While Canadian universities are intellectual leaders on sustainability, they are lagging behind their American and European counterparts when it comes to incorporating environmental and social concerns into their own investments, according to a new coalition.
"Universities are endangering more than their reputations," says Omar Dominguez, chair and co-founder of Coalition of Universities for Responsible Investing (CURI). "They are also putting endowments and pension funds at risk."
The ethical implications of investment strategies have been on the minds of university administrators recently, with a number of student-led protests landing in national headlines. Late last month at Carleton University, for instance, a board of governors meeting was cancelled after hundreds of students forced their way into the meeting room. They were upset that the board refused to consider a motion demanding that the school divest its holdings in companies that manufacture Israeli military equipment.
CURI, which will bring students and administrators together at its first national symposium on June 21 in Victoria, argues that divestment campaigns are misguided. "If you demand that universities divest from these companies, you are shutting down the opportunity to come to the boardroom of these companies to address your concerns and really affect change," says Mr. Dominguez. "If the university simply sells its shares, then it doesn't have a voice."
Mr. Dominguez points to the successes of Bard College in New York state as an example of the potential influence Canadian universities could wield with their collective $41 billion in pensions and endowments. After concerned students failed to get a response from McDonald's Restaurants to their letters regarding pesticide use, Bard College's committee on investor responsibility filed a shareholder resolution. The committee, which is comprised of four students and four university employees, received a response within a few days.
"The dialogue has moved far more quickly than I had anticipated," says Taun Toay, an administrator at Bard. "It's been a very pleasant surprise working with McDonald's. We actually withdrew our resolution because of McDonald's willingness to work with us." As a result, McDonald's is expected to soon announce a new system for monitoring pesticide use in its potatoes.
Many American and European universities have put responsible investment committees in place to review investment decisions and engage in shareholder activism. But Canadian universities haven't followed suit. The Université de Montréal and Université du Québec are the only schools in Canada that are signatories of the UN Principles for Responsible Investing. And while some universities have adopted policies, the University of Toronto is one of the only ones to appoint a responsible investing committee.
Universities are hesitant to adopt responsible investing principles because trustees don't understand the financial advantages, according to Eugene Ellman, executive director of the Social Investment Organization, an industry association that has endorsed CURI. Mr. Ellman says that universities benefit both from protecting the financial well-being of investments and from being able to assure donors that their contributions are invested in a prudent, responsible way.
"We believe, and there's research to support this, that when you take into consideration environmental, social and governance issues in investments, that you are actually layering in a higher level of due diligence than you do if you ignore them," Mr. Ellman says. "By bringing in this higher level of due diligence, not only are you identifying potential risks down the road, but you're also identifying new opportunities for investment value." These considerations are particularly important for long-term investments, such as pension funds.
Greening endowments and pension funds could be a smart financial move, according to a major report published in February by the global investment banker Mercer. The report, which looked at how climate change will affect institutional portfolios, estimated that uncertainty about climate change policy could represent up to 10 per cent of the overall risk to portfolios over the next 20 years. The report authors guessed that environmental policy could cost companies a collective $4-trillion globally by 2030.
Students involved in the recent divestment campaigns say that shareholder activism is corporate-speak for complacency. Kimalee Phillip, president of the graduate students' union at Carleton, acknowledges that the university adopted an ethical investing policy last year, but doesn't think the policy has teeth. "It does not allow for divestment or call for the screening of companies, so what is the point?" Ms. Phillip asks. "It is consistent with the UN Principles but we're not signatories. It's basically just fluff."
Ms. Phillip believes that divestment in companies with worrisome environmental or human rights practices is the appropriate action for universities. "Divestment is a strong political statement. Financial implications aren't the No. 1 factor. It's about principles, ethics, justice and fairness."
But, according to Bard College's Mr. Toay, more can be accomplished by keeping avenues of discussion open. "You can no longer take a stance in something you don't have an ownership stake in," he says. "Divestment is more of a political statement. It is an extreme stance and it doesn't leave a lot of room for conversation."
Special to The Globe and Mail
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