December 04, 2002
SRI Gains Momentum in University and College Endowment Investments
by William Baue
U.S. academic institutions are increasingly applying socially responsible investment principles,
although not comprehensively.
Universities and colleges play unique roles in society. As educational institutions, they instill
students with moral values; as institutional investors, they can wield significant influence as
large shareowners. Universities and colleges have traditionally kept the moral and financial
spheres separate, but recently, academic communities have sought to reconcile their institutions'
financial statements with their mission statements.
Many universities and colleges
have created committees to address how the institutions' endowment and pension investments may
relate to global social and environmental concerns. These committees typically assess shareowner
resolutions and determine how the institution will vote its proxies. Such committees have existed
for a number of years at institutions such as Harvard, Yale, Stanford, and the University of
Minnesota. Dartmouth College is currently in the process of establishing such a committee, and
Columbia University established its Advisory Committee for Socially
Responsible Investing in February 2000. Harvey Goldschmid, who chaired the Columbia University
committee until his appointment as a Securities and Exchange Commissioner in May, specifically
limited the Columbia committee's role to voting shareowner resolutions.
Swarthmore College's Committee for Socially
Responsible Investing, created in 1997, went one step farther by filing a shareowner resolution
Martin (ticker: LMT) this proxy season. The resolution called on the weapons manufacturer to
prohibit discrimination based on sexual orientation and received 5.9 percent support from voting
shareowners. On November 18, Swarthmore informed Lockheed of its intention to refile the
resolution in the 2003 proxy season. Three days later, the company reversed its position opposing
the resolution and issued a statement to its employees that announced its intention to add sexual
orientation to its equal employment opportunity policy.
"This really shows the power that
shareholders have to bring about positive social change," said Swarthmore Treasurer and Vice
President for Finance Suzanne Welsh. "Among colleges and universities with significant endowments,
our status as shareholders is an opportunity to influence society. I hope the college's action
helps lead the way for similar efforts in the future." Swarthmore's endowment is $850 million,
down from $1 billion in September 2000.
Earlier this year, Williams College took its first step in implementing SRI
criteria by establishing the Social Choice Fund, which is invested in the Calvert Group's Social Investment
Balanced Fund (CSIFX). When Social Choice Fund assets reach $10,000, Williams will invest ten
percent of the fund's holdings in a community development loan fund specifically geared toward
supporting the Berkshires, the region that encompasses Williams College. Currently, the fund
represents a mere fraction of the college's endowment, which was $1.109 billion for the fiscal year
ending June 30, 2002.
Hampshire College, a progressive liberal arts school with a small
endowment, is one of the very few academic institutions to comprehensively practice SRI with its
endowment investments. However, no U.S. university or college with a significant endowment has yet
joined Hampshire in comprehensively applying SRI criteria. Social investors will watch with
interest to see which academic institution with a large endowment will take the lead and grant its
committee the power to adjust endowment portfolios based on social and environmental criteria.