With student support at its back, group pushes U. to invest endowment responsibly
Following a USG referendum last spring encouraging the University to invest its endowment in “socially responsible ways,” the Princeton Coalition for Endowment Responsibility is requesting that the University form a committee to monitor its $17.1 billion endowment.
On Tuesday, Yongmin Cho ’14 of PCER met with members of the University administration to discuss the formation of the committee. Cho authored the referendum, which was passed by the student body during last spring’s USG elections by a margin of 1,121 to 450. At the time, PCER said their next step would be to present the group’s demands to Nassau Hall. On Tuesday evening, Cho presented those demands.
Cho requested an “effective regulatory committee.”
“The specifics — the constituents, the functionality — we haven’t yet decided on. We do know that we’d like it to be democratically conceived,” Cho said. “If there isn’t any regulatory mechanism in place, how can I trust whoever is making these decisions? This is a lot of money we’re dealing with.”
The University has previously held financial accounts in countries like Pakistan and Zimbabwe, in addition to investments in the embattled hospitality firm HEI. In March, the University dropped its investments in the company, though it said the decision was unrelated to HEI’s alleged workers’ rights violation.
Currently, the Resources Committee, a subdivision of the Council of the Princeton University Community, is charged with examining concerns raised over the University’s financial policy. The Committee is composed of faculty members in addition to undergraduate and graduate student representatives.
“The goal of the Resources Committee is to advise, not to regulate,” Cho said. “They lack sufficient authority.”
However, Carolyn Ainslie, Vice President for Finance and Treasurer, took a different stance, saying that the Resources Committee is not alone in its advisory capacity.
“Decisions about endowment policy sit with the Board of Trustees, and lots of things around campus involve advice and recommendations on Trustee policy,” Ainslie said. “The Resources Committee provides a conduit for campus interest and engagement to go to the Trustees.”
Other Ivies have formed similar investment responsibility groups, including Yale’s Advisory Committee on Investor Responsibility, Harvard’s Shareholder Responsibility Committees and Brown’s Advisory Committee on Corporate Responsibility in Investment Policies.
But while Princeton received an overall grade of A- from the Sustainable Endowments Institute — an institution "designed to identify colleges and universities that are leading by example in their commitment to sustainability," according to its website — the University ranks last among the Ivies in “endowment transparency,” tied with Penn, with a score of D. Cho addressed this issue in his proposition to the Resources Committee.
“People ask what evidence do we have for moral infractions. We don’t have evidence, and that’s exactly the problem,” Cho said. “Non-transparency is a problem.”
“At the same time, there’s a convincing argument which says we need opacity to be able to make profits, to have a competitive advantage,” Cho explained. “We don’t need all of the information to be publicly accessible. But we do need a way to ensure that the means by which we supply our education is wholesome.”
Currently, the Princeton University Investment Company makes available only asset allocation data which detail the categories in which endowment funds are distributed. Information regarding specific investments is not published.
Ainslie, however, noted that she did not think specific investment figures would be useful to the community at large.
“The concept of social responsibility means different things to different people, depending on who’s looking at [the data],” Ainslie said. “This is where you need to have some sort of policy construct to see what the community in general wants to look at.”
Cho admitted that whatever advisory body is in place must incorporate and represent the opinions of not only the undergraduate student body but also that of graduate students, faculty and staff.
“We’ve been operating under the assumption that students would be willing to trade away some of our financial benefits in pursuit of this goal,” Cho said. “But the endowment needs to be regulated by a set of guidelines that reflect the values of the entire community, not just a few students.”
Cho said that PCER plans to craft a follow-up proposal in the coming months in order to clearly articulate what it sees as outstanding issues with Princeton’s endowment oversight policy. The document will also include a detailed description of the kind of regulatory body needed to address these issues.
“We have to ask ourselves whether it’s feasible to regulate the entire endowment,” Cho said. “Perhaps a better solution would be to set aside an earmarked social choice fund — like the one established at Brown — over which our regulatory body would have authority.”
Brown’s Social Choice Fund was founded in 2007 as a subsidiary of Brown’s endowment that gained media attention for its commitment to investing in environmentally-friendly mutual funds.
“It’s hard to change bureaucracy,” Cho said. “But we’re trying to take an incremental approach.”
Princeton’s endowment stands at $17.1 billion as of June 2011. Year-to-year growth swelled to 22 percent for the fiscal year 2011, but declined to between 0 and 5 percent for the fiscal year that ended on June 30, 2012. The University has not yet released the exact figure.