They ask us to envision an economic system in which we consider how every action affects people around the world, now and for the future.
They look to ways where we can closely manage impacts on natural systems — our ‘life-support system’ — so we don’t excessively harvest, damage, or pollute at rates greater than those systems can regenerate.
They implore us to account for the full costs of our activities and address the market failure to account for the costs of negative effects on health, communities, or natural systems. No longer is it be acceptable, they say, to leave taxpayers, far-off communities, and future generations to bear the burden.
They are the Intentional Endowments Network (IEN), and they argue that we can create an economy that is sustainable, just, and powered by clean, renewable energy. Yes, it will take efficient resource management alongside sustainable business and investment practices, but it’s an approach that can create ample opportunities for dignified work and fair rewards for the contributions of both labor and capital.
And to reach these goals, the IEN says it will take endowment leadership to produce sustainable investing policies.
The Intentional Endowments Network is a peer-learning system where endowment staff, CIOs, trustees, and other fiduciaries learn about investing for a thriving, sustainable economy for the next generation. As a robust and active group of more than 150 leaders from colleges and universities, other endowed nonprofits and their stakeholders, financial industry practitioners, and academic experts, the vision of the IEN is for intentionally designed endowments to be the norm.
The Network helps endowments to find the most strategic, effective, and feasible ways to approach investing in the context of 21st century sustainability challenges.
What is an Endowment?
An endowment is a donation of money or property to a non-profit organization. That non-profit, in turn, designates the resulting investment income for predetermined and specific purposes. On occasion, the endowment is dedicated to maintaining a non-profit’s investments for operations or programs. Of course, these areas must be consistent with the wishes of the donor. Most endowments retain the principal amount and apply the investment income to charitable efforts.
Many endowments are administered by educational institutions, and endowments provide colleges and universities with the wherewithal to fund their operating costs with sources other than tuition, thus ensuring a level of constant and reliable stability. Additionally, university endowments can also be established for targeted disciplines, departments, or programs. Smith College, for example, has an endowment specifically for their botanical gardens, and Harvard University has upward of 10,000 separate endowments.
Investment management groups have the task of growing the funds by reinvestment of the endowment’s earnings while also contributing to the operating cost of the institution and its goals. For instance, students have advocated for divestment from industries such as fossil fuel corporations that are determined to be morally compromised.
According to US News & World Report, the top 5 universities by endowment size at the end of the fiscal year 2018 were:
- Harvard University $39,233,736,000
- Yale University $29,444,936,000
- Stanford University $26,464,912,000
- Princeton University $25,438,300,000
- Massachusetts Institute of Technology (MIT) $16,400,027,000
Why Does the Intentional Endowments Network Depend on Higher Education?
Higher education is a necessary complement to the Intentional Endowment Network. Challenges related to climate change, water, food, economic inequality, poverty, and social unrest pose an existential threat to society, and higher education is one of the few sectors designed to think and act for the long-term good of that society.
Higher education institutions play a critical role in educating the nation’s future leaders and professionals, helping solve current problems, anticipating tomorrow’s challenges, and setting a behavioral model for society.
Thus, the Intentional Endowment Network looks to colleges and universities to intentionally align all their actions — including investments — to enhance their financial sustainability and to help society evolve in a positive direction. The network becomes a learning community by bringing together higher education senior level decision makers and key stakeholders, creating venues for knowledge exchange and constructive dialogue to move past persistent barriers to action, and providing thought leadership, and partners with other organizations in the field for action.
IEN facilitates connections with experts and peers to support administrators and trustees in enhancing their institutions’ approach to sustainable investment and addressing stakeholders’ concerns.
Goals for Sustainable Endowments over the Next 10 Years
In 2018, 249 out of 802 respondents (31%) to the NACUBO-TIAA Study of Endowments applied some sort of responsible investing policy to portfolio holdings. 18% of the 802 reported seeking investments that ranked high on ESG criteria. 21% said they exclude or screen out investments that are inconsistent with the institution’s mission, while 10% said that they allocate a portion of the endowment to impact investments that further the institution’s mission. Just 8% of institutions said that their board had voted to exclude environmentally irresponsible investing considerations.
The goal of an inclusive, just, and sustainable society is central to the educational experience of all students, particularly in business and economics education. IEN has the following overarching goals over the next 10 years:
- Intentionally designed endowments, aligned with institutional missions become the norm in higher education and other tax-exempt organizations, evidenced by growth in policies, practices, and actions
- Improved sustainability performance by businesses in response to investor concerns, evidenced by changes in corporate reporting, policies, and behaviors related to investor demands and shareholder resolutions
- Endowment capital is mobilized for positive impact in addition to financial returns to benefit people, communities, and society as whole and contribute to achieving the Paris Climate Agreement and Sustainable Development Goals
In the course of achieving these goals, the estimated 50,000 trustees that serve as fiduciaries at higher education endowments become advocates for effective sustainability solutions and an inclusive economy in all areas of their personal and professional lives.
Are you interested in prodding your academic institution toward sustainable endowments? If so, check out some of these IEN resources.
- An Endowments Snapshots portfolio
- ASU Case Study on incorporating sustainable investing into endowment portfolio
- Middlebury’s Commitment to Fossil Fuel Divestment (see story feature and related Q&A here)
- University of New Hampshire’s process to intentional endowment investing which led to contributions to a community loan fund
And you might want to join the The Higher Education Climate Leadership Summit, presented by Second Nature and the Intentional Endowments Network. It will be a gathering in Atlanta from February 23-35, 2020 of higher education leaders committed to driving our nation’s climate action. As the world looks to 2020 to update emissions reductions targets under the Paris Climate Agreement, the Summit will be an opportunity for the higher education sector to take stock of its own progress and explore ways to scale local climate leadership to meet the global goals by working across institutions and across sectors.