How Hampshire Invests
By Jonathan Lash, President, Hampshire College
There is growing debate — much of it driven by students — about the obligation of mission-driven nonprofit organizations to consider non-economic issues in their choice of investments. Society exempts us from taxation because we serve public purposes. Donors support us because they believe that doing so contributes to the common good.
Each institution has its own mission, values, culture, and traditions to consider in making decisions about fiscal responsibility and moral obligation, but it is difficult to understand why an institution would refuse even to discuss the issues. For those of us engaged in education, this is no minor question: College and university endowments total more than $346 billion — funds provided by donors to lend long-term support to institutions they believe in. We have an obligation to those donors to manage their gifts prudently. But the investment decisions we make have more than fiscal impact. We teach by what we do as well as what we say. Our educational mission and responsibility to the future offer compelling reasons to invest in accord with our values.
The trustees of Hampshire College devoted more than a year to community discussion of our investment policy and concluded that it was impossible to separate investment decisions from what we do educationally and operationally. It’s part of who we are and how we live our mission. For us, there is no obvious line of distinction between classroom and campus operations, or between operations and investment.
Hampshire has a proud history of considering our values in managing our investments. These include deeply ingrained commitments to environmental sustainability and social justice. Hampshire began to invest its endowment in accord with its values more than 30 years ago, when it became the first U.S. college to pull its funds out of the stock of companies doing business with the apartheid government of South Africa. As an educational organization, we have always accepted the proposition that we have an obligation to think about what we teach not only in what we profess, but also in how we manage our campus, treat our employees, and invest our funds. This thinking led us to reassess our investment strategy, and in December 2011 our board of trustees adopted an Environmental, Social and Governance Investing policy that affirmatively directs our funds to investments consistent with Hampshire’s mission and values. Instead of screening out the shares of companies whose products or practices we disagree with, we seek out and invest in businesses whose products and policies align with our core values of social responsibility and sustainability.
Our policy led us to invest in developers of renewable energy technologies rather than producers of fossil fuels. Our donors give money to create our endowment as an investment in the future. In a rapidly warming world, the future of our students will depend on quickly expanding the use of wind, solar, and other carbon-free sources of energy. One result of affirmative investing was that our small, $40 million endowment held negligible fossil fuel holdings before the launch of the national fossil fuel divestment campaign. We met a goal important to students, one that many campuses are now struggling with and working through, not by divesting but through investing for the future.
As a college, our business is investing in the future. The students who enliven college campuses today will live and work in a world turbulent with social and resource issues generated by physical, social, and technological change. It will be a world made smaller by connection as money, goods, knowledge, ideas, and images flow almost frictionlessly across borders, creating both acquaintance and conflict, opportunity and threat. Part of my focus at Hampshire has been to be relentless and ambitious about what our community can do to prepare our students to thrive in such rapid change. More than ever students will need to have the courage to challenge old ways of doing and working, and forge new paths and solutions. I believe that the solutions to tomorrow’s problems can emerge from the ingenuity and entrepreneurship of those students who ignore boundaries, ask questions, and ignite expertise with creativity. I also know that they face the existential threat posed by climate change. Warming is creating physical and political risks — and future economic risks that markets have not yet priced. We are speeding down a path to catastrophic warming that will create massive suffering and foreclose options for future generations, for the very students we are educating. If we ignore urgent material evidence of risk of such magnitude we surely send a powerful message to our students about how we perceive science, and how we balance present comfort against future survival.
Changing investment policies is not the only way to respond to the threat of climate change, but I find it strange that many institutions make significant investments to reduce emissions but have concluded that adjusting investment policy is off limits and should not even be considered.
There is also a moral argument that some activities are so abhorrent that a mission-driven, tax-exempt institution should not profit from them. I concede that drawing the line between what is abhorrent and what one just disagrees with is an extraordinarily difficult exercise based on subjective judgments. Different institutions must inevitably draw the line in different places. I do, however, challenge the premise that there should not be any such line. That would undermine the claim of mission-driven institutions to be rooted in some kind of moral purpose. On campuses, the discussion about where such lines should be drawn, and what the practical implications might be, is one that today’s students (and tomorrow’s leaders) can learn from.
Since we realigned our investments, Hampshire College’s endowment has outperformed its benchmarks, and has been above the average compared to similar endowments. Affirmative investing has given us an opportunity for learning, innovation, and change.
You can read and download a copy of Hampshire’s investing policy at www.hampshire.edu/offices/hampshire-college-bylaws