Colleges and universities, once pioneers in using their endowments to promote socially responsible investing, are no longer innovators when it comes to investing based on environmental, social, and corporate-governance goals, says a report published on Monday.
As a whole, socially responsible investing has grown to a $3-trillion enterprise since it emerged in the 1970s, and it has become increasingly more sophisticated. But the report says that colleges, with more than $400-billion in combined assets, haven't kept up.
The report notes that while institutional investors across the public and private sectors "have made increasingly broad commitments to incorporating sustainable and responsible investing policies and practices into their investment decision-making and active-ownership activities, college endowments—as a whole—have made fewer strides."
The report, published by the Investor Responsibility Research Center Institute and the Tellus Institute, says that university-endowment leaders are largely absent from the networks of global institutional investors who help to define the field of responsible investing. It notes that even the proportion of universities that report applying some social-responsible criteria to their endowment investments has declined, from 21 percent in 2009 to 18 percent in 2011.
The report says misperceptions about the strategies and goals of socially responsible investing are part of the reason for colleges' lagging participation, along with a shift in the kinds of investments that now make up university endowments. At many institutions, socially responsible investment goals are carried out through committees that recommend how colleges should vote their proxies at shareholder meetings.
But the more colleges invest in private equity and other funds of illiquid assets, the less relevant those committees become. The report notes that some colleges are pursuing "small-scale experimentation" with programs such as Tufts University's microfinance program, but those efforts remain largely "at the margins."