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Canada’s universities urged to embrace ethical investing

Administrators, students and industry experts meet in Victoria to discuss factors to consider when managing university funds.

BY ERIN MILLAR | AUG 17 2011

Canadian universities are leaders when it comes to incorporating sustainability and social considerations in their purchasing policies, campus planning and research agendas.

However, they lag behind their European and American colleagues in applying these same values to their investments, according to the Coalition of Universities for Responsible Investing, or CURI.

Omar Dominguez, CURI’s co-founder, said that adopting responsible investing practices is about more than ethics − it may also be a smart financial move in the long term. “Universities are endangering more than their reputations,” said Mr. Dominguez. “They are also putting endowments and pension funds at risk.”

This was the message CURI delivered to university administrators at its first symposium, held in Victoria on June 21. Nearly 50 university trustees, faculty, finance experts and students gathered, and 30 participated remotely, to discuss the potential, and the hurdles, of adopting responsible investment policies at universities.

Socially responsible investing, according to CURI, means taking into consideration social, environmental and governance factors when managing investments. Rather than boycotting specific companies deemed unethical, the coalition favours what it calls shareholder activism to force companies to change their ways.

Canadian universities have a collective $41 billion in pensions and endowments, enough to wield significant influence if deployed strategically, according to CURI.

Many American and European universities have put responsible investment committees in place to review investment decisions and engage in shareholder activism. But few Canadian universities have followed suit. The Université de Montréal and Université du Québec network are the only universities in Canada whose pension funds are signatories to the United Nations Principles for Responsible Investing. And while some universities have adopted specific policies, the University of Toronto is the only one to have a responsible investing committee that produces an annual report and makes recommendations to the university administration.

Participants of the symposium seemed to agree that universities ought to consider the ethical implications of investment strategies, but there was no consensus on exactly how to move forward.

Recent research by global consulting firm Mercer suggests that adopting responsible investment strategies could help to protect investment portfolios. Its report, Climate Change Scenarios – Implications for Strategic Asset Allocation (PDF), estimated that uncertainty about climate change policies could represent up to 10 percent of the
overall risk to portfolios over the next 20 years and needs to be taken into account when making investment decisions.

However, some university trustees at the symposium remained skeptical. “Proponents of RI [responsible investing] argue persuasively that adopting these policies will not lower the return on investment,” said Michael Shakespeare, managing assistant treasurer at the University of British Columbia. “People opposed to RI say the opposite. We’re still trying to find the evidence to show whether that is a myth.”

For Mr. Shakespeare, the CURI symposium was a valuable opportunity to learn. “There is a lot of misconception about what RI is and is not,”
he said.

CURI was formed last year by four graduate students in finance from UBC, Queen’s University, Carleton University and the University of Toronto. “We looked at what was happening in Europe and the U.S. and we wondered why we were not seeing that at our own universities,” explained Heather Hachigian, chair of CURI.

These issues have been on the minds of university administrators recently, with a number of student-led protests making national headlines. At Carleton in March, a board of governors meeting was cancelled after hundreds of students forced their way into the meeting room. They were protesting the board’s refusal to consider
a motion demanding that the school divest its holdings in companies that manufacture military equipment for Israel.

CURI’s view is that divestment campaigns are misguided. “If you demand that universities divest from these companies, you are shutting down the opportunity to come to the boardroom of these companies to address your concerns and really affect change,” Mr. Dominguez said.

However, Duncan Wlodarczak, executive director of the student-funded non-profit agency Sustainable SFU at Simon Fraser University, doubts that students would accept implementing responsible investment policies as an alternative to divesting. He considers responsible investment a half step. “If we’re serious, let’s not invest
in mining; let’s invest in wind turbines,” Mr.Wlodarczak said. “What’s the difference between tobacco [which most universities don’t invest in] and tar sands?”

CURI is currently gathering the perspectives expressed at the symposium in a report that will highlight the current state of responsible investing at Canadian universities, include participants’ recommendations and identify areas of opportunity.

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