"With eyes wide open, Generation Z looks to serve, share, and impact," proclaims a recent Zendesk Relate piece. And with growing numbers of this up-and-coming generation heading off to college and into the workforce, it follows that universities are increasingly turning toward socially responsible investment (SRI) -- not only because their constituents are demanding it and it's the right thing to do, but also because it pays off. Here’s a closer look at the trend, along with what students can do to get in on the action.
What is Socially Responsible Investing?
According to Investopedia, a socially responsible investment “is considered socially responsible because of the nature of the business the company conducts. Common themes for socially responsible investments include avoiding investment in companies that produce or sell addictive substances (like alcohol, gambling, and tobacco) and seeking out companies engaged in social justice, environmental sustainability and alternative energy/clean technology efforts."
In other words, while all investments have the goal of financial gain, SRIs also have another priority: social impact.
Socially responsible investing is not a new concept. In fact, it’s been around for a long time. However, socially responsible investing trends evolve and change. “In the 1960s, investors were mainly concerned with contributing to causes such as women's rights, civil rights and the anti-war movement. [...] As awareness has grown in recent years over global warming and climate change, socially responsible investing has trended toward companies that positively impact the environment by reducing emissions or investing in sustainable or clean energy sources," explains Investopedia.
Dan Apfel, Executive Director of the student-founded Responsible Endowments Coalition, a leading voice for responsible investing in higher education, added, “There is a long history of students working to hold colleges accountable to their mission and principles in their investment policy. In the 1970s and 1980s, students successfully campaigned for their colleges to divest from South Africa. In the 1990s and 2000s, students organized to urge their colleges to divest from Sudan because of the genocide in Darfur.”
Universities and Socially Responsible Investing
A recent Nonprofit Quarterly article shared the story of a recent $50 million contribution to a US university. The gift was accompanied by two conditions. The first specified that the money be earmarked for scholarships. The second, however, didn’t relate to how the funds would be spent. Rather, it addressed its management -- specifically, that the funds be invested in a “socially responsible” way.
This is not an isolated phenomenon. Nor is the desire to do so limited to GenZ. REC executive director Marcie Smith told University Business, "Millennials are demanding that their managers and consultants develop investment strategies that incorporate people and the planet." According to the same article, meanwhile, approximately 25 percent of colleges and universities surveyed by the Commonfund Institute say they practice some form of responsible investing -- and with no negative impact on profit, according to Apfel. “Most research finds that you can do this without negatively impacting, and sometimes even positively affecting, financial returns. Companies that have better relationships with the environment and treat their workers well often make better investments. Investors can engage with the companies they own, encouraging them to become better actors,” he reveals.
Where Students Fit Into the Mix
Students benefit from socially responsible investing in several ways. For starters, SRI is in natural alignment with equal access in higher education. But it doesn’t end there. Through their own example and by offering coursework in social responsibility, universities can help create a generation of socially responsible leaders.
One inspiring example? A new fund at McGill University’s Desautels Faculty of Management dedicated to Socially Responsible Investing. What makes this fund unique is that it is under Canada’s first student-run, registered investment management fund, Desautels Capital Management (DCM). This innovative initiative will allow students to factor environmental, social, and governance issues into the investment decision-making process.
“Social responsibility is becoming more and more important to our investors and it’s also something that our students are very passionate about. [...] On top of that, there’s a growing body of research that shows that incorporating SRI factors into the investment process can improve financial performance,” insists Vadim di Pietro, associate professor of finance and chief investment officer at DCM.
The importance of social responsibility in academia is consistent with a similar movement toward corporate social responsibility in industry. The takeaway, according to Smith, is that “You can make a good bet that the idea that you can better align your investments with your values or your politics isn’t going away. The pressure to consider the social, environmental and economic impact of one’s investments is only growing.”
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