“One is not born into the world to do everything but to do something.”
― Henry David Thoreau
The University of Edinburgh has a long and proud history of taking action to address environmental challenges and social concerns, and our latest opportunity is responsible investing.
This is not something new- students and student groups such as People and Planet have been campaigning for many years on these issues, and the University has had a socially responsible investment policy in place since 2003. None the less, it is timely to consider what more we can do.
The University’s strategic plan contains a clear commitment to ‘make a significant, sustainable and socially responsible commitment to Scotland, the UK and the world’. In response, we already have a social responsibility and sustainability strategy and a climate action plan. We want to manage our own impacts, teach our students about the big global challenges of the twenty-first century, and apply our knowledge and research to making a real contribution to solving these issues. Those strategies are now being complemented by the development of a socially responsible investment approach.
I joined this University six months ago both because it convinced me that it wanted to be amongst the world’s best when thinking about social responsibility and sustainability, and because I saw a great opportunity for us to improve and to make changes for the better.
One of my first tasks has therefore been to help the university figure out exactly what being a responsible investor means, having been the first University in Europe to have signed the United Nations Principles for Responsible Investment in early 2013.
What Should We Do?
The University has significant endowment funds, that is, monies donated by alumni and others for specific reasons to advance learning, education or other socially valuable activities. The funds are a key component of the University’s ability to meet our objectives and ensure generations to come have the opportunity to learn, grow and research. So, our focus has been working out how we can continue to manage and protect these funds, whilst being a responsible investor.
My dictionary says the following:
Liable to be required to give account, as of one’s actions or of the discharge of a duty or trust…
Able to make moral or rational decisions on one’s own and therefore answerable for one’s behaviour…
Able to be trusted or depended upon; reliable…
Based on or characterized by good judgment or sound thinking..
Required to render account; answerable..
noun: investment; plural noun: investments
1. the action or process of investing money for profit.
I think these two definitions capture the central issues and tensions rather nicely. The University has responsibilities, to the people who have donated the endowment monies, to current and future staff and students, but also has a responsibility to the current generation and to our environmental, ethical and social obligations and expectations. And investment, of its very nature, tries to find ways to make a profit on money given to us, in order to allow a body such as ours to meet its other objectives.
But what are those expectations and objectives? In classic university parlance, that question is ‘contested’ i.e. at the moment it’s not completely clear what we mean and how we should proceed. There are quite a few views, inside and outside the university, on what to do and how to do it. For example, see this from People and Planet or this post from Edinburgh University academic Tim Hayward or this counter-view from Harvard.
With that in mind, we decided to undertake a wide ranging consultation with the staff and student community on how to take forward responsible investment in a way that commands widespread support, protects the endowment funds we have, but allows us to make a significant contribution to environmental and social issues.
One final point on context. To me and you, £280+ million is a lot of money, but of course as a fraction of the total amount of money invested in the world, or even in the UK, it is very small. That said, the sum is large enough to make a difference if targeted in a smart way, and our reputation as a leading university does mean we can expect our actions to have knock-on impacts not just for investment and companies directly, but across the value chain of impact from investment, through companies’ actions, to the decisions company board make on corporate responsibility issues and the impact of the signal we send about our beliefs and our values.
You can find a copy of the consultation document here. We are running our consultation to 7th March 2014 and will afterwards put forward a revised policy for investments, plus a follow up action plan.
Our consultation sets out 12 questions for consideration, in the following areas:
Principles to inform investment
The UNPRI commitment is all about trying to show both what investment decisions an organisation has made, and just as importantly, why and how those decisions are made. The University feels that its commitment to responsible investment would be strengthened if stakeholders were clearer about the principles underpinning the investment decisions that it makes.
Strategic approach to investment
It is important to recognise that in seeking to be a responsible investor, the University has a range of strategic options that it can consider, each of which would appear to have a range of advantages and disadvantages.
1. Investment in companies and funds which contribute to a wealthier and fairer, smarter and healthier, greener and safer and stronger global society
2. Direct investment in university activities and objectives e.g. renewable energy generation- on –site or off-site, climate emissions reduction, energy efficiency etc.
3. Direct investment in a range of ‘start-up’ innovative companies or social investments linked to identified social responsibility themes, perhaps using concepts such as social impact bonds
4. Avoid investment in sectors or companies failing to reach recognised standards
Avoidance of Investment ‘In-Principle’
Circumstances may arise where it is felt that investment activities are simply incompatible with the ethos and values of the university. For example, the University has taken the decision to divest from tobacco. The consultation asks by what process or methodology do you consider that the University should consider these questions?
Organisational and policy changes
The consultation also considers the range of practical matters that the University will need to address in order to fully discharge its responsibilities under the UNPRI – in published principles, guidance to investment managers, transparency and reporting.
These are difficult issues and we want to make sure we as gain as many views as we can prior to coming to a decision. Just a flavour of what we need to consider:
– What is the right balance between protecting investment returns and avoiding investing in certain areas? What should those areas be and why? Do these decisions have a disproportionate impact on our ability to meet our investment objectives (and hence a knock on impact on the viability of the university)?
– Who decides and how do they decide which issues our investment managers should consider?
– How should the balance be struck between engaging with companies to ensure they meet our standards, and avoiding investment if they continue to fail? How long do companies get before we want to take action?
– Even though we have £284m of investment funds, our influence in the grand scheme of things is limited, so how should we choose wisely to maximise our impact?
– If we should avoid investing in certain activities because they are not in line with the values and aims of the University, then what exactly are those values and aims? How do we decide and who gets to say?
I look forward to hearing your views.
Dave Gorman is the University’s first Director for Social Responsibility and Sustainability. You can find out more about the Department for Social Responsibility and Sustainability here. You can give us your views via the online form here