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From the Crimson: “Students and Administration Together”

Responsible Investment at Harvard Coalition member Felix de Rosen wrote an op-ed that appeared in today’s Crimson.

He writes about his membership on the Student-Faculty Advisory Committee on Shareholder Responsibility, noting,

Although the creation of the ACSR was an important step forward, the organization leaves a lot to be desired. First, the CCSR is not required to listen to the ACSR, making the ACSR purely symbolic. Second, and most importantly, the ACSR has no ability to initiate proxy proposals or to recommend that Harvard reconsider its investment in certain companies. The only reason the CCSR listened to the ACSR’s advice on PetroChina was that PetroChina had become a major public issue that Harvard could no longer ignore. Third, the ACSR has no way of communicating to either students or to the CCSR. This is why RI@Harvard’s objective to strengthen the ACSR is necessary.

He also urges students and administrators to work together to achieve goals, writing,

The future of responsible investment at Harvard depends on the ability of students and administrators to understand each others’ perspectives, which may be more nuanced than each group likes to think. On the one hand, the administration is genuinely concerned over the manner in which Harvard invests its money. It is not opposed to change, but understands that compromises are inevitable when working in a large organization… On the other hand, the students are a force committed to revising Harvard’s investment policy for the common good… The next step forward for RI@H is to join the shared experiences of the administration and the students. 

You can read the whole article online here.



From the Huffington Post: How Harvard is Ignoring the Failures of Our System

Martin Bourqui of the Responsible Endowments Coalition has a blog post up on the Huffington Post today entitled “How Harvard is Ignoring the Failures of Our System — and Why We Can’t Any Longer.” 

He writes about the Harvard Management Company’s pressure to drop Joshua Humphrey’s from last week’s UC Town Hall, noting,

the truth this fiasco exposes about Higher Education, Inc., and its attitude towards how to run an educational institution, must inform the work of creating the just and sustainable institutions our society needs.

He also writes, 

No shiny-new LEED-certified building, no Presidents’ Climate Commitment, and no US Newsranking will change the truth that all of our schools are investing in a wide variety of unsustainable and unjust corporate misdeeds. We can either continue to ignore the catastrophic failure of our system, or we can begin to address it like adults — ones with serious responsibilities to our environment and to each other.

You can read the entire article online at huffingtonpost.com.

The Crimson on the ACSR

Today’s editorial by The Crimson Staff calls for the administration to look closely at RI@Harvard’s demands and endorses our asks about the ACSR, while applauding the decision not to reinvest in HEI Hotels. Read the entire editorial, entitled “HEI Reconsidered,” below:

Last year, in light of numerous labor abuse allegations faced by HEI Hotels and Resorts, The Crimson urged the Harvard Management Corporation to investigate the charges against the company and consider not reinvesting in it. As of last week, Harvard has joined Yale, Princeton, Brown, and numerous other universities in deciding not to reinvest in HEI. By not reinvesting, Harvard does not liquidate its current investments in HEI, but rather makes a pledge to not provide the company with more capital in the future.

In light of the recurring allegations of labor abuse that HEI has been unable to refute successfully, Harvard has surely done the right thing in deciding not to reinvest and announcing publicly its decision. Workers at the company, most prominently those lobbying for union representation, have repeatedly complained of mistreatment. The activist organization Students Against Sweatshop Labor claimed in a report that the hotel chain cuts costs by reducing staff levels excessively and forcing remaining employees to work in unreasonable conditions. Shockingly, at one HEI property, 80 percent of housekeepers reported work-related injury. Just last week, workers at HEI-owned Le Meridien Hotel right here in Cambridge   publicly voiced discontent over their work conditions.

Although it is our belief that Harvard acted appropriately, the institutional process to arrive at this sort of measure could be significantly improved. The Corporation Committee on Shareholder Responsibility, the body within the HMC that considers the social ramifications of the university’s investments, is limited to proxy voting and has no influence over new or current investment decisions. Perhaps, if this group were not so limited in its power, Harvard would not have been among the last of its Ivy League peers to announce it would not reinvest in HEI. The Responsible Investment at Harvard movement has already called for a more efficient manner to reconsider investment decisions, and we urge the University to study its proposals carefully.

In addition, we find the University’s lack of transparency regarding the resolution of this matter to be both puzzling and unnecessary. Jane L. Mendillo, the president of the HMC, saidin an email to University President Drew G. Faust that the decision not to reinvest in HEI stemmed from “factors related to the HMC portfolio and its strategy and needs.” We wish that ethical considerations, not financial ones, had been the motivating factor in this case; Harvard should simply not associate itself with a company engaging in the practices allegedly committed by HEI. If the labor accusations against HEI were indeed the HMC’s primary reason for not reinvesting in the company, Harvard should have said so publicly, thus taking a clear moral stance.

Mendillo’s statement suggests, disappointingly, that investment concerns had more to do with the University’s choice than a genuine ethical sensitivity. Regardless, the public outcry against HEI seems to have had an effect, and the workers and activists who so tirelessly denounced the company have gained one more victory with Harvard’s decision. We trust it is the right one.

Investing in Harvard’s Future

Op-ed from the Harvard Crimson on March 1st by RI@Harvard members  Ben Collins and Nicole Granath:

Investing in Harvard’s Future

John Maynard Keynes, the British economist widely considered the father of modern macroeconomics, wrote in 1935 that “the social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future.”  His words of John Maynard Keynes may be equally relevant today. We have just emerged from one of the largest financial crises in our country’s history, where the “dark forces of time and ignorance,” as applied to financial instruments like mortgage-backed securities, contributed to the excessive financial leveraging that necessitated “Too Big to Fail” measures and a taxpayer bail-out of $85 billion for one company alone. As a result, the ethics of investment practices have since been the subject of increased scrutiny.

Despite the costly financial and ethical lessons learned since 2008, have we really changed the way we think about and make investment decisions?

By some measures, yes. At Harvard, at least, post-crisis resolutions have focused on reducing risk and exposure in our endowment portfolio. Such reduction has been accomplished through increasing in-house asset management, the appointment of a designated chief risk officer in 2009 to perform restructuring, and the sale of illiquid assets like private equity vehicles to facilitate immediate access to cash that could be used towards the purchase of submarketpriced securities.

Yet, one area in which Harvard has been conspicuously silent is whether its investment practices can and should be informed by fundamental social and environmental values. In its submission to the College Sustainability Report Card, Harvard received “A”s across the board, with the notable exception of one “C” in endowment transparency. So why doesn’t Harvard engage in responsible investing?

Responsible investing—also known as socially responsible investing, or SRI—is the practice of investing for the purpose of reaping not only financial returns, but also social benefits.  SRI can take many forms, including divestment from undesirable investments, community investing, and social screening, i.e. integration of environmental, social and governance concerns to inform investment choices.  The adoption of responsible investing has proliferated over the last two decades, rising from $639 billion in 1995 to $2.71 trillion in 2007, and major institutional investors such as CalPERS, with over $218 billion under management, have pledged to incorporate environmental, social, and governance criteria across all of its asset classes.

Persistent critiques of responsible investing brand it a violation of central tenets of Modern Portfolio Theory, or a breach of fiduciary duty because it constrains optimal portfolio. Thus, due to responsible investment’s added focus on social gains, many believe that portfolios engaging in RI strategies must make sacrifices in financial returns.

This assumption is false.

Recent research has demonstrated that responsible investing can provide market rate returns—and, sometimes, perform even better than conventional investing strategies. In the close to twenty years since its creation, the Domini 400 Social Index—an index of 400 largely U.S.-based companies that are filtered by social impact criteria—has always either matched orsurpassed the performance of the S&P 500. Applied to Harvard’s own investing strategy, responsible investing is an opportunity to allow the university to represent its values in its investment choices without sacrificing the portfolio’s financial gains.

Harvard’s history shows a precedent of responsible investing. In 1972, under President Derek C. Bok’s leadership, Harvard created the Advisory Committee on Shareholder Responsibility and the Corporation Committee on Shareholder Responsibility to provide recommendations on how the school should cast its proxy votes. In that same year, Harvard also helped found the Investor Responsibility Research Center under Institutional Shareholder Services, which researches corporate governance and social responsibility for institutional investors. Forty years ago, Harvard was in the vanguard of responsible investment.

But university leadership did not take action by themselves: students, alumni, and faculty played a crucial role in advocating for change. For example, during the 1980s, students and alumni protested Harvard’s investments in companies that operated in apartheid South Africa. As a result, Harvard Management Company partially divested. More recently, in 2005 and 2006, Harvard sold its stake in the PetroChina and Sinopec companies in response to student protests over links between these firms and genocide in Darfur.

In the wake of the most recent financial crisis and reflecting on the 40th anniversary of the ACSR and the IRRC, it is high time for Harvard to once again become a leader in the area of responsible investment. There are a number of options available to Harvard: it can enlarge the mandates of the ACSR and CCSR beyond proxy voting on directly held investments, establish a social choice fund to allow donors more control over how their gift is managed, create a time-delayed mechanism for transparency to allow more oversight from members of the University community, and start a new unit at the Harvard Management Company dedicated to the integration of RI principles across all asset classes.

Harvard should take steps to implement any or all of these measures as the HMC continues the process of restructuring; indeed, some—like creating a social choice fund—could be implemented fairly easily and quickly, in a matter of months rather than years. By taking action in these areas, Harvard can break new ground in the realm of responsible university endowment management and better protect itself from extra-financial risk factors that have proven so devastating in recent years. More importantly, though, Harvard has the opportunity to use RI to bring our investments, a key component of our global influence, in line with the values of the university.

Nicole Granath ’15 lives in Hurlbut Hall. Ben Collins ’06 is a student at HKS ’12. They are both members of the coalition for Responsible Investment at Harvard.