Where’s Our Money? Looking at Other Schools

Students at Brandeis recently wrote a letter in their school paper asking for endowment transparency due to the effect investment decisions have on student life, noting that “the endowment has a direct effect on financial aid, department chairs, fellowships and research opportunities”. The students’ decision to pursue transparency at their school on the basis of financial returns is interesting. Most pleas for transparency are initiated because of social justice considerations. For example, is our school invested in companies that treat their workers well? Does our school refuse to invest with companies whose actions harm the environment? Most schools don’t do this; they invest blindly and then don’t utilize their shareholder power by voting their proxys. Because of this, there has been a growing movement of students demanding accountability and active shareholding from their universities. Yet Brandeis students bring up a great point: that this transparency will not be at the expense of returns, but perhaps to its benefit. Transparency will open up the endowment to increased scrutiny and open avenues for student involvement and activism. If a school is truly interested in promoting the active citizenship of its student body, and in aligning its institutional decisions with its values, transparency should not be an issue.

It can be assumed that transparency will lead to increased socially responsible investment, as schools will not want to jeopardize their reputations and their investment decisions will be more closely monitored. This can lead to gains, as socially investment has performed demonstrably well over the past few years. There are upwards of 20 studies that show that SRI mutual fund performance is comparable to non-SRI mutual fund performance, and the oldest SRI index (started in 1990) has had even higher rates of return during this time than the S&P 500, a traditional index. And, obviously, the rapid growth of socially responsible investment provides the most compelling support for SRI’s performance. Potential investments can, and should, be screened for both social/environmental impact and financial return. And, this can aid the “bottom line”, as students at Brandeis are saying.

While transparency and socially responsible investment work reciprocally, many institutions have claimed that they are investing in socially responsible ways, but don’t want to make specific information public because they don’t want to publicize their “financial strategy”. This is problematic. First of all, a school with a compelling SRI would generally want to make this known to promote public relations and bolster their reputation, and their failure to do so seems questionable. Secondly, there are ways to make one’s endowment transparent without undermining a financial strategy. For example, Colombia provides public records of their investments – they just won’t give out records for the three preceding months. Finally, the idea that knowledge about a university’s financial plans and investments would negatively affect returns is not really valid in and of itself. In their article, Brandeis students point out that Harvard and Yale “each release lists of their investments along with a record of how their proxies vote on shareholder issues”. Harvard and Yale are two highly reputable schools and have the two largest endowments in the country with some of the best investment managers. Would they make financial decisions that put their reputation and returns in jeopardy? Definitely not. Students at Tufts should demand this same transparency, shareholder engagement, and socially responsible investment.

The Brandeis article can be found here:

http://thebrandeishoot.com/articles/8606

ORIGINALLY PUBLISHED: http://www.trcommons.org/2010/10/wheres-our-money-looking-at-other-schools/

Local banking: Bank on it

This past July, Republicans in the Senate rejected a bill aimed to help struggling small businesses through the expansion of loan programs and tax breaks. As David Herszenhorn reported in the July 30 New York Times article "Republicans Block Bill to Aid Small Business," this move was largely spurred by Republican desires "to deny Democrats any further legislative accomplishments ahead of November's midterm elections." Herszenhorn's reasoning fails to recognize other justified reasons for Republican opposition — namely, the cost of the program, which would be an additional stress on our already strained economy. But the proposition of the lending program itself and the increased need for one given the current recession should cause members of the Tufts community to reexamine the business practices in which we are all involved.

Firstly, we need to realize that this recession is the result of large banks and irresponsible banking practices. There are a variety of factors that led to the current economic situation, but all of them (irresponsible borrowing, lack of regulation, lack of transparency about risks being taken) somehow come back to the "too big to fail" banks. Big banks package and resell large loans, capitalize off of students and uneducated borrowers, charge big fees and then take risks with our money. At the same time, they have little to no beneficial impact on our local community. That's why this bill would have been a great step toward remedying some of those practices that got us into this position in the first place; the small business loans and tax breaks were going to be distributed by creating a $30 billion lending program that would engage with local banks, which are proven to make more loans to small businesses. They also charge fewer fees than the big banks, are less likely to engage in the irresponsible borrowing of larger banks and are more accountable to their clients.

It's sad that this bill was shut down and equally sad that it is being lauded as a partisan issue. We can all agree, regardless of political orientation, that supporting our neighbors, assisting fledgling small businesses, maintaining long−standing businesses in our community and promoting responsible banking practices should be priorities. That's why Students at Tufts for Investment Responsibility (STIR) is launching our campaign for community investment at Tufts. Let's put our money in the community and act as more than "global citizens" and act as local ones, too.

This idea is hardly new. The Community Reinvestment Act of 1977 encouraged banks and savings associations to assist borrowers of all income levels in their communities. The bill was originally passed to prevent redlining, or participating in discriminatory credit practices to low−income (and primarily black) borrowers. But even though it has been more than 30 years since the bill's passage, we can still do much, much more. As tuition−paying students at this school, we have power. Furthermore, the reputation and $1 billion endowment of Tufts University is powerful. We need to make a collective statement and say where we want to put our money and how we want to be active members of our community.

Students at Macalester College have done this; they moved $500,000 to a local bank in 2007, and the bank is now working to establish student internship opportunities at the bank and through the local businesses the bank supports. And at Mount Holyoke College, they raised $25,000 for a pilot Responsible Investment Fund that has invested in a nearby community−development financial institution that emphasizes local lending. These examples from peer institutions demonstrate that community investment is not simply possible but also beneficial. Aside from material benefits, Tufts will reap the rewards, such as an improved reputation and town−gown relations that come with such a progressive, community−oriented decision. Change really is possible, and other schools are catching on. Let's join them and do what Congress failed to do this summer. Let's support community investment!

ORIGINALLY PUBLISHED: http://www.tuftsdaily.com/op-ed/local-banking-bank-on-it-1.2336704

Tufts deserved ‘D’ for endowment transparency

Tuesday's front−page article on Tufts' sustainability ratings highlighted many of the great ways the university works to build a sustainable community. However, the article seemed to focus on the flawed methodology of the Sustainable Endowments Institute (SEI) in creating their College Sustainability Report Card.

For example, the questions and criteria used were said to "be flawed and vague," and Tufts is currently focusing on a different study, according to Executive Vice President Patricia Campbell. The student body must do its own research to determine the validity of these claims. We should question whether the university's participation in a different study — namely, the Sustainability Tracking, Assessment and Rating System (STARS) — is necessarily more effective.

An area where Tufts consistently performs poorly is in its Endowment Transparency Rating. This year, the school earned a "D." Yet this poor grade has little to do with flawed methodology or vague questions. Instead, it accurately speaks to the current endowment transparency climate at Tufts. Presently, endowment holdings and proxy voting records are only available to top administrators. This is incredibly problematic and quite different from practices at other nearby schools, such as Harvard University, where proxy voting records are fully accessible to the entire public.

The College Sustainability Report Card accurately assesses endowment transparency by asking how the school handles proxy voting, who is given access to investment information, where endowment holdings are held, and whether alumni can direct gifts to an investment fund allocated to tackle sustainability issues. All of these questions have multiple possible answers, as well as space for clarification.

For example, in response to the question, "Where is information about proxy voting records made available?" there are five possible answers, including: information is not made available; information is available at the investment office or similar office on campus; information is sent to individuals upon request; information is on the school website with password protection; and information is on the school website and is accessible to the public. This allows for a specific and finely tuned ranking.

On the other hand, the STARS system, which Tufts is adopting, is much less specific. Like that of the SEI, the rankings are derived from self−reported data from Tufts. However, STARS uses simple "yes" or "no" questions. For example, they simply ask the school to respond in the affirmative or negative to broad topics such as "endowment transparency," "committee on shareholder responsibility" or "investment screening." Under these broad criteria, schools could score highly even if their transparency committees or screened investments are so small or so ineffective as to be basically nonexistent.

Obviously, the school should not fall prey to the multitude of ineffective ranking organizations. On the other hand, we should ensure that any decisions to work with a particular ranking organization are motivated by the desire to evaluate Tufts truthfully and will not result in possibly skewed or misleading rankings.

At the end of the day, Tufts deserved a "D" in endowment transparency, and the school should recognize that and work to promote change. Hopefully, we will see a commitment to endowment transparency that will pass the test of any ranking system.

+The article was printed in the Tufts Daily and can be found here: