Students apply ethics to college endowments

Some of the most ardent supporters of ethical investing don't have a portfolio. They're college students deeply concerned about social justice or the environment. Thirty years ago, you might have found them marching in the streets in protest. Today, they're just as likely to be knocking on boardroom doors, trying to influence the investment policies of their university's endowment fund. These hold billions of dollars' worth of stocks and bonds. If this student movement catches on, it will greatly expand the ethical investing world. Last week, the Monitor's Laurent Belsie discussed the topic with three current or former student activists in Massachusetts. Sarah Pritchard is a student at Mount Holyoke College and the student representative for the Responsible Endowments Coalition, a nationwide nonprofit that works for social change through university endowments. Kayvan Zainabadi led the Sudan divestment effort at the Massachusetts Institute of Technology. John Pearson is a recent graduate of the University of Massachusetts at Boston who headed a campaign for responsible investment. Here are edited excerpts of their conversation: Why are students focusing on investments to change the world?

Mr. Pearson: Students are beginning to realize that 51 of the top 100 biggest economies in the world are corporations. And so when they look at ... who has the biggest influence over world affairs, over child labor, over environmental issues, they're beginning to see it's corporations. And they make the connection to endowments.

What concerns students most?

Ms. Pritchard: Divestment from Sudan has been a big topic of interest ... and also climate change, I think, is on the minds of students these days.

How do university officials react when you urge them to divest from Sudan?

Mr. Zainabadi: They didn't say anything. They ignored us for about nine months out of the 12 months that it took for us to get a response from them.

No response at all?

Zainabadi: Their administrative assistants would say: "Thank you for your e-mail; we'll take it into consideration." No responses of substance. And this was [after] we drafted petitions that garnered 500 signatures from faculty, alumni, and students. We had resolutions pass at both the graduate student council level and undergraduate student government [level]. We had a letter-writing campaign. We had letters to the editor. And finally, a "die-in," which was a protest to represent the 80,000 people who had died in the eight months that MIT was taking to reach a decision.

Out on the streets?

Zainabadi: We laid on the main entrance to MIT – it's the dome [building], if you will. And 82 of us lay down for five minutes of silence that was broken by [Rev.] Gloria White-Hammond, who has been a big advocate on Dar­fur.

Then what?

Zainabadi: Believe it or not, we had an announcement.... [But] they said we'd divest, as appropriate, given our investment principles, which ... are not known. So we had to, for another three months, approach the administration. And finally just last month, we had a definitive statement saying we had divested from the top 20 companies who are the worst offenders in Sudan.

Pearson: That's typical, too, of many university campaigns. They ignore you or give you: "What's the return [or loss] on investment from divestment or doing community investment?..." And you just have to keep pushing and building your coalition.

You've all succeeded with Sudan. But you want your universities to do more.

Pritchard: About three years ago now, we went to the trustees with a proposal to invest 1 percent of Mount Holyoke's endowment into community investment. The reason we decided on 1 percent is that we found out that 1 percent of our current endowment is invested in low-return investments. So we wanted to replace those low returns with a similar return in community investment. Well, the trustees weren't ready to do that, so they gave us permission to [raise funds] to build a trial fund. Right now, we have $25,000 in our trial fund, which will run three to four years. In that time we will invest in various socially-responsible avenues with a focus towards community investment and then come back to the trustees and prove to them that responsible investment is responsible socially and monetarily.

You got a lot of resistance, too?

Pritchard: At Mount Holyoke there was a lot of resistance, because Mount Holyoke did in fact divest from South Africa, and they ended up losing a lot of money because of that. So I think that because of the history of divestment from South Africa being so unprofitable, trustees are reluctant to engage in dialogue about responsible investment.

Is it ethical to limit their investment options? The endowment helps future students. The trustees have to be financially prudent.

Zainabadi: I absolutely agree. But if you ask people on campus – "Do you want future scholarships to come from blood money, to come from genocide, to come from environmental degradation?" – they'll say no. And I don't think it's a matter of you either be responsible and lose money or be irresponsible and make a lot of money. I think there's a very large gray area where you can [be profitable].

Twenty years from now, will we see real change in university endowments?

Pearson: I think we'll still be having these discussions.... I think there's always different things that are going to come up. The world's not a perfect place. And there are always going to be people trying to make money in ways that aren't exactly ethical. I can say, though, that I hope in 20 years these processes are more institutionalized with student involvement, faculty in­­volvement, and alumni involvement. So that instead of making mistakes and having to back out of them, they can be prevented from making mistakes, or only go into situations where they want to make a positive change.

Pritchard: My hope is that, working with the Responsible Endowments Coalition, in 20 years almost every university will have a committee on shareholder responsibility and will be engaging purposefully with their endowment. Because the reality is: Universities have these positive social missions. And so I think that it is, in the long run, beneficial to institutions to make sure that their endowments are in line with their social missions.