ESG Investing at University Endowments: Next Steps

A new report, Environmental, Social and Governance Investing by College and University Endowments in the United States, finds environmental, social and corporate governance (ESG) efforts by endowments are less prevalent than often believed, particularly given their history as pioneers dating back to 1970s anti-apartheid campaigns. These findings are particularly surprising at a time when ESG factors are increasingly factored into investment the decisions of mainstream investors.

The report, from the Investor Responsibility Research Center Institute (IRRCI) and Tellus Institute, provides a comprehensive analysis of ESG investing and activism by educational endowments aggregating multiple survey data sets plus new primary research. The report addresses three broad areas:

  1. the incorporation of ESG criteria into endowment management;
  2. shareholder advocacy and active-ownership initiatives; and
  3. the governance and transparency of ESG investment decision-making.

US college and university endowments have more than $400 billion in combined assets under management.

Webinar speakers include Jon Lukomnik, IRRC Institute executive director and  Joshua Humphreys, a fellow at Tellus Institute and the study’s lead author.

The report’s key findings are as follows:

  • The primary form of ESG investing activity by endowments tends to remain single-issue negative screening of public-equity portfolios related to issues such as tobacco or targeted divestment from the Sudan.
  • Increasing numbers of surveys and reporting mechanisms have emerged over the last decade to obtain information about sustainable and responsible endowment management. Yet, a widespread lack of independent verification of self-reported data exists. Moreover, there is confusion about the semantics of ESG investing, resulting in problematic claims and misclassification of investments. Despite the proliferation of surveys, ESG investment transparency remains poor.
  • Considerable focus is placed on proxy-voting recommendations. Yet, many colleges are shifting investments from publicly traded securities to indirect investments in commingled vehicles and more opaque, illiquid investments in alternative asset classes, meaning that traditional equity investing including proxy voting, is a decreasing portion of many endowments. There is little consideration by endowments of ESG issues in non-public equity asset classes despite some interesting, but small, ESG programs in different asset classes.
  • The endowment community exhibits a weak understanding of ESG investing strategies, trends, opportunities, and language. Also, there is no  standardized conceptualization of sustainable and responsible investment activities that are widely practiced in the capital markets.
  • Endowments are absent from leading investor networks where ESG investment issues are routinely discussed.
  • Small-scale experimentation is occurring in areas such as microfinance investment, student-run SRI funds, green revolving loan funds, and shareholder advocacy

Misperceptions about ESG investing open immense learning opportunities for the endowment community, though a much greater openness to discussions of sustainable and responsible investing is needed. “Investment policies are remarkably opaque, even at some state-funded universities,” according to Jon Lukomnik,  the IRRC Institute’s executive director.

He also noted that the educational community is largely absent from national and global institutional investment networks.

Not a single endowment is amongst the 900 signatories of the United Nations Principles for Responsible Investment, and only one is a member of the Council of Institutional Investors, the leading U.S. association of institutional investors.

Endowments need to join these conversations if they are going to make a difference.

The report comes at a good time for my own efforts in this area. As announced last March (Student Run Investment Portfolios: Beyond Stock Picking), I hope to be working a little as a volunteer consultant with interested student-run funds, beginning with the University of the Pacific. We’ll examine proxy voting policies and explore the idea of submitting shareowner proposals.

I was encouraged to see at least a few dozen schools where endowments included student representation. I think students and alumni are likely to be the drivers of change going forward. Seventeen schools were reported having a “student-managed SRI fund” and 25 student-run funds incorporate ESG criteria.

Although no endowments were found to have submitted shareowner resolutions to promote shareowner rights, the following were listed as possibly filing or co-filing resolutions on environmental or social issues: Bard College, Colorado State University, Dickinson College, Creighton University, Loyola University, Regis University, Rockhurst University, University of San Francisco, University of Scranton, University of Vermont, University of Oregon, and University of Colorato Foundation.

Additional data resources:

The IRRC Institute is a not-for-profit organization that provides thought leadership at the intersection of corporate responsibility and the informational needs of investors. Tellus Institute is a Boston-based interdisciplinary, non-profit think tank pursuing a “Great Transition” to a future of enriched lives, human solidarity, and environmental sustainability. The Institute brings analytic rigor and a systemic, global perspective to a range of critical problems, from energy and environmental resource use to climate change, corporate responsibility and sustainable development.


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