitments to sustainability.
Responsible Investment Committees (AASHE Members Only) - This resource highlights colleges and universities that have formally established Responsible Investment Committees. These committees have multi-stakeholder representation and make recommendations on responsible investment opportunities. Although these committees share a common purpose, their structures are diverse.
