With an endowment of $32 billion, Harvard is the second wealthiest nonprofit institution in the world, following the Vatican. Harvard’s power stems not only from its research, teaching, and reputation, but also from this wealth. If the Harvard Management Company (HMC), which manages the university’s endowment, invests in certain businesses and funds, it can help socially beneficial ventures succeed; if it invests in certain other companies, it can perpetuate social and environmental injustice. Unfortunately, HMC has too often taken the latter path. Therefore, we at Perspective endorse the efforts of a new student group, Responsible Investment at Harvard, which aims to make Harvard’s investment practices transparent, accountable, and socially responsible.
Over the years, there have been numerous campaigns to end Harvard’s least ethical investments, particularly those in companies and countries that have consistently violated human rights. For instance, concerned students, faculty, staff, and administrators have in past years successfully convinced HMC to divest from apartheid South Africa, tobacco companies, and PetroChina, a corporation that partnered with (and provided funding for) the Sudanese government during the genocide in Darfur. Most recently, as a result of pressure from the Student Labor Action Movement (SLAM), Occupy Harvard, and others, HMC announced that it would reconsider its investments in HEI Hotels and Resorts, a company known for its sweatshop-labor practices and legal troubles with the National Labor Relations Board. Single-target campaigns such as these have often achieved great victories, and Perspective supports the current campaign for the university not to reinvest in HEI. However, in order to ensure that Harvard invests responsibly and transparently in the long run, a more comprehensive campaign is necessary.
People concerned with responsible investment often speak in jargon, but while the particulars may be complex, the underlying principles are straightforward. A responsible investment platform requires investors not to invest in companies that endanger people’s health or welfare, violate fundamental rights, or harm the environment. At the same time, they should invest in companies that aid sustainable development and provide valuable jobs, goods, and services while respecting human dignity. For instance, Harvard could invest in companies that are attempting to create permanent jobs in Allston or that are developing affordable medical diagnostic tools for doctors and patients in the developing world. Both transparency and accountability are widely viewed as necessary to ensure consistent responsible investment. For instance, GreenReportCard.org counts “endowment transparency” along with variables such as “climate change and energy” and “green building” when determining the overall environmental sustainability of a college or university. Harvard, unfortunately, gets a C on endowment transparency, which indicates that too many of the university’s investments are shrouded in mystery. Without transparency, neither the Harvard community nor the general public can hold the university accountable.
The Harvard Management Company may view responsible investment as a hindrance to financial success. However, according to Principles for Responsible Investment, a United Nations affiliate, responsible investment practiced strategically can lead to increased long-term returns and decreased long-term risk. Given that these investments produce sustainable growth and don’t have harmful side effects, these benefits are not surprising. It is clear that responsible investments are good for everyone involved.
The student group Responsible Investment at Harvard (RI@Harvard for short) is a coalition of people involved in various environmental, labor, and social justice issues on campus. RI@Harvard is working on several campaigns to transform the nature of Harvard’s investments. In the long term, it intends to convince HMC to adopt a standard protocol for disclosing investments and to incorporate social and environmental concerns into all investment decisions. In the nearer future, RI@Harvard hopes by the end of the semester to create a responsible investment fund for the university, an idea pioneered by Brown in 2007, to which donors can choose to give their money. RI@Harvard intends to convince a large portion of the senior class to donate their senior gift to this social choice fund or “shadow endowment” and to build alumni support for it from there. A social choice fund would represent a powerful first step towards responsible investment generally, for in addition to the concrete result of moving funds, it would demonstrate to the university that this issue is important to a wide cross-section of the Harvard community.
RI@Harvard also hopes to reform the Advisory Committee on Shareholder Responsibility (ACSR) and the Corporation Committee on Shareholder Responsibility (CCSR), the two committees that deal (to some extent) with social responsibility in investing. We agree with RI@Harvard that these entities should have more power so that they can move beyond shareholder proxy votes to make real decisions about investments. We particularly support increased power for the ACSR, which consists of faculty, students, and alumni. Perspective also urges the university to increase the student and faculty presence on the ACSR and to create more formal opportunities for students, faculty, and staff to voice their opinions on investments. Hopefully, these changes will make Harvard Management Company more accountable to the entire university population.
As a nonprofit institution, Harvard receives generous tax exemptions because it is assumed to serve the public good. As a center of teaching and learning, Harvard College, according to its mission statement, encourages students to “rejoice in…critical thought…assume responsibility for the consequences of personal actions…promote understanding, and serve society.” The time has come for Harvard to put its money where its mouth is. If incoming students are encouraged (or pressured, according to some) to sign a pledge to uphold the university’s values, then surely the university itself must uphold these values. To promote understanding and critical thought, Harvard should disclose its investments, so that students can think for themselves about whether these investments are just. To encourage students to take responsibility for their actions, the university must lead by example, and take responsibility for the social and environmental impacts of its portfolio. Ultimately, Harvard does not set an example for just its own students; as one of the world’s leading universities, it sets an example for countless for-profit and nonprofit institutions. Thus, responsible investment at Harvard would energize an already-growing movement for responsible investment around the world.