Using Higher Ed.'s $340 Billion in Endowments to Make the World a Better Place

By Don Hazen and Jan Frel, AlterNet. Posted May 5, 2008.

Socially responsible investing, the use of financial investments for social good, is a powerful tool to promote economic and social democracy. It convinced Home Depot to stop using old growth timber, RJR Nabisco to discontinue its "Joe Camel" advertisements and ARCO to withdraw its operations from the totalitarian state of Burma -- and it's gaining popularity as a tool for activists.

But what about on college and university campuses across the country?

Campus activists have traditionally gone after corporate offenders on issues such as fair trade and sweat shops, and the multi-hundred billion dollar growth in school endowments in recent decades is a huge opportunity to change corporate behavior. Enter the Responsible Endowments Coalition (REC), which helps students and other university members to push corporate reform on human rights, environmental responsibility and equal opportunity. AlterNet caught up with REC executive director Morgan Simon to discuss the crucial role that endowments can play in forcing economic change.

AlterNet: Why is responsible investing a key vehicle for change on campuses, and why are students responsive to working on endowments as a form of activism?

Morgan Simon: Students are naturally interested in changing their campuses for the better, thinking about the structure of society and what's going to be effective: Sometimes that means taking over buildings, but it also means doing petitions and raising awareness on important social issues. Students are really starting to explore where their leverage point is in society.

Nationwide there's $340 billion worth of endowments at U.S. colleges and universities -- that's the leverage point and a pretty powerful message. Capital markets have the power to transform the society we live in. For me as an undergrad at Swarthmore College, which has a $1 billion endowment, I started thinking that this is where I could make some real impact. In general, the students that I talk to are thrilled to learn about responsible investing as a form of activism, because it is a a tactic and a tool kit that can be applied to all social and environmental justice issues. It doesn't matter if you're passionate about the environment, diversity issues, or equal opportunity on gender or race, genocide, the list goes on -- but students can apply responsible investment to all.

AlterNet: How do you deal with the obstacle of how complicated the various financial instruments are and how they operate?

Simon: One of REC's major emphases is helping students from all class backgrounds understand what a mutual fund is. A big hurdle is getting students to be fluent about the role of money in society -- that they aren't afraid of it. But the truth is that students don't have to understand everything about the market.What's key for them to understand is that their school is probably sitting on a big pot of money, and that there are a lot of fairly simple things those students can do to make the schools change their attitudes and practices with that money to support social justice and the environment.

AlterNet: Your literature also explains that you're also focused on reaching out to trustees and the college administration.

Simon: Yes, we talk to administrators and tell them that a focus on responsible investing is a great way to show student and alumnae what your values are, and teach your students to learn more about the financial world. It ties the student body much closer to administrators. And when this happens, the feedback we hear from students is, "Gosh, I had no idea how hard it is to run a school; how much it takes to run an endowment and that trustees are very often volunteeers who really care about the school." It builds relationships of trust.

There's also the issue for school administrators that colleges and universities are nonprofit, mission-driven institutions; they don't pay taxes. Is it the case that there are financial institutions that happen to run a school, or are they mission-based institutions that believe in a cause and have an investing arm that's part of it? Are a school's assets supporting its mission 100 percent of the time? That's the same conversation that the foundation world has to consider.

This is a different tack that a lot of campus campaigns take, which frequently pit students against the administration. In many instances, the trustees just need to be made aware of the power that their endowments have from a shareholder perspective -- that you don't have to change the stocks you're holding, but that you can use the power of your stock in the company to change its practices. We can tell the school administration, "Look you'll either make the exact same amount of money, or you might even improve the value of those stocks because the responsible practices you're pushing for will improve the company's value.

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Don Hazen is AlterNet's executive editor. Jan Frel is AlterNet's senior editor.