The Daily Tar Heel

Serving the students and the University community since 1893

Thursday April 22nd

How to invest - or divest: UNC needs avenues for airing concerns about the endowment

Earlier this month, the UNC Sierra Student Coalition delivered a letter to Chancellor Holden Thorp calling on the University to divest from coal.

Endowment transparency is an old issue, but this letter — which was co-signed by 35 student leaders from across UNC’s campus — merits another look at our endowment.

Also copied on this letter were the members of the Board of Trustees, the endowment’s board of directors and the UNC Management Company, which is responsible for investing the University’s endowment. Like any business, the mission of UNC Management Company is to maximize returns.

But since these returns are used exclusively to fund UNC, it makes little sense for them to be earned by supporting ventures that are directly opposed to the University’s stated aims. And one of these aims is sustainability.

UNC Management Company was established in 2003 to manage UNC’s endowment, recently estimated at $2.5 billion.

The company’s status as a separate — but still nonprofit — entity allows it to operate differently than the rest of the University.

Unlike the UNC administration, UNC Management can offer its employees the same kind of compensation as other asset managers, with whom UNC Management competes for talent in the lucrative financial services industry. The company can also limit disclosure of its investments.

But the University itself is not a business, and our investment choices should reflect this.

Altering the way our endowment operates need not mean sacrificing our returns. Some of the largest and most successful endowments in the country screen their holdings to avoid investing in socially irresponsible companies.

While the endowment may not want to provide a detailed list of its holdings, it can do a better job of providing information about where it invests the University’s funds.

Some universities divulge detailed information about their holdings, which tend to be extensively diversified to minimize risk.

The money in a given university’s endowment might be invested in anything from a mutual fund in Hong Kong to real estate in California.

The Sierra Club’s goal of total divestment from the worst offenders in the coal industry may be too lofty, but UNC Management must do more than just present its target asset allocation, which is the extent of its current disclosure.

Other options exist to make our endowment more socially responsible.

For companies in which UNC holds a significant stake, UNC Management and the endowment’s board can use UNC’s influence as a shareholder to push for changes in company policy.

For instance, if UNC invests in a large utility, we could lobby for it to retire its coal plants within a specific time-frame or ask that it retrofit its existing plants to modern pollution standards.

Yale University and Duke University have two of the largest endowments in the country, at $19.4 billion and $5.7 billion, respectively. Both universities have committees consisting of students, faculty, alumni and administrators to review proposals like the Sierra Student Coalition’s.

If the committee thinks a proposal’s complaints are legitimate, it makes a recommendation to the endowment’s board to divest from the industry in question.

If nothing else, the endowment should insert a clause into its charter that would allow it to consider social responsibility in its administration of the portfolio. Numerous other prominent state schools have similar clauses.

Moreover, there is a precedent for socially conscious investing at UNC: in 1986, after months of student protest, UNC divested from apartheid South Africa. More recently, the University took a stand against human rights abuses in Sudan.

It may be true that coal doesn’t present the same sort of immediate, severe threat to human rights as the examples above, and it therefore lacks the near-unanimous disapproval these more widely publicized causes enjoyed.

Nevertheless, in terms of endowment divestment, coal is the issue students have shown interest in. It transcends environmental issues and reaches into the spheres of public health, employment and industry in North Carolina.

As the University embarks on another fundraising campaign, there is no better time for the endowment to be more transparent, since students, faculty and donors deserve to know where their money is going.

It is time for the University to stop paying lip service to our campus-wide sustainability goals and instead put our money where our mouth is.

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