College Endowment Investment Trends and Best Practices: an Analysis of Sustainability Tracking, Assessment & Rating System (STARS)™ Data
Total Page:16
File Type:pdf, Size:1020Kb
A Sustainable Endowments Institute Report College Endowment Investment Trends & Best Practices An Analysis of Sustainability Tracking, Assessment & Rating System™ (STARS) Data Aaron Karp Mark Orlowski Jaime Silverstein College Endowment Investment Trends and Best Practices: An Analysis of Sustainability Tracking, Assessment & Rating System (STARS)™ Data Executive Summary 3 Introduction 8 Committee on Investor Responsibility (PAE-16) 11 Shareholder Advocacy (PAE-17) 14 Positive Sustainability Investments (PAE-18) 17 Student-Managed Sustainable Investment 20 Fund (PAE-T2-1/PAE-T2-7) Sustainable Investment Policy (PAE-T2-2/PAE-T2-8) 23 Investment Disclosure (PAE-T2-3/PAE-T2-9) 26 Conclusions and Recommendations 29 Appendix: Methodology 36 Appendix: Table - Schools’ STARS 1.x Investment Credits 38 Appendix: Table - Schools’ STARS 2.0 Investment Credits 47 Acknowledgments 49 Cover Photo Credit: the University of Saskatchewan, the Peter MacKinnon Building and the Bowl College Endowment Investment Trends and Best Practices Executive Summary Striving to advance sustainability, higher education STARS 1.x features six credits focusing on institutions have mostly focused on instruction, investment-related activities, and 178 institutions student services, and campus operations. Now, received points for at least one of the STARS scrutiny of sustainability is going beyond the investment credits.2 Th ese institutions represent classroom, the dining room, and the boiler room 63 percent of all 283 schools that have a current to examine the policies and programs of the STARS rating. Th ey hold a cumulative $185 boardroom. billion, representing nearly half of all higher education endowment assets (totaling more than Choices by the board of trustees about the $400 billion). transparency of the endowment, its investment priorities, and shareholder advocacy are all vital Th e schools taking part in STARS represent a indicators of how deeply sustainability is integrated motivated and self-selected sample endeavoring to throughout the college culture. Th e off -campus implement sustainable practices. Th e Sustainable ramifi cations of endowment investments should Endowments Institute (SEI) reviewed their reports merit attention as expressions of a school’s values and in order to determine trends and investment best priorities—the type of future that the institution is practices. As a result, SEI’s evaluation provides a supporting with its fi nancial resources. unique opportunity to inform the conversation about sustainable endowment investment in higher For institutions seeking to enhance the sustainability education. of their investment policies, what trends and best practices can help guide the process? A key resource Such third-party analysis of investment policies is the Sustainability Tracking, Assessment & within STARS data seeks not only to highlight best Rating System™ (STARS), which includes detailed practices and recent trends, but also to encourage sustainability criteria to evaluate investment more such eff orts. To date, there has been little policies and practices. Developed with a broad independent verifi cation of self-reported data, collaborative eff ort led by AASHE (Th e Association as noted by the IRRC Institute and the Tellus for the Advancement of Sustainability in Higher Institute in their 2012 report, Environmental, Education), STARS provides a transparent, self- Social and Governance Investing by Colleges and reporting framework.1 Universities in the United States. Th e present report 1 Th e Association for the Advancement of Sustainability in Higher Education (AASHE), “STARS Overview.” https://stars.aashe.org/ 2 Th is report uses STARS 1.x as an inclusive abbreviation for STARS pages/about/stars-overview.html. 1.0, STARS 1.1 and STARS 1.2. 3 College Endowment Investment Trends and Best Practices attempts to address this essential need for analysis • Wesleyan University: Committee and verifi cation of the data submitted to STARS. for Investor Responsibility SEI has briefed AASHE about the development Shareholder Advocacy (PAE-17) of this research and has shared the report fi ndings • University of Iowa: Letter Writing with them prior to publication. Although SEI and Negative Screens and AASHE have collaborated on other projects, • Bard College: Filing a Shareholder Resolution the two organizations have agreed not to formally partner on this project in order to avoid any Positive Sustainability Investments (PAE-18) potential confl ict of interest or perception thereof. • Okanagan College: Socially As a result, AASHE has not endorsed this report Responsible Mutual Fund and was not involved with the research or analysis. • Green Mountain College: Sustainable Investment Fund STARS Investment Credits: Best Practices Student-Managed SRI or Sustainable Investment Fund (PAE-T2-1/PAE-T2-7) Committee on Socially Responsible Investment • University of Michigan: Student- (SRI) or Investor Responsibility (PAE-16) Run Social Venture Fund • Th e New School: Advisory Committee • Columbia University: Student- on Investor Responsibility Run Microfi nance Fund STARS Investment Credits: Credit Consistency 100 90 62 80 15 70 30 68 60 STARS-reportingSubmissions Inconsistent institutions with Criteria that received credit 50 26 40 15 27 Submissions Consistent 42 Submissions consistent with investmentwith Criteria credit criteria 30 Number of Schools of Number 31 28 28 20 18 10 0 Fund Policy Investment Responsibility ble Investment tive Sustainability Student-Managed Shareholder AdvocacyPosi stainable Investment Committee on Investor Sustaina Su Investment Disclosure 4 College Endowment Investment Trends and Best Practices Socially Responsible or Sustainable For higher education institutions pursuing Investment Policy (PAE-T2-2/PAE-T2-8) investment credits, submission inconsistencies • Earlham College: Robust Guidelines have hindered comparisons of sustainable investing for Socially Responsible Investment trends and discernment of best practices. Based on • Unity College: Divestment from Fossil Fuels SEI’s analysis, these inconsistencies did not arise from unclear credit requirements, but primarily Investment Disclosure (PAE-T2-3/PAE-T2-9) from lack of adherence by institutions to explicit • University of Louisville: Detailed criteria. While STARS can help by further defi ning Snapshot of Investment Holdings concepts and providing illustrative examples, our • University of Wisconsin System: analysis suggests that STARS-reporting institutions Disclosure of Investment Holdings need to ensure that their submissions are consistent and Proxy Voting Records with STARS credit criteria. Applications should be submitted only when an institution’s achievements clearly comply with the credit rationale. In addition to the widespread school submission inconsistencies with the investment credit criteria, there is an overall trend of limited participation in these STARS credits. In turn, this stems from the paucity of institutions committed to integrating sustainability criteria with their investment policies. A year-by-year analysis of the percentage of schools earning each of the six STARS investment credits provides a useful perspective on trends. A brief visual overview is shown in following graph of STARS Investment Credits By Year Reported3. 3 Participation percentages based on STARS 1.x data. 5 College Endowment Investment Trends and Best Practices STARS Investment Credits By Year Reported 100% 80% 60% 2011 2012 2013 Percantage of Schools of Percantage 40% 2014 20% 0% ty li vocacy Fund Policy Investment Responsibility Student-Managed Shareholder Ad Positive Sustainabi Committee on Investor Sustainable Investment Sustainable InvestmentInvestment Disclosure As depicted in the graph, the percentage of schools to 26.5 percent. However, it is unclear if this earning investment credits since 2011 has, for the large increase can be sustained given the short most part, evidenced no progress. In 2011, 26.6 duration of previous gains. For example, in percent of all available STARS investment credits 2012, 18.2 percent of schools earned this credit, were awarded.4 Th is declined to only 21.1 percent but then the level declined to 15.3 percent in in early 2014 (through February).5 On a credit by 2013. credit basis, the following trends in participation • Positive Sustainability Investments (PAE- were observed: 18): In 2011, a notable 40.3 percent of schools • Committee on Investor Responsibility (PAE- earned this credit. Since then, the number of 16): Th e percentage of institutions pursuing schools earning this credit has dropped by one- this credit steadily declined from 22.2 percent quarter to 29.4 percent in 2014. in 2011 to 14.7 percent in 2014. • Student-Managed SRI or Sustainable • Shareholder Advocacy (PAE-17): Th is credit Investment Fund (PAE-T2-1/PAE-T2-7: was the only one to notch growth between From 2011 through 2013, the percent of 2011 and 2014, increasing from 12.5 percent schools earning this credit remained relatively stable, varying between 16.7 and 18.1 percent. 4 In 2011, 72 institutions received at least partial points for 115 of However, in 2014, the proportion of schools of the possible 432 credits available (72 schools X 6 credits). earning this credit diminished slightly to 14.7 5 Th rough February 2014, 34 schools received at least partial points percent. for 43 of the possible 204 credits available (34 schools X 6 credits). 6 College Endowment Investment Trends and Best Practices • Socially Responsible or Sustainable Regardless of