The Intentional Endowments Network Highlights Sustainable Progress
Part 2 of 3 on University Endowments' Sustainable Investing Efforts
The previous post in this series highlighted limited involvement in fossil fuels, uncertain financial returns, and a lack of sustainable pooled fund alternatives as reasons university endowments struggle to submit to students’ calls for fossil fuel divestment. It suggested students bear greater impact if they urge university endowments to engage in broader responsible investing (RI) alternatives instead.
The Intentional Endowments Network (IEN) is a group that’s advancing this initiative. On Monday, February 29, 2016, it confirmed a group of 60 founding members composed of universities, non-profits, and investment firms dedicated to “advancing intentionally designed endowments through a variety of strategies – e.g., ESG integration, impact investing, shareholder engagement.” Universities taking leadership roles include Arizona State University, The California State University, Carleton College, Hampshire College, Middlebury College, Portland State University, and the San Francisco State University Foundation.
They are joined by contributing members Ball State University Foundation, Beckler College, Humboldt State University, Lane Community College, Lewis and Clark College, Unity College, University of Dayton, and the University of Maine.
IEN promotes sustainable investing strategies that account for a university’s mission and values and generates positive returns, suggesting the two aren’t mutually exclusive options. It welcomes non-profit and investment firm participants to engage the larger RI ecosystem in providing solutions to university endowments’ concerns. It also aggregates lists of member and non-member universities that incorporate ESG criteria directly into investment policy statements, manages sustainable investment funds (SIFs), and become signatories to other sustainable networks like CDP, Principles for Responsible Investment (PRI), and Ceres’ Investor Network on Climate Risk (INCR).
These lists represent just a few RI alternatives for universities to pursue in response to students’ calls for fossil fuel divestment.
Universities are slowly becoming more receptive – increasing transparency around endowment holdings and enshrining their thoughts on responsible investing in public investment policy statements. In 2011, the Sustainable Endowment Institute’s College Sustainability Report Card found that approximately one in five schools made lists of endowment holdings available to the campus community. Now, schools across the U.S. openly engage students in responsible investment working groups, and top-performers like Stanford University even hire dedicated RI community liaisons.
In January 2016, Stanford hired Alison Colwell as Director of Investment Responsibility Stakeholder Relations. Stanford’s clear two-page Statement on Responsible Investment helps Colwell’s team direct dialogue and explain RI decisions; however, it may help the endowment raise more funds, as well.
A January 2016 Bloomberg report quotes Stanford fundraising’s Martin Shell saying, “Increasingly people are looking to the research university in this country to help resolve some of the intractable problems that are facing humankind… Universities are seen as positive agents of change, and people want to be part of that.” Stanford beat Harvard University in annual donations by raising $1.63 billion between 2014-2015. Large endowments empower bolder investments (and thus, higher returns) than small ones, which struggle to implement ESG practices amidst pressure for strong financial performance.
Harvard is another prime example. It was first university endowment to subscribe to the United Nations’ Principles for Responsible Investing. This large institution’s resources allow it to pursue a mix of ESG integration, active ownership, and collaboration strategies amidst a diversified mix of asset classes. Schools like Tufts University, mentioned in the series’ last article, create Sustainable Investment Funds that struggle to diversify and outperform because of limited resources and sustainable pooled fund alternatives.
This scenario raises two points. First, as the field develops, it is worth investigating successful RI stakeholder relations’ effect on endowment donations, and those donations’ effects on the likelihood of successful and diversified RI. Second, the world’s universities need more talented students and investment managers to create sustainable, pooled fund alternatives for smaller endowments until they reach that larger point.
The third and final blog in this series will take a look at U.S. universities’ responsible investment curricula prepping the investment professionals of tomorrow. Stay tuned.
Ali Edelstein is a Master of International Business candidate at Tufts University's Fletcher School of Law & Diplomacy with experience in corporate sustainability and investment management. She's interested in the nexus of these fields and is always seeking to convene key players between the two.