Harvard Endowment Commits to Responsible Investing

(April 9, 2014) — Harvard University’s endowment has announced its public commitment to the United Nations-supported Principles for Responsible Investment (PRI), promising to adopt environmental, social, and governance (ESG) practices into its investments.

The $32.7 billion fund is the first US university endowment to join the organization. 

“As long-term investors we are, by nature, focused on material ESG factors and the responsible stewardship of our investments,” said Jane Mendillo, president and CEO of the Harvard Management Company (HMC), in a statement. 

“After careful review of the PRI, we decided that implementing the principles put forth by this pioneering organization is a natural step for us in the evolution of our sustainable investment practices. At the same time, it is consistent with our paramount focus on maximizing returns to support the mission of Harvard University.”

The announcement comes just six months after Harvard University president Drew Faust said the university would not divest from the fossil fuel industry.

“While I share their belief in the importance of addressing climate change, I do not believe, nor do my colleagues on the corporation, that university divestment from the fossil fuel industry is warranted or wise,” Faust wrote in a letter to the campus community in October last year. “The endowment is a resource, not an instrument to impel social or political change.” 

HMC said the decision to join the PRI followed a “year-long review process and Faust’s commitment” expressed in the same letter last year “to strengthen Harvard’s approach to sustainable investment”. The University’s Corporation Committee on Shareholder Responsibility, a group committed to addressing questions regarding investment policy, has endorsed HMC’s pledge to the PRI, according to the press release.

“Sustainable investment is one of the world’s fastest-growing investment trends, and Harvard’s leadership provides a model for other US universities,” said Fiona Reynolds, managing director of the PRI.

In addition to joining the PRI, Harvard also became a signatory to the Carbon Disclosure Project’s (CDP) climate change program. The CDP works with investors to “request that portfolio companies account for and disclose information on greenhouse gas emissions, energy use, and carbon risks associated with their business activities in order to increase transparency and encourage action.”

In another letter to the Harvard community, president Faust articulated her support for HMC’s gestures towards responsible investing.

“Both these significant steps underscore our growing efforts to consider ESG issues among the many factors that inform our investment decision-making, with a paramount concern for how the endowment can best support the academic aspirations and educational opportunities that define our distinctive purposes as a university,” she wrote.

The PRI came under fire last year when a consortium of Danish pension funds declared they were leaving the organisation, citing continued fruitless attempts at improving the organisation’s overall structure.

In a statement released today, PRI said of the 360 signatories it quizzed 75% would recommend the benefits of being involved with the organisation. In addition, 88% of the members said they believed being a PRI signatory enabled them to demonstrate their commitment to responsible investment. 

The PRI was established to embed six basic ESG principles in investment decisions. Some of the world’s largest investors have signed up to the principles, including pension and sovereign wealth funds, alongside some of the largest asset managers.