A long-awaited report on Pitt’s endowment was released Thursday night by the University’s Socially Responsible Investment Committee.
The 61-page report weighs the positives and negatives of factoring Socially Responsible Investing (SRI) considerations into managing the University endowment, which support research funding, scholarships, advancements in technology and student life initiatives, among other projects. The SRI committee, which consists of Pitt students, faculty and staff, was formed in late 2017 to research socially responsible ways to invest the University’s endowment.
In the report, the committee noted that SRI practices have become increasingly common in managing endowment-type funds and detailed SRI efforts being spearheaded at several other universities, such as Yale and Northwestern. The report detailed three ways SRI practices can be used in managing an endowment: negative and positive screening — including or excluding certain investments due to certain characteristics — and engaging in the corporate governance process, such as sponsoring shareholder resolutions to advocate sustainability practices.
The report noted that Pitt adopting SRI practices would be in alignment with the University’s mission, most notably the Pitt Sustainability Plan. The sustainability plan, released in 2018, is meant to introduce “deep and lasting changes” to create a University that is environmentally, socially and economically responsible.
“As a result, failure to include SRI considerations into endowment portfolio decision could be considered as incompatible to this aspect of the University’s mission and might send mixed signals to the internal and external community about the University’s true commitment to the full meaning of sustainability,” the report said.
Pitt spokesperson Joe Miksch said at the present moment, it is difficult to say what the University’s response to the report will be as the review process has just begun.
The committee also spoke positively of adopting SRI practices in that it could make Pitt a leader in a developing global trend. The inclusion of SRI considerations into investment portfolios has been growing steadily, with assets under management using SRI strategies growing by 38% since 2016.
“There are a broad range of issues addressed b screening investments on a variety of environmental, social and governance criteria,” the report said. “Thus, investors have considerable options should they wish to include SRI considerations into their portfolio choices.”
The report also noted that SRI practices may be viewed positively by alumni donors and that prospective students could be attracted by the knowledge that their university is concerned about sustainability and other social issues. The committee cited a 2018 report from the Princeton Review which found that since 2008, a consistent majority of prospective student respondents said having information about colleges’ commitment to environmental issues would contribute in some capacity to their application and attendance decisions.
The committee also noted that if the University were to adopt SRI practices, it would be staying consistent with the ideals of existing students, faculty and staff. In recent years, Pitt has been under pressure from student groups to divest its endowment from fossil fuel investments. According to The Guardian, part of Pitt’s endowment as of November 2017 was invested in EnCap Energy Capital Fund IX-C, a Cayman Islands hedge fund, which was revealed in the Paradise Papers scandal last year.
The committee recounted how a majority of students at Pitt appear to support SRI practices, citing the efforts of the Fossil Free Pitt Coalition, as well as a March Student Government Board referendum where 91 percent of student voters supported divestment from fossil fuels.
The report also described two public forums held for members of the Pitt community in Nov. 2018, where the majority of attendees spoke in favor of SRI considerations, including divestment from tobacco, private prisons and fossil fuels and investment in diversity and human rights. An online forum also found that the majority of respondents thought SRI factors should be taken into account concerning the management of the University’s endowment.
During these forums, it was noted that a couple community members professed concerns about the University’s finances being affected by SRI practices. These concerns were also shown by the SRI committee in the report.
The committee suggested that adopting SRI practices, while attracting some donors, could deter others. Adopting SRI practices could also lead to higher management fees and expense ratios than currently paid by Pitt’s endowment fund, reducing net returns on investments and hindering the University’s operating budget.
“The expected cost of incorporating SRI considerations would have to be weighed against the expected benefits of incorporating SRI considerations into the university’s portfolio,” the report said.
Overall, the committee stated that a compelling case can be made for including SRI considerations into allocation decisions, finding them to be consistent with Investment Committee and University policies and the views of the majority of the Pitt community. Still, it cautioned that taking them up could impact the University’s ability to pursue its mission.
“Therefore, we recommend that the pursuit of socially responsible investment strategies should involve a careful consideration of (i) The importance of the social issue to the University community, (ii) The impact of the University’s investment policy decision on the social issue, and (iii) The impact of the University’s investment policy decision on the value of the endowment corpus,” the report said.
SRI committee members include:
- David Denis, committee chair and professor at Pitt’s College of Business Administration
- CB Bhattacharya, chair in sustainability and ethics at Pitt’s Katz Graduate School of Business
- Ronald Brand, professor at Pitt’s School of Law
- Emily Elliott, associate professor in Pitt’s department of geology and environmental science
- Young Sarah Grguras, a recently graduated Pitt student
- Maggie Kennedy, a recently graduated Pitt student and former SGB President
- Sera Linardi, associate professor of economics at Pitt’s Graduate School of Public and International Affairs
- Clayton Steup, assistant director of admissions of Pitt’s School of Medicine