Higher education institutions are gradually adopting sustainable investment strategies, but some student-led funds are leaning in, according to a recent report from the Intentional Endowments Network, which advocates for using approaches that address climate change and social equity.
IEN examined 40 student-managed investment funds, or SMIFs, that use sustainable investment strategies in its network of schools. Just under half of the funds were supported with donations. A similar share (41%) were part of their college's endowment. And about half were managed as part of a course, while a third were run through a club.
Colleges are continuing to incorporate these strategies across their investment portfolios, and the pandemic's economic impact could provide impetus for the change.
Sustainable investing practices have been gaining steam. Colleges are going beyond reconsidering which types of industries they are investing in. They are also reexamining how those industries and the businesses within them treat the environment, society and their workforces, and how those nonfinancial factors can affect their performance — a strategy sometimes referred to as ESG.
More than $17 trillion of assets were being managed with ESG strategies at the close of 2019, up 42% from 2018, according to a report from US SIF, which advocates for sustainable investing.
One-quarter of the funds IEN surveyed focused primarily on ESG while a similar share emphasized impact investing when making decisions. The 40 SMIFs held $68 million in assets, representing about 10% of all SMIF assets under management in the U.S.
IEN's report highlights how a few SMIFs are using these strategies.
A student-led impact investment fund at Portland State University created in 2019 puts money behind local companies that emphasize environmental or social change. Donors seeded the fund with $160,000, and the college has plans to raise another million through donations and grants, according to the report.
A similar SMIF at Northeastern University, in Massachusetts, was founded in 2016. Its students invest in Boston-based companies that are looking to address social and environmental challenges.
Many colleges had their SMIFs adopt a sustainable investment philosophy following the Great Recession, the IEN report notes. A similar trend is playing out during the coronavirus pandemic, with experts predicting that higher education institutions will lean into sustainable investing across their portfolio during the health crisis.
Schools are responding to continued calls from students to divest from fossil fuels. Yale University, in Connecticut, adopted new principles in April to guide its investments into companies producing fossil fuels. The school will place companies that fail to meet its new criteria, such as requirements that they support "meaningful and effective" government policies that address climate change, on a list of firms in which it will not invest.
Amherst College, in Massachusetts, is promising to stop making new investments in gas and oil companies and to end its $2.5 billion endowment's direct investments in fossil fuel industries by 2030. Since 2015, the share of the college's endowment invested either directly or indirectly in fossil fuels has fallen from 6% to 3%.