Responsible investing in the Financial Times

Two Financial Times articles sent to us from Cheyenna at the Responsible Endowments Coalition caught our attention - one about how responsible investing is further entering the mainstream, and one about how many are looking to responsible investing strategies as a way out of the current financial crisis.

Investing in doing good can be good risk management.

Investing the old-fashioned way, just by looking at a company’s financial statements and deciding how the current share price relates to the fair value of the stock, is so last year.

Instead, the most hard-headed commercially-minded asset managers are talking about a new form of investment process, including a checklist more usually associated with Greenpeace or Oxfam. Climate change, corporate responsibility, human rights – all these come under the banner of sustainable investment, and a broad range of industry participants have simultaneously come to the conclusion this is the way forward.

“It’s not a manifesto for saving the planet, it’s a tool for better assessing risk,” says Charles Cronin, head of the CFA Institute Centre for Financial Market Integrity, EMEA. “It’s just another way of peeling the investment onion.”

Investors sign up to a better world.

As markets collapse, investors are turning to sustainable investment as a possible way out of the maelstrom. (PDF)

The United Nations Principles of Responsible Investment were continuing to gather signatories, said James Gifford, UNPRI’s executive director. “You might expect this agenda to have less salience at the moment,” he said, “but just 20 minutes ago, the Shell pension fund signed up.”

...

“We need a more responsible and sustainable form of capital markets,” agreed David Blood, managing partner of Generation Investment Management, which has continued to win mandates for its sustainable investment strategies in recent weeks.

“This is clearly a horrible crisis, but it is also an opportunity to take stock and think of ways to build a more sustainable form of investment.”

Check them out! It's well-explained, thorough, and interesting reading.

STIR: an FAQ

Socially Responsible Investing and the Tufts Endowment:
An FAQ from your friends at STIR

In our everyday activities, we often encounter similar questions about our motives, and objections to our agenda. We've compiled a list of some of the most common questions here if you'd like to learn in more detail what we're about and why we believe what we do.

What is STIR?

Students at Tufts for Investment Responsibility (STIR) is a movement that has grown out of years of pressing the Tufts administration to invest the endowment in more transparent, democratic, and socially responsible ways. We see ourselves as part of a larger movement taking place on campuses nationwide, as well as in a growing number of businesses and other large and powerful institutional investors, to redefine the nature of investment beyond maximization of profits without regard to political, social, or environmental concerns. In the short term, however, we're trying to empower our school's ACSR, the body that is supposed to help advise Tufts in making these decisions, but which the administration has disenfranchised.

What is the ACSR?

The Advisory Committee on Shareholder Responsibility (ACSR) is an existing committee at Tufts which was created to help serve as a bridge between the community and the administration in helping provide input into how Tufts can be a socially responsible shareholder. Many other schools have taken steps to create powerful advisory or oversight committees comprising faculty members, alumni, graduate and undergraduate students, and other democratically chosen representatives, which is what was originally proposed to the administration. Instead, what we have is a small committee (three undergraduates) which has little to no say in any investment decisions. Furthermore, the ACSR is completely cut off from our community by nondisclosure agreements, preventing them from discussing their work or serving as true representatives of the Tufts community, as well as from making better informed decisions with the support of others.

STIR advocates an ACSR that is allowed to be influential, open, and representative of the Tufts community. We wouldn't expect the TCU Senate to do their job if there were only five senators, little control over the student activities fee , and no freedom to discuss their processes. This is more or less the state of the ACSR at Tufts – a non-functioning advisory committee – and unless we pressuring the administration to change this, it's going to stay this way.

Doesn't the endowment belong to the school, not the students, faculty, or alumni?

While some people may believe that the endowment is a private institution's money to use however they please, the reality is more complicated. Universities rely on alumni to donate to the school's endowment, which in turn subsidizes our tuition, our research, and our salaries. Each one of us is intricately tied to the endowment in our daily lives, and our ability to demand access to information about the social impact of its use is an inherent right. Furthermore, the tax-exempt statuses that Tufts enjoys complicate further the idea of Tufts, or any other university, as a purely private institution. This is not a radical belief – rich and prestigious schools such as Harvard, Dartmouth, and Williams have endorsed this notion, opening up part or all of their investment portfolios and allowing their advisory committees to help direct their investment activities to sustainable and socially conscious efforts.

Isn't this unnecessarily politicizing the endowment?

Part of the fundamental truth behind the socially responsible investing (SRI) movement is that all investments are inherently political. We can either ignore the consequences of our investment decisions and focus on maximizing profits, or we can act in a socially responsible manner, as we do when we choose to eat organic or change to efficient light bulbs. Whether you're investing in a local farm or General Electric, your investment decisions carry the weight of intrinsically supporting their business practices, and it's important to know whether those practices are...

• environmentally sustainable

• respectful of the rights of women, labor, and indigenous peoples

• not supporting corrupt governments

• providing LGBTQ benefits to workers…

…The list goes on and on. Whatever issue you may care deeply about, the hundreds of millions of dollars that Tufts invests undoubtedly have an impact on it, and we want to make sure it is a positive one.

We're in the middle of a financial crisis! Shouldn't we leave this to professionals who can keep the money safe?

We want Tufts fiscally healthy and secure just as much as anyone else, and our proposals won't affect the bottom line. There are a number of different strategies and subcategories that fall under the umbrella of socially responsible investing, but for now, all we're asking for is a strong ACSR to advise and oversee shareholder engagement - simply fulfilling the rights and responsibilities our school has as a large institutional investor. Tufts holds immense power to vote on shareholder resolutions as well as to directly engage with the corporations it invests in. Taking full advantage of this power, with the help of the ACSR speaking for the community, will have no negative impact on our investment portfolio. Remember, even if Tufts wanted to play it extra safe and only allow to ACSR to advise them on matters concerning 10% of the endowment’s investments, that's still $100 million that could have a more positive social impact. No matter what economic climate, there's no "wrong time" to do this!

How can I learn more?

You can learn more by speaking with us one-on-one, emailing us at STIRupTufts@gmail.com, or finding our Facebook group. We have already posted (or will shortly) the op-ed articles we write on this blog also. In addition, you can check out these websites to learn more about the socially responsible investing (SRI) movement elsewhere:

SRI on Wikipedia
The Responsible Endowments Coalition

You can also come to our meetings!

How can I help?

Our goal is to convince the administration to give the ACSR the power, personnel, transparency, and support it needs to operate properly. To convince them to meet with us, however, we will need to show that we have the sympathy and support of the student body, faculty, graduate students, and alumni. There are an array of ways you can help us achieve our goals that aren't a significant time commitment: we need help with networking, publicity and awareness-raising, drafting proposals, putting together awareness events - however you'd be interested in helping out. If you're unable to donate your time, we'd still love to hear your input or ideas either one-on-one or part of a larger dialogue. We'd love to see you at our meetings – you can find their times and locations on our Facebook group or by emailing us. We're confident we can achieve our goals, but we can't do it without your support!

Tufts: Not the Dirty-Hippy, Tree-Hugging, Progressive School We All Pretend It Is

By Alex Marqusee

An edited version of this article appeared in the Tufts Daily on November 18, 2008.

I’ve heard the notion batted around that Tufts is an almost disturbingly progressive school, and in some respects it’s true. We, the student body, are committed to universal human rights and making this world a better place. We believe in a globally equitable response to the recent financial crisis. We are morally outraged at the international community’s relative silence on the rising violence in the Congo. We hate the scientists who hurt defenseless rabbits and chimpanzees, and we scoff at anything labeled “Conservative” (with the exception of those brave contrarians at Primary Source).

We as a student body are the do-gooders of the world. We are those nice guys and girls who volunteer at elementary schools, raise money for charities, and educate ourselves to go out there and be the greatest, most ethical leaders we can be.

But when it comes to how our endowment is run, our administration doesn’t follow the ethos they preach to us.

I’d like to believe that the Tufts endowment doesn’t own anything it shouldn’t. I’d like to believe that we don’t support the companies that destroy communities and wreak environmental devastation. But after hearing the story of a few students who tried to reassure themselves of the same thing, I just don’t know.

In the midst of the anti-Iraq war movement, a concerned group of students approached the administration with a simple question: are we investing in companies that are involved in war profiteering? Their original question then morphed into a broader, progressive movement to make the one and a half billion dollar endowment more transparent and socially responsible. After battling through bureaucracy, they succeeded in forming an Advisory Committee on Shareholder Responsibility (ACSR), composed of faculty members, administrators, graduate students, and undergraduates. Together, through research and oversight, they would make sure that the Tufts’ actions match its rhetoric.

After the Fall of 2007, these students came back ready to participate in the committee whose powers were modest at best. The Tufts endowment would remain closed to the public but this advisory committee would be able to make recommendations about proposing and voting on proxy resolutions at companies that Tufts had invested in.

These proxy resolutions work about the same as political referendums during election season. So, for instance, if you were registered in California this election you could have voted to ban gay marriage, and if you lived in Massachusetts you could have voted to decriminalize marijuana. To extend the analogy, if Tufts were invested in an oil company, we could vote on a resolution asking "should we invest in renewable energy technology, or just drill baby drill?" If Tufts abstains, however, its as if we don’t care. We are just trying to make sure we make a tidy return off of owning part of the company.

Upon their return, these brave souls were told that the full committee would not be allowed to continue as previously promised. Tufts’ reasoning for not wanting a committee to vote on proxy resolutions, and even more so for not wanting an open endowment, is either institutional laziness, incompetence or more likely a fear that outside “meddling” in the endowment could hurt the endowment’s profits.

Students at Tufts for Responsible Investment (STIR) believes that the actions of the administration and the endowment are part and parcel of who we are as a community. We believe that socially responsible investing is something worth believing in as a possible balance to pure profit maximizing. We believe that the people who run Tufts are capable and compassionate enough to be able to balance the University’s needs for a bigger endowment with its self-stated moral obligation to “contribute to the advancement of humanity and improvement of today's global community and environment”.

Would STIR’s proposal to resuscitate the advisory committee bring financial ruin to the University? No. The currently proposed committee would vote on resolutions that the companies themselves define as irrelevant to profit margins. The committee would say yes to investments in alternative energy, would say yes to better working conditions, would say yes to whatever the Tufts community decides through democratic representation is best for Tufts and the world.

Having endowments act as socially responsible investors has worked before and more and more colleges and universities are recognizing their moral imperative to do what they can to make the world a better place. Schools with endowments large and small are embracing the idea of socially responsible investing without loosing money because of it. Swarthmore, Williams, Columbia, the University of Pennsylvania and that archetype of irresponsibility and foolishness, Harvard, have all responded to student initiatives and are taking steps to use their endowments more responsibly.

Our beloved President Larry Bacow, in every matriculation address he has given at our school, has emphasized that Tufts is a progressive institution and that we, the student body, have a responsibility to be active citizens in making the world a better place. Well Bacow, here we are being active citizens and demanding that Tufts does more.

I was inspired last year when I heard you tell the graduating seniors, “The world desperately needs people who are willing to think beyond the narrow confines of their own self-interest.” I’d like to think most of students have heeded your call, but has Tufts?


Alex Marqusee is a Senior, an Economics Major, and a member of Students at Tufts for Investment Responsibility (STIR).

Jumbo Invests, But Responsibly?

Two years ago, our school was the backdrop of a heartwarming story of a dedicated freshman with an idealistic dream of human rights advocacy, who followed through on his plan of action and achieved his goal with enough hard work and charisma.

This freshman, who had joined the ranks of the Tufts anti-war movement early on in his first year, began to ask difficult questions about the injustices of war profiteering, and how such a troubling but distant issue could have touched our pristine campus here on the other side of the world. When he and other curious students realized that the university’s finances were closed books, these concerned undergraduates met with the director of the endowment’s investments, and then the president himself, and finally made a presentation to the Board of Trustees. By this time, these students had become very concerned with the lack of disclosure that the administration was giving, and they politely but forcefully made their wishes known. They wanted Tufts’ investment portfolio to be opened up to scrutiny and reflection, and and an advisory committee of faculty, administrators, graduate students, and undergraduates to serve as a mouthpiece of the Tufts community that would help draft input on how to invest the endowment responsibly by voting on shareholders’ proxy resolutions.

Luckily, everyone’s hard work paid off. The board agreed to create the committee, and our enterprising hero was put at the helm, with his wish to help steer the endowment’s investment down a socially just path finally realized. It was a storybook ending: intellectual curiosity manifested, active citizenship embodied, change realized.

Unfortunately for everyone, the fairytale has turned out to be much more Charles and Diana than Cinderella and Mr. Charming.

Fast forward to today: our hero is frustrated. Despite protests, the advisory committee is only three undergraduates, not the originally proposed full slate of faculty members, administrators, and graduate students, cutting off access to the community’s resources and crucial opportunities for dialogue with others. Worse, they have been placed under virtual gag order, forced to sign nondisclosure agreements forbidding them from discussing the institution’s financial activities—including who we’re invested in—with anyone else. Without democratic input from the Tufts community or educated opinions from faculty authorities, the committee is forced to struggle alone through the demanding research necessary to offer a moral voice to Tufts’ vote on shareholder proxy resolutions. They are cut off from the community they’re supposed to represent, but receive no support or communication from the administration either, who may or may not even be considering their input.

While a large portion of our community is still ignorant of this plight, some students, faculty, and others have already turned up a skeptical eyebrow based on what little they have heard. Some say the endowment shouldn’t be politicized, even though all investments in any business are intrinsically political actions. Others may think undergraduates should stay out of complex financial decisions, despite the fact that student movements at Columbia, Swarthmore, and many other schools have succeeded in influencing proxy voting and opening up investment portfolios. And of course, many fear for Tufts’ financial health in lieu of the credit crisis and spiraling stock markets, even though research has shown that making responsible investment decisions does not have to mean lower profit margins—not at all.

When I first heard this story, that of a well-intentioned, idealistic freshman organizer, now a marginalized, frustrated, and struggling junior trapped in bureaucracy, I felt my pride in Tufts flicker and fade somewhat. This frustration is not based in some radical, untenable agenda, but in the desire to bring about social, labor, environmental justice with the $1.5 billion our school is empowered with. Our mission statement—and yes, I believe this school, including its endowment, is truly and wholly a communal ours and not some foreign entity—speaks of “active citizenship,” “serving the common good,” and “a dedication to globalism.” The Students at Tufts for Investment Responsibility (STIR) think it’s about time that our institution started behaving the way it has always asked us to do. Stop obfuscating, and open up the endowment. Strengthen our advisory committee, and let it speak. We hope you will join us in our demands.

This article was published in the November 3, 2008 issue of the Tufts Observer.

Shame on Tufts for not investing openly and responsibly

Last week's Observer led with a two-page spread ("Brown and Blue Go Green," Sept. 29) patting Tufts on the back for all of the sustainable initiatives it is making in plain sight for all of us to see and feel good about.

For shining some light on the issue of sustainability, the author should be applauded; however, her article is just the latest illustrative example of a massive gap in our discourse on these matters. For all the money Tufts may be spending -- or saving -- in the name of the environment, we are once again ignoring a crucial issue: Is the university using our endowment responsibly, and if so, why the embarrassing lack of transparency?

Despite the interest our community has shown in shining a light on the university's endowment over the past two years, very little concrete progress has been made. Last year, the administration permitted the creation of the Advisory Committee on Shareholder Responsibility (ACSR), a committee intended to be representative of the Tufts community -- faculty, undergraduate students, graduate students, administrators and alumni -- to provide representative input into the proxy voting process.

Despite the wave of optimism this development originally generated, a year later, we find ourselves with little true progress having been made. The ACSR has been reduced from its ten original members from the Tufts community, including alumni, faculty and graduate students, to just three undergraduates lacking the support they need. These three remaining members have been forced to sign nondisclosure agreements, meaning that the rest of us are in the dark about decision-making and there is essentially no democratic process. Nobody knows if the ACSR's input is being taken seriously (if it's taken into account at all) or if it is truly representing the values of our university.

We can't expect change overnight, and we know a group of students can't run an investment portfolio as well as professionals can. But we also believe there's a middle ground we must find. We acknowledge that we can't shine a light on many of Tufts' financial activities purely due to the nature of the investments themselves -- mutual funds, for example, which the investors themselves often cannot view.

Furthermore, we should understand that there are abstract but important issues at stake in how one chooses to view the situation. While some students may be crying out for more transparency and oversight into the administration's finances, others may be skeptical of delving into the investment activities of an endowment they don't see as intrinsically theirs.

But despite these questions, and the murky nature of figuring out just how Tufts is investing the endowment behind tightly closed doors, there is a larger, clearer picture in front of us. The Responsible Endowment Coalition, a nonprofit advocacy group devoted to integrating universities' positive values with their investment practices, gave Tufts an "F" in investment transparency last year.

Many other schools -- including Columbia, Swarthmore, Williams and the University of Pennsylvania -- now have stronger oversight mechanisms to allow community access to, and in some cases, participation in, the investment decision-making and proxy voting process.

These successes, however, were only achieved after student movements raised awareness, started a dialogue and pushed hard on their administrations.

Undoubtedly, our financial system, as well as entire financial practices such as investment banking, is under siege right now, and many may see the maximization of profits in the "rainy days" ahead to be our primary goal.

But even President Bacow's e-mail on Monday, which warned that the current financial storm will undoubtedly affect our investment portfolio, financial aid and major projects, was nevertheless upbeat about the "cushion" of reserves we still possess following the most successful year of fundraising in Tufts history.

Now is not the time for us to throw up our hands; the economy may be faltering, but institutional investors such as Tufts still play a major role in the global economy, and how our endowment is invested can have an enormous impact on environmental sustainability, human rights, and the implementation of other ethical business practices. What we invest in, and how Tufts University uses its right as a shareholder to cast its proxy vote, can signal an implicit endorsement or rejection of whatever the university as a whole chooses to endorse or reject. It is a power we must use wisely and take seriously.

For all of these reasons, I'm proud to announce our newest student movement, Students at Tufts for Investment Responsibility (STIR). Keep your ears open in the coming days and weeks to hear more about STIR publicizing this issue; based on the administration's attitude, a protracted, forceful, campus-wide push may be the only way to convince the administration to take our concerns seriously. If you would like to get involved, I hope you will contact me to learn more about this issue and what each of us can do to resolve it.

For long enough, Tufts has been silent, dismissive and evasive while other schools have opened up their investment portfolios and treated the views of their communities with the respect and importance they deserve. President Bacow has stated that he does not want to "engage in social engineering through the endowment," but our own university has taught us better than that. Let us tell Tufts to put her money where her mouth is, because being a shareholder isn't just about maximizing profits, it's about wielding your influence in a smart and responsible way.

This article was published in the October 9, 2008 issue of the Tufts Daily.

TCU backs endowment advisory committee

The Tufts Community Union (TCU) Senate passed a resolution on April 6 endorsing the Advisory Committee on Shareholder Responsibility's (ACSR) quest for a greater role in overseeing the Board of Trustees' investment policies.

The resolution was submitted by advisory committee members Lorenzo Arroyo and Nicole Zeller, both juniors, and sophomore Gabe Frumkin. It calls on the Board to permit the ACSR to expand in size and scope by allowing for the inclusion of non-undergraduates on the committee and permitting members to disseminate information on the Board's activities to the greater university community.

Frumkin, the chairman, said the ACSR's three members wanted the Senate to pass the resolution to demonstrate that the student body supports the committee's goals.

"It would help show the Board of Trustees and the administration that this is not just a small group of students, but in fact that what we are trying to do with the ACSR is supported by the student government," Frumkin said. The resolution passed by a vote of 19 to three.

The resolution petitions the administration to remove a requirement forcing committee members to sign nondisclosure agreements.

Currently, the administration and the Board of Trustees require the three ACSR members to sign nondisclosure agreements, which prevent them from publicizing university investments to the greater Tufts community.

"At this time our policy continues to be that endowment investment decisions are the responsibility of the Trustee Investment Committee," Executive Vice President Patricia Campbell said in an e-mail.

"That committee has agreed to involve undergraduate students appointed by the TCU Senate in the proxy vote process," she added. This is the process by which the Board makes decisions on corporate policies, including investments.

The resolution also calls on the Board and the administration to permit the ACSR to include graduate students, faculty, staff and alumni. The committee originally hoped to include such members, and individuals from these demographics did participate in the committee during its early stages. But the Board clarified in February that the ACSR must include only three undergraduates.

Campbell said that she informed the Trustee Investment Subcommittee of the resolution's passage last week, but she said the administration has not adjusted its position.

The administration has called the ACSR a good "educational opportunity" for students, emphasizing the committee's role as an edifier for ACSR members rather than an opportunity for these three students to make the Board's investments more transparent to the rest of the university community.

TCU President Neil DiBiase said that the Senate endorsed the resolution to help the committee achieve

its goals.

"I think that the idea is really to let the committee function in the way that they described to us that it was created to function," said DiBiase, a junior.

DiBiase added that the Senate exists to help causes championed by the student body.

"I think that the Senate has an obligation to advocate for student needs and what students want," DiBiase said. "Our job is not to pass judgment on the needs of the student body."

Frumkin was pleasantly surprised by the Senate's support for the ACSR. "We had a much more favorable outcome in the votes than I anticipated," Frumkin said. "That just goes to show that there is even more support among the student body than I thought."

He said that the committee has not yet planned its next move, but that it will continue negotiations with the administration.

"We will continue to pursue greater transparency and greater democracy," Frumkin said.

This article was originally published in the April 15, 2008 issue of the Tufts Daily.