Recent research summarized in a Greenbiz blog by Robert Kroop suggests that college and university endowments are no longer leaders in environmental, social, and corporate-governance (ESG) investment. A report from the IRRC Institute and Tellus Institute entitled Environmental, Social and Governance Investing by College and University Endowments found transparency of ESG investments to be poor despite the proliferation of sustainability survey tools. The results were based on aggregate data from multiple survey datasets, including data from public STARS reports.
The September STARS blog highlights data in the Investment subcategory of STARS to provide context to the report’s findings. The institutions highlighted in this blog provide evidence of best practices in sustainable investment - an area that has proved challenging for many institutions.
Sustainable Investment
The Investment subcategory in STARS awards up to 17.5 points for investment decisions that promote sustainability. Average available points earned are lowest in the Investment category when compared to all other STARS subcategories by a significant margin. (The second-lowest subcategory is Energy, at 20.5 percent of available points earned)
The chart below and on the left displays average available points earned in the Planning, Administration & Engagement (PAE) category, which includes Investment and four other subcategories. The chart on the right displays average available points earned for each of the six credits within Investment.
Source: STARS Average Scores dashboard visualization
Note: Total point value is represented by the size of each slice. Average available points earned is indicated by the radius of the colored fill of each slice.
Investment Credits
STARS data support the finding in the ESG report suggesting that there may be a lack of transparency for investment among college endowments. As shown in the table below, only 34 percent of institutions indicated that they make snapshots of investment holdings available to the public. In addition to this, 60 to 70 percent of STARS-Rated institutions did not pursue PAE credits 16, 17, and 18, and several institutions stated that the information was not available, particularly if the endowment was managed by an independent Foundation.
| Investment Credits | Average Points Earned | Points Available | % of Points Earned |
|---|---|---|---|
| PAE-16: Committee on Socially Responsible Investment - Institutions have a formally established committee on investor responsibility or other body | .44 | 2 | 22% |
| PAE-17: Shareholder Advocacy - Institutions use investment power to promote corporate sustainability by filing shareholder resolutions, submitting letters, or conducting negative screenings | .97 | 5 | 20% |
| PAE-18: Positive Sustainability Investments – Institutions invest in sustainable industries, businesses selected for exemplary sustainability performance, sustainability investment funds, community development financial institutions, or socially responsible mutual funds | .69 | 9 | 8% |
| PAE T2-1: Student-Managed SRI Fund - Institutions have a student-managed sustainable investment fund | .04 | .25 | 15% |
| PAE T2-2: Socially Responsible Investment Policy - Institutions have a policy, practice, or directive to consider the social and/or environmental impacts of investment decisions | .08 | .25 | 31% |
| PAE T2-3: Investment Disclosure - Institutions make a snapshot of investment holdings available to the public | .09 | .25 | 34% |
On average, institutions earn .69 out of 9 points for PAE 18: Positive Sustainability Investment, making it the Investment credit with the lowest rate of average available points earned. Nonetheless, three institutions earned maximum points by investing 30 percent or more in sustainable investments. These included Okanagan College and Simon Fraser University (both in British Columbia, Canada) and Haywood Community College in North Carolina.
| Best Practice Highlight: Positive Sustainability Investments |
|---|
| 30% of investments at Okanagan College are held in Community Values Funds administered by Phillips, Hager & North. These funds exclude companies deriving revenue in excess of 5%-10% from alcohol, gaming, military weapons, pornographic materials, or tobacco products. They also both positively screen and negatively screen for community, corporate governance, employee relations, environment, human rights and product safety. (Okanagan College, STARS Silver, July 2011) |
The University of Nevada, Las Vegas came close to earning full points for PAE 18, with 25 percent of its total investment in sustainability investment funds.
| Best Practice Highlight: Sustainability Portfolio Analysis |
|---|
| To better understand the composition of its holdings with respect to sustainability and socially responsible investment, the UNLV Foundation undertook a portfolio analysis designed to quantify its sustainability-related investments. The analysis cross referenced the Foundation's portfolio with the Dow Jones Sustainability Index. Findings from the analysis showed that savvy investment strategy does not necessarily entail avoiding firms which place an emphasis on sustainability. (University of Nevada, Las Vegas, STARS Silver, June 2011) |
Visitors to the AASHE website can access case studies, publications, and related finance and investment resources in the Sustainable Investment and Financing section of the AASHE Resource Center.
With significant room for improvement among colleges and universities in the area of ESG investment, STARS and other survey tools can help motivate institutions to increase investment transparency. As institutions develop and improve tracking mechanisms for positive sustainability investments, we hope to see marked improvement in Investment scores.
With the development of STARS 2.0 under way and a public comment period set to start in the coming weeks, members of the public will have the opportunity to provide feedback on improvements to STARS that may encourage transparency of ESG investment among colleges and universities. Readers can provide feedback on sustainable investment and other topics at any time by emailing stars@aashe.org.
