What are YU doing about socially responsible investing?
(originally published at Schulich's Student Monthly: The Insider)
Sir Nicholas Stern, Al Gore and other oracles have slapped the collective C-suite across the face – so hard that most have woken up to a looming crisis. It is not by good will that they have awoken from their quarterly earning stupor, rather executives have sighed a collective, “aha,” finally realizing the effects that global warming, increased transparency and greater accountability will have on their future returns.
This realization has come from a confluence of these forces as we are now able to compute the cost of risks posed by some environmental, social and governance (ESG) issues, such as Sir Stern did in his seminal and self-titled report, we are now able to share what companies are doing in great detail and, evident changes to the climate and those stirring the pot like Al Gore have finally evoked some passion amongst the populace to demand action. Even the classic business press and venerable business strategists such as Michael Porter have begun to write about how businesses must adapt to these issues, or they will lose competitive advantage. Consequently, C-suites around the globe have all noted in their board minutes, “What are we doing about ESG issues?”
At York University, these issues have also begun to worry the higher echelon. In May of 2006, the investment committee that oversees the university's endowment also wrote in their minutes, “preliminary discussion on socially responsible investing [has begun].”1 This interest by the committee and the university's board to whom it reports is perhaps in part due to concerns of risk exposure, but may also be due to fear of activism -- Former zodiac piloting activists are learning more about how greater transparency and accountability offers them the ability to scrutinize the activities of organizations and so they are increasingly picking up calculators, flipping through annual reports and investment statements rather than chaining themselves to trees or nudging rubber boats in front of tankers. So perhaps the university should be nervous. On campus, there are a number of groups who have begun to ask questions about what York is doing with its money.
What groups like these are finding is that institutional investors like York, or perhaps the Canada Pension Plan, are spreading their risk far across the whole market (a sound strategy for large, “universal” investors) and in doing so they have been investing in all sectors of the economy without particular regard to ethical, environmental, social and governance matters. Now that some ESG issues can be quantified, the activities of companies are more openly available, and reports have begun to show that not addressing ESG factors is a poor choice economically, activists have been pressuring these institutional investors to begin to consider ESG in their investment decisions. Where these groups have been met with resistance, or closed doors, they have done considerable harm to the reputations and the “brand” of many big companies and institutions. In Europe and the United States, for example, there have been a number of cases where funds, or companies found to be investing in companies who do work in the Sudan, or who are major polluters, have been pressured by these groups to divest from these companies.
One group at York involved in such work is the York Coalition for Responsible Investment a grass roots multi-stakeholder organization, who has taken the initiative to raise awareness and to lobby to have ESG issues considered in university's investments. They held a panel on the 26th of September, at the university on the topic of "Universities and Responsible Investments.” In parallel representatives from Stand, an international student organization that is devoted to ending the atrocities in Darfur2, has engaged with the university for over a year to review the university's investments – they advocate for divestment of ownership of companies who are directly linked with genocidal actions in Darfur. And a third group are a number of academics at the university, including Simon Granovsky-Larsen, a Political Science PhD Candidate who has been active in human rights and Professor Wesley Craig, a well known professor of ethics from the Schulich School of Business, have been involved in advocating for and researching the topic of socially responsible investment at national and international levels for several years.
Though there has been much interest on campus, 19 months after the investment committee decided to look into this matter, it still does not have a recommendation for a Socially Responsible Investment (SRI) policy. For a university in suburbia, surrounded by large oil storage facilities and wedged between three massive highways it is perhaps not surprising that it is not a leader in considering the environmental impact of its investments. The gross delay in addressing the social or governance implications of its investments, is perhaps less understandable for a fund that exists to create educated leaders. Any delay is certainly not because York University itself lacks the intellect to address this issue – within the corridors of the university are many of the world's leaders on how to responsibly invest. Evidently the delay was because the committee had been distracted by matters that normally might be considered quite routine for an investment committee, such as a review of the “asset mix and related investment policy matters”. 3
This delay is particularly regrettable as this review of the asset mix, that was presumably caused by divestments in US stocks implicated in the sub-prime housing flop and changes due to the skyrocketing Loonie had led the 306-million dollar fund5 to make substantial changes to its holdings -- had an SRI policy been in-place, the university could have made these changes also considering the environmental, social or governance factors that it has for so long said that it would address.
-- Ian Howard is the president of the Schulich Chapter of NetImpact, a MBA student group that focuses on affecting positive social and environmental change on business.
References:
5http://www.canada.com/nationalpost/financialpost/story.html?id=92cb135f-b6b5-4697-b5dd-a98c7cca77b6&k=13850
6http://www.cppib.ca/Results/Financial_Highlights/public_equity.html – note this is the number of publicly traded Canadian equities held by the CPP.
7source: CDP 2006 Annual Report http://www.cdpcapital.com/media/ra06_RAPPORT_ANNUEL_2006_EN.pdf – note, this figures is the amount of publicly traded Canadian equities held by the CDP.
8 stated at the launch of the Carbon Disclosure Project in Toronto, 10 October 2007
9Carbon Disclosure Report, CD5, Canada, http://www.cdproject.net/download.asp?file=CDP5_Canada_Report.pdf
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