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Taking Responsibility

Socially responsible investing is a student concern, both for institutional endowments and for student-managed investment funds.

By Apryl Motley

In April 2013 students at Harvard University, Cambridge, Massachusetts, held a rally to put pressure on the administration to divest Harvard's $31 billion endowment from fossil fuel companies (as reported by WGBH news in Boston).

At the end of last year, a group of students at Swarthmore College, Swarthmore, Pennsylvania, asked the school's administration to sell off the endowment's holdings in large fossil fuel companies (as reported in the Delaware County Daily Times, Pennsylvania).

Stories like these have become the norm. Clearly, students—as well as some alumni and faculty—are unhappy about their institutions' investment policies, particularly their holdings in fossil fuel companies. In short, students want higher education institutions to put their money where their mission is.

Some are protesting. Others are voicing their concerns through participation on committees on investor responsibility (CIRs) and as analysts for student-managed investment funds.

Climate Change

Dan Apfel, executive director of the Responsible Endowments Coalition (REC), which advocates for responsible investing in higher education and has helped students form CIRs on 45 campuses, says students are reacting to what they perceive as a disconnect between their institutions "investing in companies that are destroying the future for students and institutions themselves" and "the other work these schools have done around sustainability."

"Over the last year or so, there's been a lot more interest in responsible investing around climate change and the environment," he continues. "We've seen substantial growth in institutions looking at these issues in their endowments."

Founded in 2004 by student activists from Barnard College, Duke University, the University of Pennsylvania, Swarthmore College, and Williams College, REC engages with students interested in leveraging their institutions' endowments to positively change corporations. Among REC's key initiatives is helping to lead a campaign in support of universities and colleges divesting from fossil fuel companies.

Most institutions have a sustainability initiative; yet, according to Apfel, "often their investments don't address the problem of climate change. We work with students to advocate for these institutions investing their endowments more responsibly. It's important for them to be proactive with their investments and influence companies in becoming more sustainable."

 "This campaign is an important way to make this issue clear from students' perspective and provide an opportunity for institutions to expand their sustainability efforts to their endowments," Apfel says. "We are creating a really large conversation around endowment responsibility in terms of climate change."

At the same time, he acknowledges that "divestment isn't the answer to every problem," but emphasizes the need for higher education institutions "to, among other options, engage with the companies they own."

Student-Managed Sustainability

Apfel believes that student-managed investment funds could potentially play a significant role in the keeping the conversation about climate change going and increasing higher ed institutions' engagement with the corporations in which they invest.

"It's great that students are managing portions of their institutions' endowments," he says. "It's an opportunity to have conversations around environmental and social issues."

"Students are much more inclined to think about these issues," he continues. "Their involvement in managing endowment investments has the potential to be a great starting point for these critical conversations."

He offers the relationship established between Middlebury College's Socially Responsible Investment Club and its Student Investment Club as an example of how students are working together to address these issues. In April 2013 Middlebury, in Middlebury, Vermont, held a student panel discussion on divestment, and representatives from both groups participated.

"We worked with a group at Middlebury focused on socially responsible investing that then engaged with the student fund's managers," Apfel explains. "Students in the investment club were interested in these issues as well."

Apfel expects this trend towards socially responsible investing to continue as today's student fund managers transition to become tomorrow's investment analysts at colleges and universities. In the meantime, he hopes that students will be given "a broader range of ability to invest differently to create a more sustainable world."

Currently, the majority of SMIFs are generally limited to investing in U.S. public markets.

APRYL MOTLEY, Columbia, Maryland, covers higher education business issues for Business Officer.