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April 10, 2014

Harvard Joins Principles for Responsible Investment
    by Robert Kropp

Harvard's endowment is the first in the United States to join the global network of sustainable investors; the university also announces it will report its greenhouse gas emissions to the CDP.

SocialFunds.com -- Last year, Harvard was criticized by the student divestment movement for refusing to join the growing number of college and university endowments that are divesting their holdings in fossil fuel companies.

Despite strong support from students at the university for the action, Harvard President Drew Faust said, “As shareholders, I believe we should favor engagement over withdrawal. In the case of fossil fuel companies, we should think about how we might use our voice not to ostracize such companies but to encourage them to be a positive force both in meeting society’s long-term energy needs while addressing pressing environmental imperatives.”

Sustainable investors have come down on both sides of the divest vs. engage debate, but what might have been most troubling about Faust's position was her concept of fiduciary duty. “The funds in the endowment have been given to us by generous benefactors over many years to advance academic aims, not to serve other purposes, however worthy,” she wrote. “As such, we maintain a strong presumption against divesting investment assets for reasons unrelated to the endowment’s financial strength and its ability to advance our academic goals.”

If, for example, ExxonMobil, which recently reported that “Any future capping of carbon-based fuels to the levels of a 'low-carbon scenario' is highly unlikely due to pressing social needs for energy,” is wrong about its position on stranded assets, then an enlightened view of fiduciary duty would seem to support divestment.

Nevertheless, Harvard has taken steps to address the concerns of its stakeholders. Also last year, Harvard Management Company, the endowment's investment manager, announced the hiring of Jameela Pedicini as its first vice president for sustainable investing. Pedicini was formerly employed by the California Public Employees’ Retirement System (CalPERS), a leading pension fund with a long-standing commitment to sustainable investing.

This wee, Harvard took further steps toward a philosophy of sustainable investment, when it announced that it will become the first university endowment in the US to become a signatory to the United Nations' Principles for Responsible Investment (PRI). As readers of SocialFunds.com surely now, PRI is an international network of sustainable investors committed to the incorporation of environmental, social, and corporate governance (ESG) criteria into their investment strategies.

“Harvard University is the first US endowment to publicly commit to investing its funds in a more responsible and sustainable manner using the PRI’s voluntary framework, and we are thrilled to welcome them to the organization,” said Fiona Reynolds, Managing Director of the PRI. “Sustainable investment is one of the world’s fastest-growing investment trends, and Harvard’s leadership provides a model for other US universities.”

At the same time, Harvard, which in 2008 committed to reducing its greenhouse gas (GHG) emissions by 30% by 2016, announced that it will report on its GHG emissions and reduction strategies to CDP (formerly the Carbon Disclosure Project). Almost 800 institutional investors, with $92 trillion in assets under management, work with CDP to encourage disclosure and management of GHG emissions by corporations, cities, and other organizations.

“Both these significant steps underscore our growing efforts to consider environmental, social and governance issues among the many factors that inform our investment decision-making,” University President Faust said, “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.”

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