Endowment Activism:
How Students Can Move Big Money
Think broke students have no power to influence Wall Street?
Think again.
http://www.yesmagazine.org/new-economy/endowment-activism-how-students-can-move-big-money?utm_source=wkly20120518&utm_medium=email&utm_campaign=titleGelder
Students are known for having an abundance of ideals, but not much money or
power. But student
-
Middlebury College is know for its focus on social responsibility and
sustainability. Members of Middlebury's team attach solar panels to the
roof of Self Reliance, their entry in the Dept of Energy Solar
Decathlon.
organizations around the country are finding ways to put
thousands, sometimes millions of dollars behind sustainable companies.
At Middlebury College, members of the school’s Socially Responsible
Investing (SRI) club are working to guide the school’s $900 million dollar
endowment towards more sustainable investments.
They’ve joined a growing number of other schools in invoking the kind of
ownership rights seldom embraced by the left: the right to influence the world
through the tools of Wall Street, using their role as investors to spur change
in powerful corporations.
“Colleges have the opportunity to be leaders in socially responsible
investing because we combine liberal ideals with a huge amount of money,” says
Olivia Grugan, a Middlebury senior and president of the SRI club.
Responsible
investing
At Middlebury, a group of students started a
Socially
Responsible Investing (SRI) club and began working with the administration
to set aside a part of the school’s $900 million endowment to be managed in a
socially responsible way.
Having ethically managed funds was a priority for the club, and they
initially asked that the school allocate 1 percent of its endowment to a fully
transparent fund.
Middlebury’s administration was wary of sacrificing too much of the
endowment’s money-making potential.
“Our endowment supports some major commitments we’ve made,” says Patrick
Norton, chief financial officer of the college. “We have a commitment to future
generations of students and can never put our funding stream at risk.”
As the stewards of significant pools of capital, colleges
can also use their position as shareholders to influence the way the company
operates.
But values and profits don’t have to be mutually exclusive, notes Dan Apfel,
the executive director of the Responsible Endowments Coalition, which regularly
works with students to incorporate the principles of SRI into their schools’
endowments.
Grugan argues that socially conscious investing is part of the school’s
responsibility. “Middlebury has a mission statement that includes language like
‘environmental stewardship’ and ‘global community,’” she says, “and those
values are something we want reflected in the entirety of our endowment.”
In 2010, the school created a socially responsible fund of $4 million, to be
matched with another $4 million raised through fundraising efforts.
The current size of the fund is $2.5 million
, but students and administrators are hopeful that it will
grow in the next few years. Although the fund is not managed by students, they
were able to provide input on the general direction of the investments.
“When we got this fund, we had a couple of choices in what direction we
could take it,” says Grugan. “We could try to make it the greenest fund ever,
or we could aim to make it a model for how the entire endowment could someday
be run. We chose the latter.”
The fund runs along the same line as a regular pool of investments, but
weighs its decisions according to the
“triple
bottom line” of profit, people, and planet. As a result, its assets are
spread among companies that lead their fields on environmental and social
issues.
Shareholder
activism
Steering money towards sustainable companies is not the only way to
encourage the triple bottom line. As the stewards of significant pools of
capital, colleges can also use their position as shareholders to influence the
way the company operates.
“This is a really powerful type of investment activism,” says Grugan, “some
would argue that it’s the most powerful—you’re utilizing your position within a
company to change the way it operates.”
When Grugen discovered that a Middlebury-based fund owned shares in Exxon
Mobil, she wondered if they could use their position as shareholders to
influence Exxon’s position on the proposed
KXL Pipeline that would carry the oil
across the United States.
The studentsdecided to join a
coalition of socially minded Exxon Mobil investors who were attempting to bring
a resolution about the risks of tar sands development to vote at the annual
shareholders’ meeting. The mere act of holding a vote would signal the
importance of the issue, and if the vote were to pass, it would put real
pressure on the management to consider the risks of pipeline involvement.
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“Endowments are leaders in the financial world... We can
lead in the shift towards making socially responsible investing the norm.”
Before the resolution could go to vote at the annual meeting, though, Exxon
lawyers challenged it through the Securities and Exchange Commission, and it
was dismissed.
The SEC dismissal of the Exxon shareholder resolution was a setback, but
Grugan was encouraged that the small club had had a real impact on how the
school managed its funds. “We had a five-student club, and we got $4 million
allocated. What could we do if we had the whole student body on board?” she
wondered.
Currently, the SRI club is devoting its energy to getting more students
involved in the management of the school’s endowment. “This is a unifying
tool,” says Grugan, “because no matter what your issue, you can use shareholder
advocacy to further it.”
The
potential of socially responsible investing
Values-based investing is a growing trend, and not just on college campuses.
In 2010, almost one dollar out of eight
was invested in a fund that is ethically
screened in some way.
In 2008, the endowments from U.S. four-year institutions totaled over $400
billion. That represents a huge body of influence—if its custodians choose to
wield it.
“Endowments are leaders in the financial world,” says Apfel. “We can lead in
the shift towards making socially responsible investing the norm.”
And students aren’t the only ones who can participate in the direction of
endowments; as a major source of donations, alumni can have a major influence.
Says Apfel, “just sending a letter to your school asking where they invest and
expressing your desire to donate to a socially responsible fund can
be
influential.”
“Where socially responsible investing is great is in its potential, which is
largely untapped,” says Grugan. “Colleges are not doing all they can. This
isn’t a solution story yet, but it could be. There is a lot of potential."
Martha van Gelder wrote this article for
YES!
Magazine, a national, nonprofit media organization that fuses powerful
ideas with practical actions. Martha is a freelance journalist based in
Washington DC. She tweets about sustainable investing and the tar sands at
@marthavangelder.
America's
Promise Alliance is hosting a free webinar on May 31 from 1-2:15pm ET to share
how new communications research can inspire more participation from target
audiences. The session will explore both the research findings and how to use
the resulting messages to help reach the Grad Nation goal of a 90 percent
graduation rate. 
