Heron’s Chair Buzz Schmidt comments on university endowments and divesting in response to a recent article.
Evan Mandery of the New York Times recently penned a passionate criticism of the reluctance of universities to remove fossil-fuel energy companies from their portfolios. With academics playing a major role in the fight for climate change policies, it seems counterproductive to continue supporting companies that simultaneously attempt to block these efforts. While Mandery focuses on the practice of morally guided divestment, Buzz Schmidt highlights the need for all investors, particularly those with clear social values, to look at everything in their portfolio on an enterprise level and ensure their investments are in sync with their mission objectives.
Mandery lays out the context and response as a break from precedent:
Climate Change is our era’s defining challenge, but most of America’s universities are planning to sit this one out. Though students and faculty members at more than 400 colleges have called for administrators to divest from fossil-fuel energy companies, fewer than 20 have committed to doing so. Stanford recently divested from coal, but none of the other schools had endowments within the 150 largest in 2013. …
The principal justification schools offer is that endowments should be reserved to advance an academic mission. As Cornell’s president, David J. Skorton, put it, “We must resist, in almost all cases, the temptation to manage these precious funds to further social or political causes, no matter how worthy.” Drew Gilpin Faust, Harvard’s president, said, “The endowment is a resource, not an instrument to impel social or political change.”
Divestment is a slippery slope. Where do universities draw the line? Columbia’s president, Lee C. Bollinger, says, ‘The bar has to be very high, and the reason is there are lot of things that people don’t like about the world.’
Heron board chair Buzz Schmidt offered a different perspective that university presidents could have taken:
All investors have responsibilities for what they invest in. Investor attention is critical for the proper functioning of a faithful investment marketplace, and we cannot depend upon self-interested intermediaries to handle this for us. And being responsible is not all about rooting out the bad guys. Rather, it’s about identifying and encouraging the good ones. We should be consciously building portfolios of the best companies not just lopping off the obvious bad ones when they come to our attention. Further, institutional investors like foundations and universities have special responsibilities. We are bastions of articulated values, repositories of significant sums and engines of analysis. If we can’t take our investor responsibility seriously, who can?
Click here for more quick reads featuring interesting articles on philanthropy and impact investing.