As a network, we are tracking trends in the field to understand with more nuance which steps endowments are taking to align their investments with their institutional goals.
Increasing interest in investing with environmental and social considerations
Assets & Number of Institutions Invested for Sustainability
The 2018 Sustainable, Responsible and Impact Investing Trends report by US SIF: The Forum for Sustainable and Responsible Investment found $12 trillion in US assets were invested with consideration of environmental, social and governance (ESG) issues in investment research, analysis and decision-making or with an active ownership strategy through shareholder engagement. This means that 1 in 4 dollars of the total US assets under professional management are using one or more of these strategies. Out of $12 trillion, US SIF found that educational institutions held $317 billion in assets which were subject to various ESG criteria. These assets represent portfolios considering ESG issues in their investment research, analysis and decision making in addition to the assets represented by institutions that filed or co-filed shareholder resolution on ESG issues.
The majority of ESG assets were subject to conflict risk and tobacco criteria. After conflict risk, the most prevalent social issue considered by educational institutions was equal employment opportunity and diversity. Consideration of climate change and carbon emissions in investment analysis increased since 2016.
The 2018 NACUBO-TIAA Study of Endowments found that out of 802 U.S. higher education endowments surveyed, 249 (or 31%) had addressed ESG issues by either adopting a sustainable investment policy or including sustainable investments in the portfolio”. A later analysis of this data by NACUBO revealed that a little more than half of the those institutions (or 16% of the 802) had made investments in ESG or SRI strategies in their portfolio where ESG was defined as an incorporation of ESG-related risks and opportunities in their investment analysis and SRI was defined as a divestment of particular products or industries.
IEN's own tracking of the field also found that as of June 2020:
- 97 US colleges and public university systems have an investment policy statement language addressing environmental, social, and governance considerations.
- 69 colleges and public university systems have signed on to at least one major commitment on sustainable investing, with most focusing on climate action including 18 in the US and 51 internationally. These commitments include the Principles of Responsible Investment (PRI), CDP, Ceres Investor Network on Climate Risk and Sustainability, Net Zero Asset Owners Alliance, Montreal Pledge and the Fossil Free Declaration organized by People & Planet in the UK.
- 95 US colleges and public university systems have established committees on investor responsibility.
- 195 colleges and public university systems have partially or fully divested from fossil fuels, private prisons and other harmful sectors including 70 in the US and nearly 125 internationally.
Other Key Issues and Trends
- Investing in Diverse Managers: According to the 2018 NACUBO-TIAA report, 4%—or about 32 institutions—of the 802 institutions surveyed had a diversity and inclusion policy for hiring managers. Out of the 32 institutions, about 2 of them were invested with diverse managers. Read more about allocating to diverse managers.
- Shareholder Activism: The recent NACUBO report showed that endowments have not been exercising their rights as shareholders to engage businesses on sustainability concerns. In 2018, only 8–10% of the 802 higher education institutions surveyed answered that their managers vote proxies consistent with their sustainable investing policies. Read more about becoming an active shareholder.
- Community Investing: Higher education institutions also play a critical role in local economic development and are increasingly being asked to better serve and engage with their home communities. Currently, a very small percentage of educational institutions use their endowments to invest in their own campuses and surrounding communities. However, in the past few years, we have seen more examples of institutions investing in Community Development Financial Institutions (CDFIs) which are private financial institutions that increase access to financial services for low-income people and communities and offer endowments cash or fixed-income-like investments. Read more about investing in the community.