Environmental Investing Down at Universities, Study Finds
Only eight colleges and universities reported using sustainability investing in 2011, while 5 percent of the full sample, or 41 schools, used “environmental criteria” but didn’t provide specifics, according to the National Association of College and University Business Officers’ Commonfund Study of Endowments (NCSE).
This statistic is reported in a new study, commissioned and funded by the Investor Responsibility Research Center Institute and conducted by Tellus Institute, which analyzed existing data and publicly available surveys on sustainable investing (see chart – “#” refers to number of colleges or universities). It found US college and university endowments’ environmental, social and corporate governance investments are less prevalent than often believed.
This is significant because US schools’ endowments manage more than $400 billion in combined assets and have historically invested in environmental and socially responsible funds and technologies.
While endowments pioneered ESG investing in the 1970s, the study, titled “Environmental, Social and Governance Investing by College and University Endowments in the United States: Social Responsibility, Sustainability, and Stakeholder Relations,” says three decades later endowments no longer lead institutional ESG investing — at a time when ESG factors are becoming increasingly widespread among mainstream investors.
Among the endowments with some form of SRI policy reported to NCSE, 32 percent said sustainability influenced investment decision making in 2010, according to IRRCI. This was down from 37 percent in 2009.
The study did find a few notable exceptions to the overall decrease in ESG investing, including Yale University’s $1.4 billon holdings in sustainable timber, renewable energy and clean technology. This was the largest capital investment reported to the Association for the Advancement of Sustainability in Higher Education for its Sustainability Tracking, Assessment & Rating System (STARS), and it represented just over half of the total sustainable investments reported to STARS.
According to IRRCI’s report, of 118 STARS-participating schools, 22 reported holdings in sustainable industries with a collective total of $2.5 billion invested. It also says 16 reported holdings in “sustainability investment funds” with $179 million collectively invested, and four reported collective holdings of $19.12 million in businesses selected for “exceptional sustainability performance.”
Sustainable Endowments Institute’s College Sustainability Report Card, however, found higher levels of environmental investing among schools. According to IRRCI, the SEI report card, which stopped publication this year, found that 152 colleges and universities — more than half — invest in “renewable energy funds or [a] similar investment vehicle.” It also says 120 schools include environmental factors in their investment policy.
IRRCI says a lack of clarity around what constitutes sustainable investments can at least partially explain the discrepancies between the AASHE and SEI findings.
In terms of companies’ environmental investing, a June report from Deloitte says an organization’s understanding of how its stakeholders (including shareholders) perceive and value the organization’s environmental, social and governance issues can lead to financial benefits. A report published the same month by The Conference Board says shareholders are placing more value on corporate sustainability initiatives, and are becoming increasingly interested in linking such performance to executives’ compensation.
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