Dear Princeton Students,
The USG referendum that we, Princeton Coalition for Endowment Responsibility (PCER), has sponsored, recommends that our university’s $17.1 billion endowment be invested in socially responsible ways.
VOTE HERE: https://princeton.heliosvoting.org/
So that all of us may be able to make an informed decision on this issue, we provide answers to the following questions:
- What is the Endowment ?
- Why are we calling for oversight?
- What are some examples of previous investments that have been controversial?
- What is socially responsible investment?
- Is socially responsible investment feasible?
- Will adopting socially responsible investment methods harm us in any way?
- What will the Princeton investment oversight committee look like?
What is the Endowment ?
- An endowment is a collection of assets used to generate income for current and future operations.
- Composed of 3,935 discrete funds, it is valued at $17.1 billion (as of June, 2011) and is the 4th largest endowment in the United States.
- Princeton Investment Company (PRINCO) manages our university’s endowment, with the University’s Board of Trustees supervising the process.
- PRINCO is the “manager of managers” – it does not invest funds directly but rather creates broad guidelines for its investment portfolio and then selects outside investment managers to give funds to.
- PRINCO employs around 30 people who select and monitor private funds. The company works with more than 100 private funds and pays outside managers roughly $215 million per year.
- PRINCO does NOT release its investment portfolio to the public, meaning outsiders don’t have any way of knowing where our university holds its money.
Why are we calling for oversight?
- Fundamentally, PRINCO instructs the hired investment managers to invest our endowment with the goal of maximizing revenue in the long term.
- The University actively chooses not to take a position or play an active role with respect to “external issues of a political, social or moral character.“
- This has led to cases in which the endowment has been invested in areas that have caused widespread condemnation from both within and beyond the Princeton community.
- These have included extensive holdings in apartheid South Africa; probable indirect holdings in five companies active in Darfur; and the private equity fund HEI, which buys and sells hotels and has been convicted in court multiple times for various labor violations.
- These are the few cases that we know about only because there were nationwide protests calling for responsible investment by universities.
- Despite the morally questionable nature of these investments, PRINCO still refuses to disclose the companies that our endowment funds.
- Here are some articles that cover Princeton’s controversial investments:
- HEI: http://www.dailyprincetonian.com/2012/03/01/30159/
- Darfur: http://www.dailyprincetonian.com/2006/09/13/15751/
- South Africa: www.dailyprincetonian.com/2008/12/10/22389/
What is socially responsible investment?
- We believe that employing socially responsible investment methods will address the problems mentioned above.
- Socially responsible investment (SRI) an investment strategy which consider both financial returns and the social good. SRI is a profitable investment strategy, yielding returns above the overall market rate.
- In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, and human rights.
- At the same time, they actively avoid funding firms whose corporate practices violate human rights, labor rights, perpetuate discrimination, and destroy the environment.
- As it applies to our university, an effective investment oversight committee would be responsible for both refining the current investment policy statement to account for the social good and making sure that PRINCO manages our endowment by those standards.
Is socially responsible investment feasible?
- Yes! All Ivy League schools except Princeton and Cornell have committees responsible for regular review of their institution’s financial investments.
- These committees also serve as a forum for student and faculty concern over the moral or political consequences of the investments.
- For instance, the investment oversight committee at Stanford University has done a good job of doing just what we are recommending.
- Their investment policy statement can be found here: https://www.stanford.edu/group/apir-l/docs/public/STANFORDS_STATEMENT_ON_INVESTMENT_RESPONSIBILTY2012.pdf
- The endowment is separate from the direct operating account.
- Only 4 – 5.75% of the entire endowment is annually spent as part of the operating budget, which encompass general expenses that the university incurs for education and research. (This information found here: Endowmentppt-2-23-2012-meeting-summary)
- This means that even if returns on our endowment were to decrease from responsible investment, it will not negatively affect student life in any tangible way.
- More importantly, we should not hastily assume that responsible investment methods are unprofitable.
- In the last 20 years, the total amount of US dollars invested with responsible investment strategies have yielded returns above the market rate.
- Consisting of undergraduates, graduates, faculty, and administrators these committees play an advisory role by convening regularly to produce reports for the investment office.
- It will oversee the endowment to ensure that investments are made in accordance to with the values of the University community.