The Dutch University Fund as Socially Responsible Investor:
A Research into Applied Strategies and Ethical Deliberations
Tijn Melle Croon
MSc Thesis in Political Economy (Political Science)
Graduate School of Social Sciences, University of Amsterdam, The Netherlands
Under supervision of dr. R.J. Pistorius
Second reader: dr. M. Parvizi Amineh
June 22, 2018
Abstract
The decline of public funding and the subsequent re-emergence of private capital
flows towards Dutch universities confront policymakers with multiple dilemmas. This
research explores the handling of the ‘fourth flow’, private donations to university
funds that can be accumulated on the stock market. Investment could offer a structural
complementary source of income, but at what costs? The theory of socially
responsible investing (SRI) is therefore explored in this research, with special
emphasis on the moral and practical considerations for university funds. It turns out
that Dutch university funds prefer moral purity rather than moral effectiveness in their
investment portfolios. The former implies the inclusion of companies that have a
strong environmental and social governance (ESG) performance and the exclusion of
harmful sectors and companies, while the latter implies a more activist approach. The
activist approach translates into engagement and voting strategies, which are not
applied due to various reasons. This research thus explores the deliberations that drive
or dissuade Dutch university fund policymakers to apply SRI strategies. As
institutional investors have a short-term perspective due to fiduciary requirements,
university funds could have an impact as knowledge-based advocates of a long-term
investment policy.
Keywords: Socially Responsible Investing (SRI), Environmental and Social
Governance (ESG), Sustainability, Institutional Investors, Active Ownership,
University Funds, Higher Education Funding.
Table of Contents
1 Introduction
4
2 Developments in the private funding of universities
6
2.1 History of Dutch higher education funding
7
2.2 Re-emergence of private funding in Dutch higher education
11
2.3 Dutch university funds as endowments or intermediaries
18
2.4 University endowment funds in the U.S.
21
2.5 Conclusion
23
3 Moral considerations for the university fund as socially responsible investor 24
3.1 Costs and benefits of ethical investment by universities
25
3.2 Position within financial discourse
28
3.3 Conclusion
31
4 Socially Responsible Investing (SRI)
32
4.1 Historical development of SRI approaches
33
4.2 Predominant SRI strategies
35
4.3 Policy, implementation and accountability
39
4.4 Financial performance of ESG funds
40
4.5 Conclusion
42
5 Methodology
43
5.1 Methodological approach
43
5.2 Case selection
45
5.3 Method of data collection
46
5.4 Ethical considerations
49
6 SRI strategies of Dutch university funds
49
6.1 Case studies into the application of SRI strategies
50
6.1.1 Stichting Leids Universiteits-Fonds
50
6.1.2 Stichting Erasmus Trustfonds
52
6.1.3 VUvereniging
54
6.1.4 Stichting Amsterdam Universiteitsfonds
57
6.1.5 Stichting Groninger Universiteitsfonds
59
6.1.6 Stichting Universiteitsfonds Limburg
62
6.2 Comparative analysis of applied SRI strategies
64
7.1 General remarks on policy and accountability
67
7.2 ESG integration
68
7.3 Positive selection
70
7.4 Negative selection
71
7.5 Voting and engagement
73
8 Conclusion
74
Bibliography
76
The Dutch University Fund as Socially Responsible Investor:
A Research into Applied Strategies and Ethical Deliberations
Tijn Melle Croon
MSc Thesis in Political Economy (Political Science)
10554785 – t.m.croon@gmail.com
Graduate School of Social Sciences, University of Amsterdam, The Netherlands
Under supervision of dr. R.J. Pistorius
Second reader: dr. M. Parvizi Amineh
June 22, 2018
Abstract
The decline of public funding and the subsequent re-emergence of private capital
flows towards Dutch universities confront policymakers with multiple dilemmas. This
research explores the handling of the ‘fourth flow’, private donations to university
funds that can be accumulated on the stock market. Investment could offer a structural
complementary source of income, but at what costs? The theory of socially
responsible investing (SRI) is therefore explored in this research, with special
emphasis on the moral and practical considerations for university funds. It turns out
that Dutch university funds prefer moral purity rather than moral effectiveness in their
investment portfolios. The former implies the inclusion of companies that have a
strong environmental and social governance (ESG) performance and the exclusion of
harmful sectors and companies, while the latter implies a more activist approach. The
activist approach translates into engagement and voting strategies, which are not
applied due to various reasons. This research thus explores the deliberations that drive
or dissuade Dutch university fund policymakers to apply SRI strategies. As
institutional investors have a short-term perspective due to fiduciary requirements,
university funds could have an impact as knowledge-based advocates of a long-term
investment policy.
Keywords: Socially Responsible Investing (SRI), Environmental and Social
Governance (ESG), Sustainability, Institutional Investors, Active Ownership,
University Funds, Higher Education Funding.
1. Introduction
Socially Responsible Investing (SRI) has been on the rise for the past decades and this development changed policies within the corporate and public spheres (Sparkes, 2003). At present, not only credit risks are taken into consideration during due diligence processes, but
also risks with regard to Environmental and Social Governance (ESG). This is a promising prospect, since the norms and values of the financial sector have a gigantic impact on sustainable development (Jeucken, 2010).
Institutional investors from the U.S. such as pension funds, churches and universities were pioneering this attempt to incorporate ethical demands into profitable funds. The endowment funds of American universities created SRI strategies that range from the exclusion of certain assets to the engagement with companies on issues regarding social, environmental and corporate governance performance. The theory of SRI may comprise a moral pre-eminence that is often challenged by noise traders, but rather hailed by the institutional asset managers that pursue long-term value creation (Sethi, 2005). Besides that, progressive universities might find it hard to turn a blind eye to the fact that their accumulation of capital is at the expense of the social good. Especially with conscious student organizations that have mobilized public and political outrage in the past and present, resulting in divestment from South-African companies in the 80s and a contemporary debate about fossil fuels (Grady-Benson & Sarathy, 2016).
In the Netherlands, awareness campaigns on the financial impact of universities
commonly focus on the partnerships with banks and pension funds.1 That is because the
Minister of Education prohibited the publicly funded universities to invest in stocks from 2003 onward. However, this regulation does not apply to Dutch university funds that consist of donations and therefore have an independent legal status. These university funds are emerging, illustrated by the 25 million euros that the Erasmus Trustfonds raised last year (Van Calmthout, 2017). One of the aims of this thesis is to elaborate on the urgency of this private capital flow. Dutch universities traditionally receive public funding. Although the ambitions and performances of Dutch university funds have not yet been addressed in the academic literature, they might reflect a broader development in the funding of higher education. Huib Pols, rector of the Erasmus University, describes them as “a great gratuity at a time when the resources for universities are in decline as the subsidy per student is dropping” (Van Calmthout, 2017).
Nevertheless, the primary aim of this thesis is to research whether the Dutch university funds are using SRI strategies in their asset management. In doing so, it contributes to an academic debate that is extensively set out in the book ‘The Sustainable University:
1 e.g. Christina Marigliano and Tim van Dijk from Fossil Free UvA encourage the University of
Amsterdam to engage with its bank and pension fund regarding fossil fuel investments in the following article: https://www.folia.nl/opinie/109163/uva-stop-met-investeringen-in-fossiele-brandstoffen
Green Goals and New Challenges for Higher Education Leaders’ by James Martin and James E. Samels (2012). One of the goals they set for universities, “greening the endowment”, corresponds perfectly with this research (Martin & Samels, 2012: 165-179). The editors acknowledge that universities are at the forefront of efforts to preserve the earth’s resources for future generations, and therefore provide effective and coherent guidance to administrators. SRI strategies could not only serve as an ethical minimum but also as visionary valorisation. It further tries to reflect on the cost-benefit analysis of Simon et al. (1972), and the utter relevance of their policy dilemma between ‘moral purity’ and ‘moral effectiveness’. It therefore tries to find the specific underlying deliberations of SRI strategies for Dutch university funds. The main question is thus as follows:
‘What deliberations drive or dissuade the policymakers of Dutch university funds to opt for an incorporation of SRI strategies in their asset management?’
The thesis is structured as followed. First, the historical developments of higher education funding in the Netherlands are described in the second chapter to give an in-depth background and to explain how Dutch university funds have become investors and why they become more active in the investment market. The third chapter then explores the moral considerations that investing universities should take in mind, with particular attention to the impactful role they could have. Subsequently, the fourth chapter expounds a theoretical framework on SRI approaches and strategies. The fifth chapter then explains the choice for a framework analysis and presents the case studies and data collection methods.
In order to answer the main question, we have to answer several sub-questions. First, we have to find out what strategies are actually applied by the university funds: ‘What SRI strategies do Dutch university funds apply?’ This answer is given in chapter 6. Second, we have to analyse the underlying deliberations that support and discourage the policy choices. The supportive deliberations are an answer to this sub-question: ‘Why would policymakers of Dutch university funds opt for particular SRI strategies?’ The discouraging deliberations answer to the following sub-question: ‘Why would policymakers of Dutch university funds refute certain SRI strategies?’ These deliberations are analysed in chapter 7, so that we can answer the main question in the conclusion.
2. Developments in the private funding of universities
The academic community of the Netherlands has been dissatisfied with the declining public funds in the past decades. Professors are nostalgically pining for the 1970s when the Dutch
government appreciated the value of science and they could do their research independently and yet without financial concerns. At the same time, they feel hesitant about complementary funds from a private capital flow. But how new is this phenomenon of private university funds in the context of time? And are their similarities to the renowned endowment funds in the United States?
The paragraph 2.1 thus describes where the post-war momentum of publicly funded higher education came from, and why it is gradually dwindling in the Netherlands. This clears the road for an analysis of the renewed focus of universities on the attraction and accumulation of capital in 2.2. The following paragraph 2.3 explains the difference between Dutch university funds that tend towards endowment funds or act as an intermediary between the donator or testator and the university. Finally, the emergence of Anglo-American university endowment funds is set out, focusing on the income and accumulation of their capital. This explanation is not only relevant because they were ‘early adaptors’ of SRI, but also because theory and interviews show they have set an example for the Dutch university funds. Margot van Sluis-Barten, director of the ‘Erasmus Trustfonds’, acknowledges “the concept was copied from the Anglo-American endowment funds” (personal communication, May 14, 2018). In addition, “the idea of private funded universities is American by nature”, according to the science editor of ‘de Volkskrant’, Martijn van Calmthout (personal communication, May 15, 2018).
2.1 History of Dutch higher education funding
In order to understand the historical background of the Dutch university funds, this paragraph briefly looks into the political and financial context of Dutch universities since their establishment.
Establishment of the first Dutch universities
The government of the Netherlands was decentralized in the 16th and 17th century, and
wealthy regents ruled the semi-autonomous provinces in the Dutch golden age. It was against this backdrop that the first universities were established. (Knegtmans, 2007: 412) The oldest university of the Netherlands in Leiden was founded by William of Orange in 1575 and initially funded by taxes imposed upon monasteries (Otterspeer, 2015: 44-45). Regents governing the provincial and city administrations financed the other universities that were
established in the beginning of the 17th century, in order to educate future merchants and
leaders (Knegtmans, 2007). 2 On the second day of the Athenaeum Illustre’s inauguration in
1632, Casparus Barleus addressed the local merchants and advocated an eternal bond between
merchants and scientists. 3 In this pledge he introduced the term ‘mercator sapiens’, by which
he meant that a wise merchant would be well grounded in science (Van der Woude, 1967). According to Dr. Jochem Miggelbrink, historian and development manager of the ‘Amsterdams Universiteitsfonds’, the Dutch universities remained heavily reliant on grants from wealthy merchants in the subsequent centuries (personal communication, May 2, 2018).
Centralisation of the academic system in the Napoleonic era
The Dutch political and economic context at the beginning of the 19th century was completely
different from the golden age. King Louis Bonaparte, brother of the French emperor Napoleon, ruled a country that was beset by an ailing economy. His administration tried to transform the provincial universities into a centralised and hierarchical academic system. When the Netherlands was incorporated into the French empire, Napoleon planned to make the universities part of his ‘Université Impériale’. (Dorsman & Knegtmans, 2012: 17-23) During this process, two universities were shut down by decree (Dorsman & Knegtmans,
2012: 25-26).4 The continued existence of other universities, like the ‘Rijksuniversiteit
Groningen’, was hanging by a thread (C.J. Jepma, personal communication, May 14, 2018). After the fall of Napoleon the Oranges came back to power, but the centralisation of the academic system went ahead and led to the ‘Organiek besluit’ in 1815. This ruling arranged the funding of the national academic system, which excluded technical education. (Otterspeer, 2015: 247) This exclusion accordingly affirmed the disparity between the
aristocracy and the working class. Until the last quarter of the 19th century the Dutch
academic system remained centralized and predominantly aimed at the education of the upper class. (Bank, Van Buuren, Braun & Draaisma, 2000: 265)
Segregation and political conflict at the end of the 19th century
Abraham Kuyper, educated as a liberal minister, developed into the Dutch leader of the
Neo-Calvinistic movement at the end of the 19th century. He established a newspaper and the first
2 The university of Groningen was established by the provincial government and the universities of
Utrecht and Amsterdam were established by the city government (Knegtmans, 2007: 61).
3 At that time, the official name of the ‘Universiteit van Amsterdam’ was ‘Athenaeum Illustre’
(Knegtmans, 2007).
political party of the Netherlands in the 1870s in order to successfully spread his faith (Bank
et al., 2000: 37). 5 The Dutch society was at that time politically segregated and Kuyper saw
the centralized universities as restrictive. He therefore dreamed of a Christian university in Amsterdam. Although the ‘Wet op het Hooger Onderwijs’ of 1876 ensured more resources for and an ease of access to the existing universities, it was still utterly impossible to receive public funding for a confessional university due to excessive requirements. (Dorsman & Knegtmans, 2012: 9)
In the absence of public funding, the ‘Vereniging VU’ was established in 1878 in order to collect sufficient resources (D.B. Stadig, personal communication, May, 29, 2018). The liberal dominance in the central government eventually led to Kuyper’s decision to establish a private university named the ‘Vrije Universiteit’ in 1880 (Bank et al., 2000: 360). In the first decades of its existence, the Vrije Universiteit was still at the mercy of private contributions. The financial necessity resulted in a strong relationship between the university and its Protestant community, a relationship that had not existed before. (Flipse, 2012: 69-70). At the same time, the private university was in line with Kuyper’s political thinking. He later argued as the Dutch prime minister that the government should rather support private universities than establish or support public universities (Flipse, 2012: 71-72).
Kuyper looked with admiration to American universities as Harvard and Penn, as
they flourished due to private funding.6 He deplored the inability of Dutch universities to
collect donations from the wealthy upper class, with exception of his Vrije Universiteit and
the municipal ‘Universiteit van Amsterdam’.7 Kuyper envisioned a future in which
universities would stand on their own feet. Nevertheless, he recognized the change of culture that such a policy would imply, and the consequent political unwillingness. (Flipse, 2012: 72) He therefore introduced legislation to provide his Vrije Universiteit effectus filis, meaning public funding (Bank et al., 2000: 362). However, this did not end the heated political debate
5
The newspaper was called ‘De Standaard’ and was established in 1972 (Bank et al., 2000: 66). The ARP or ‘Anti-revolutionaire Partij’ was established in 1878 (Bank et al., 2000: 39).
6
Handelingen Tweede Kamer 1903-1904 24 februari 1904, available at http://resolver.kb.nl/resolve?urn=sgd%3Ampeg21%3A19031904%3A0000248
7 Kuyper noted that the sponsors of the Universiteit van Amsterdam had another motive than an
intrinsic believe in higher education, as they made donations because of urban chauvinism (Flipse, 2012: 72). The Amsterdams Universiteitsfonds, ‘Leids Universiteits Fonds’ and ‘Groninger
Universiteitsfonds’ were all established at the end of the 19th century. In the case of the last, it was a
group of professors that feared declining public funds and therefore created a fund that could protect their university from political developments in The Hague (C.J. Jepma, personal communication, May 14, 2018).
on the funding and independence of Dutch higher education, which was part and parcel of the segregation or ‘pillarization’ at the turn of this century (Baggen, 1998).
The private foundation of the Vrije Universiteit has always continued to be a part of the university’s identity, as well as the fundraising activities amongst alumni and the Protestant community (D.B. Stadig, personal communication, May 29, 2018).
State-centred governing arrangements in the 1970s and 1980s
The public funding of universities quickly increased after the Second World War, hand in
hand with the student populations.8 Higher education started to be regarded as a national
affair and a public good in the Netherlands, which explains the minor role of private education – or private funding – in the 1960s and 1970s. (De Boer, Enders & Leisyte, 2007: 28) Social elevation of the working class was in the spirit of this age, and subsequent Dutch administrations opted for the ‘Rhineland model’ rather than the Anglo-American model that is explained in 2.4. This meant that “solidarity was preferable to individualism” and
“craftsmanship played a central role”.9 (Van der Wal, 2012: 149) The idea of a strong state
and a strong academic community was evident, and resulted in academic self-governance with regard to the research content and state regulation with regard to the non-academic matters (De Boer, Enders & Leisyte, 2007: 29).
The strong influence by state regulation had paved the way to the university for many underprivileged youths, but there was a downside to this idealism. The public expenditures went up rapidly, and retrenchment policies hardly contained the costs (De Boer, Enders & Leisyte, 2007: 29). The costs of the new laboratories and libraries “rose to dizzing heights”, with as consequence that “each budget exploded” (Baggen, 1998: 8). During the first half of the eighties, state-centred governing arrangements came under pressure, and the political tide shifted to another perspective (Bovens & Witteveen, 1985). There was less faith in the governing capabilities of the academic community, which would lack “corporate rationality” (Neave & Van Vught, 1991: 242).
8
The student numbers went up from 25.000 in 1950 to nearly 190.000 in 2003 (De Boer et al., 2007:29).
9 The general focus on equality led to a small variety in quality among Dutch universities, contrary to
Anglo-American universities, and league tables had therefore not existed until recently (De Boer et al., 2007:28).
New Public Management and cutting of costs
The state-centred governing arrangements started to change around 1985, when the government introduced ‘steering at a distance’ as a new way of governance. The government tried to reform the system into a performance-driven and demand-driven network, strengthening “institutional leadership and managerial technologies in the higher education sector”. (De Boer, Enders & Leisyte, 2007: 30) It seemed the state-centred governing arrangements that had channelled the Dutch universities for decades were at their wit’s end, and New Public Management was the new standard. Just like other European governments, the Dutch government was inspired by the Anglo-American countries and started to stimulate privatization and New Public Management strategies in higher education (Pérez-Esparrells & Torre, 2012: 55).
The government thus started to demand more efficiency from the Dutch universities, and in the following decades public funding would lag behind in comparison with the
growing student populations.10 Endowment funds of an Anglo-American size remained an
exception in Western Europe, where public funding continued to be “the principal source of finance for teaching and research” (Salmi, 2009: 23). The budget cuts in relative terms however did increase awareness that other flows of funds, corporate and private capital,
would be necessary to complement the first flow of funds, public funding.11 The next
paragraph elaborates on the other flows of funds, particularly the fourth flow, and how universities organized their development strategies.
2.2 Re-emergence of private funding in Dutch higher education
It came forward in paragraph 2.1 that private funding of Dutch universities is not an entirely new concept, but largely disappeared after the Second World War. The government subsequently experienced an increase of public expenditures and started to cut costs at the end
of the 20th century, demanding more efficiency from the universities. This paragraph looks
into the developments in the 21st century, from the stimulation of the second, third and fourth
10 The university population increased by 54%in the period from 2000 to 2015, while the public
funding only grew with 12 percent. (Van Dijck & Van Saarloos, 2017: 53) As a result, the Dutch subsidy per student dropped from €19.900 in 2000 to €15.000 in 2016 (VSNU, 2018).
11 This thesis is not aiming to deliver a normative stance on the desirability of a third flow of funds
towards universities, although it is wise to point out that there has evolved a lively academic debate in this respect (Bernabela et al., 2015).
flow of funds to a renewed effort from Dutch universities to attract and accumulate private capital.
Stimulating the second, third and fourth flows of funds to universities
While we are already familiar with the first flow of funds, direct public funding from the Ministry of Education, Culture and Science, there are three more flows to explore.
The second flow of funds represents the competitive allocation of funds from
independent public organisations.12 Because an organization such as the NWO has a ‘top
sector policy’, it means technical, medical and beta sciences receive relatively more funds
from the second flow than the humanities.13 Researchers from the Rathenau Institute
concluded in 2016 that the increase of EU funds and associated increase of ‘matching pressure’ are becoming of greater importance for universities, and that these developments are
causing more competition between universities.14 (Koier, Van der Meulen, Horlings & Belder,
2016: 29-35)
The third flow of funds, contract research, also increases the competitive element of research (Van Dijck & Van Saarloos, 2017: 54). It is often provided by private institutions, but governments, the EU and NGOs can also contribute to the third flow of funds. The vast majority of this contract research is project-based. It therefore brings in market elements, and signifies a commercial choice of research topics. The Anglo-American countries were
pioneers of the third flow of funds, resulting in various joint ventures.15 In the Netherlands,
the third flow of funds has grown significantly in the past decades.16 (Kojer, Van der Meulen,
Horlings & Belder, 2016: 35-37)
The fourth flow of funds is a relatively new concept. It was introduced in 2005 in a
report of recommendations to the Dutch cabinet.17 This report by ‘Innovatieplatform’, named
‘Geven voor weten: de vierde route’, suggested regulatory and fiscal policies to stimulate
12 Dutch examples are NWO, KNAW, ‘Technologiestichting STW’ and ZonMw (Koier et al., 2016:29).
13 The Netherlands Organisation for Scientific Research.
14 ‘Matching’ means the external funding of indirect research costs such as office space and other
facilities. The research of Koier et al. emphasizes two different outcomes that ‘matching pressure’ could have. The first implies that it could efficiently lever the first flow of fund, while the second suggests it could hurt the independence of a university (Koier et al., 2016: 57-58).
15 Wellcome Trust (U.K.) and National Institutes of Health en de National Science Foundation (U.S.)
are Anglo-American examples. Continental European examples are Volkswagenstiftung (Germany) and QuTech from The Netherlands. (Kojer, Van der Meulen, Horlings & Belder, 2016: 36)
16 From less than €50 million in 1990 to more than €600 million in 2014 (Kojer, Van der Meulen,
Horlings & Belder, 2016: 37).
17 This report was written by members of the ‘Innovatieplatform’, a think-tankthat was established to
stimulate the Dutch knowledge-based economy, chaired by the Dutch prime minister Jan-Peter Balkenende (Nauta, 2008).
private donations towards Dutch universities. While referring to the American endowment funds, the Innovatieplatform described how the government had an important role in creating an attractive philanthropic atmosphere. It also encouraged universities to engage in fundraising activities among alumni, under the flag of one university-wide fund. Moreover, this university fund ought to professionalize its asset management in order to acquire a higher Return on Investment (RoI). (Innovatieplatform, 2005) The Dutch cabinet reacted positively to the report with a number of reforms and measures, mainly fiscal incentives, to stimulate ‘unconventional funds’ (Balkenende, 2006).
Attracting donations from alumni
The Innovatieplatform’s first suggestion to universities was that the university funds should raise donations from alumni. Some of the Dutch universities quickly responded to this appeal, although it is evident that a change of culture was necessary.
The donation of private money to universities had not been common practice for
Dutch alumni in the 20th century, mainly because higher education was regarded as a public
good and thus urgency was missing (Sanders & Hoornstra, 2006). This theory was accepted by the domain leader Finance of VSNU who stated, “the utilization of private money had never been a priority for Dutch universities because the public funding was in line with the
student population” (D. Smeets, personal communication, April 10, 2018).18 A study by Mora
and Nugent discovered several more reasons for the subdued donations towards European universities compared to their American equivalents, varying from a lack of effort to cultural difference (1998). The domain leader Accountability of VSNU thus believes “we should learn from American and Israeli universities” in terms of the attraction of donations (R.L. van Brakel, personal communication, April 10, 2018). Van Dijck and Saarloos add that these donations would not only indicate complementary funds, but could also contribute to the support for science in society (2017: 69).
The idea that universities should approach their alumni and companies for donations has been embraced, but is still in its infancy in the Netherlands. Miggelbrink emphasizes that the University of Amsterdam as biggest university of the Netherlands only started with
fundraising in 2007 and that it was considered a ‘dirty business’ before that.19 He states that
the arrival of dr. Louise Gunning-Schepers as chair of the Executive Board in 2012 was a
18 VSNU is the ‘Association of Universities in the Netherlands’.
turning point in the alumni relations of the university, as the focus shifted to fundraising.20
(personal communication, May 2, 2018) Gunning-Schepers called this the “culture of contribution” in an interview (Okker, 2012: 6). Figure 1 shows how the university fund of the Netherlands’ biggest university has transformed since then regarding the received donations,
grants and bequests. 21
Figure 1 - Donations, grants and bequests to the AUF 2007-2016.
Other university funds have also scaled up their fundraising activities, with special attention to the Erasmus Trustfonds. As mentioned before in the introduction of this chapter, the fund has followed the example of the American endowment funds. The board began to approach wealthy alumni only since 2016 and has already attracted €25 million of pledged endowment. (M.M. Van Sluis-Barten, personal communication, May 14, 2018) The difference between endowment and ordinary donations is explained in 2.3. Figure 1 shows an aggregate of the
20
This was in fact a renewed focus on fundraising, since the University of Amsterdam had only built an auditorium in the Oudemanhuispoort after a private fundraiser in 1889 (Bureau Alumnirelaties en Universiteitsfonds, 2015).
21 This data has been derived from the annual reports of the Amsterdam Universiteitsfonds. Visit their
total donations, grants and bequests eleven university funds have received from 2012 to
2016.22
Figure 2 - Donations, grants and bequests to Dutch university funds from 2012 to 2016.
The fundraising activities are still in their infancy compared with their Anglo-American equivalents. However the differences between the Dutch universities are quite sufficient, the large majority has boosted its alumni relations and thus the attraction of donations. Recent efforts of the Amsterdams Universiteitsfonds and the Erasmus Trustfonds have shown that the ‘culture of contribution’ is not solely an American phenomenon.
22 This data has been derived from annual reports of the following university funds: Leids Universiteits
Fonds, Erasmus Trustfonds, Amsterdams Universiteitsfonds, Groninger Universiteitsfonds, Universiteitsfonds Delft, Utrechts Universiteitsfonds, Radboud Fonds, Universiteitsfonds Twente, Ubbo Emmiusfonds, VUmc Fonds and Universiteitsfonds Tilburg. The annual reports of the university funds such as VU-Vereniging, Universiteitsfonds Limburg, University Fund Wageningen and
Universiteitsfonds Eindhoven did not date back to 2012.
0 2.000.000 4.000.000 6.000.000 8.000.000 10.000.000 12.000.000 14.000.000 2012 2013 2014 2015 2016 T ot al d on at io n s in E u ro s Fiscal year
Accumulating capital and contemporary regulation of private capital flows
The Innovatieplatform’s second suggestion was that the university funds ought to professionalize their asset management and utilize their capital more economically. This paragraph elaborates on the regulatory history of Dutch universities’ financial management, and indicates that the university funds are enhancing their investment activities.
It had been lawful for Dutch publicly funded universities to invest public money in
the stock market during the 20th century. However, minister Hermans of Education, Culture
and Science proposed the ‘Regeling beleggen en belenen door instellingen voor onderwijs en onderzoek’ in 2001, banning the public funds of universities from the stock market as of
200323. He believed that the investments were too risky, and that public money should go
directly to public affairs. This ruling changed the financial regulatory environment for Dutch universities dramatically. At that time, the universities had investment portfolios of around 600 million guilder on aggregate, of which 157 million was invested in stocks. (De Volkskrant, 2001)
Hence, the universities had to form portfolios that consist of bonds and real estate with their publicly funded assets. The subsequent Ministerial Regulation of 2009 did not contain radical changes that are relevant to this thesis, except for the addition that universities
would be obliged to do business with banks with an AA- minus status (Botter, 2013: 233).24
The consensus of different administrations preserving the judgment of minister Hermans touches upon a wider debate concerning the relationship between publicly funded economic
activities and fair competition, resulting in the Wet Markt & Overheid in 201225. This law set
a framework under which conditions the government or semi-public authorities could involve in commercial enterprises with tax revenue (Mohammad, 2013: 194). The latest Ministerial Regulation on the financial policy of Dutch publicly funded universities, ‘Regeling beleggen,
lenen en derivaten OCW 201626’, left out the banking status and elaborated on the actual
theme of derivatives.
Because the university funds are independent and fall under the regulation for charity foundations, it is possible for them to invest on the stock market if they take fluctuations of
income into account (Belastingdienst, 2018).27 It is therefore feasible for university funds to
accumulate their private capital flow under Dutch law, but that does not mean that the board
23 M.R. of July 13 2001, Uitleg. OCenW-regelingen Gele katern, 18a, deel 1.
24 M.R. of September 16 2009, Stcrt. 2009, 14404.
25 Wet Markt en Overheid of July 1 2012, Stb. 2012, 254.
26 M.R. of June 6 2016, Stcrt. 2016, 30576.
of every university fund has decided to invest in stocks. First of all, the difference between an endowment structure and an intermediary structure is explained in 2.3. Second, the tendency in Anglo-American direction among some university funds regarding the accumulation of capital is deepened in 2.4. Finally, the university funds that invest in stocks vary significantly
in risk strategies, from moderately defensive to offensive, which is clarified in chapter 5.28
It is in any case noticeable that the investment activity of Dutch university funds is increasing. The aggregation of all securities owned by these funds had grown to slightly over €100 million as of December 31, 2016. In the five years prior to this date, the aggregate had
increased by 40,4%. This development is visualized in Figure 3.29
Figure 3 – Security aggregate of seven Dutch university funds 2012-2016.30
This regulatory context for Dutch universities has gradually changed, just like the funding of higher education has transformed. The fourth flow of funds has been embraced, and the government stimulates universities to attract and subsequently accumulate private donations
28 Not everyone agrees that stocks are more risk bearing than bonds, because economists think the
interest rates will increase in the coming years (C.J. Jepma, personal communication, May 14, 2018).
29 The majority of the university funds does not differentiate between bonds and shares, which is why
‘invested capital’ shall be construed as ‘securities’. The receivables and liquidities are thus not included.
30 Leids Universiteits Fonds, VU-Vereniging, Erasmus Trustfonds, Amsterdams Universiteitsfonds,
Groninger Universiteitsfonds, Universiteitsfonds Delft and Universiteitsfonds Delft.
0 20.000.000 40.000.000 60.000.000 80.000.000 100.000.000 120.000.000 2012 2013 2014 2015 2016 S ec u ri ti es i n Eu ros Fiscal year
through university funds. Although their fundraising activities are still in their infancy, recent efforts from the Amsterdams Universiteitsfonds and especially the Erasmus Trustfonds have shown that the ‘culture of contribution’ is not exclusively an Anglo-American phenomenon. Until now, the investment activities have been barely comparable to those of the American endowment funds as 2.4 illustrates. However, the aggregate investment activity grew by more than 40% in the last five years. This indicates that at least some Dutch university funds opted for endowment instead of direct distribution. The following paragraph explains the difference between these two university fund structures.
2.3 Dutch university funds as endowments or intermediaries
The previous paragraph described how the Dutch government mobilized and stimulated private funds towards universities, and how the fourth flow of funds requires independent university funds to attract donations from alumni and companies. This paragraph explains how the university funds have a choice to make regarding their organizational structure. They either try to accumulate capital with an investment policy, or they act as transitory safe havens between the donor and an academic purpose.
Varying policy choices
Ultimately, all university funds aim to contribute financially to the academic pursuits and
student life within their universities.31 The board generally decides what the money from the
annual budget is used for, and this could vary from university facilities to student conferences and from scholarships to endowed chairs. The amount of assets they annually spent also differs, as some university funds use fixed amounts based on their total assets or on recent investment returns, while others just spend the obtained capital.
In the Netherlands, charitable organizations are not allowed to hold own funds longer than the time reasonably needed for the continuity of foreseeable operations, unless the donor or testator explicitly stated this (Belastingdienst, 2018). This means Dutch university funds must request permission from a donator or testator in order to accumulate donations, grants and bequests in the long-term through investment. Only if such permission is given the university fund may treat the donation, grant or bequest as an ‘endowment’. An endowment is defined in this thesis as “gift of money or property to a person or organization, which may be
invested to produce regular income, or the accumulated sum of such gifts used by a non-profit organization such as a university to fund its activities” (Kariithi, 2007: 46).
Complications concerning endowments
There are a few odds and ends when it comes to the endowment structure. In contrast to operating and annual funds, facilities support and legacy gifts, the donator or testator must be sure that an institution is able to manage assets (Pérez-Esparrells & Torre, 2012: 56). In addition, the donator or testator loses control over the destination of the funds. This is particularly unappealing for somebody who wants to contribute to a specific academic purpose. If a wealthy ex-patient wants to donate to a teaching hospital’s section that has taken good care of him, it may be difficult to convince him that his donation could also be submitted to the central administration (D.B. Stadig, personal communication, May 29, 2018). Other possible reasons to directly siphon funds are that the short-term interests prevail in the financial management of universities, or that they are hesitant to engage in active asset management.
Opportunities concerning endowments
However, there are also reasons why an endowment structure could be attractive to the university fund’s management, or the donators and testators. First, it can be expected that an endowment fund is able to contribute structurally to the university with the annual RoI. Instead of spending the donation under time pressure, the university could utilize the money
perpetually.32 The unlimited investment horizon that universities have is often referred to as a
unique characteristic of their endowment funds (Brown, Garlappi & Tiu, 2010: 291). Second, it is important to point out the economy of scale in terms of financial, human and technical resources. When a board is able to manage one major endowment fund rather than several individual funds this would offer cut advantages due to the scale of operations and investments (Stichting Erasmus Trustfonds, 2018: 3). Finally, paragraph 2.4 shows how actively managed endowment funds in the U.S. have accumulated large amounts of capital and therefore provided academic funding.
32 Henry Hansmann, a famous critic of the American endowment funds, claims that investments in
market securities would in any case be more useful to society than “less efficient forms of accumulation” as “useless facilities or excessive esoteric research” (1990: 40).
Endowment ambitions of Dutch university funds
The Dutch university funds currently find themselves in a quandary. Transforming into an endowment fund has its benefits, but there are some complications.
As mentioned before, the Erasmus Trustfonds is the first Dutch university fund that announced the ambition to become an endowment fund. A major fundraising campaign among wealthy alumni was required in order to attract sufficient capital. Miggelbrink is allegedly impressed with this outcome: “All Dutch universities should be proud of this.” (personal communication, May 2, 2018) Becoming an endowment fund is also one of his aspirations, in agreement with the Amsterdam Universiteitsfonds’ administration and the Executive Committee of the university: “That is the next stage (...) so that we can structurally offer assistance to people who need that due to the financial benefits.” (Miggelbrink, personal communication, May 2, 2018).
Another interesting reflection of this policy dilemma is the situation in Groningen. The Rijksuniversiteit Groningen has two university funds that offer a fourth flow of funds: the ‘Groninger Universiteitsfonds’ and the ‘Ubbo Emmius Fonds’. The former does not attract private donations as an independent organization, but is able to contribute out of a RoI that is the product of its treasurer, Professor Jepma. The latter is part of the university and does attract donations, due to active fundraising efforts. However, the Ubbo Emmius Fonds is not
active in the stock market or in any investment (2017).33 The situation of the two university
funds has gradually developed in this manner, according to Jepma: “but there is now debate going on” (personal communication, May 14, 2018). If it was up to him, the university ought to paint a broader picture of the aforementioned dilemma towards the donator, instead of solely executing acquisition for its own intermediary fund.
As opposed to the previous two university funds, the ‘Leiden Universiteits Fonds’ is devoted to spend its donations, grants and bequests at shorter notice than what is currently the case. Director Alumni Relations and Fundraising, Lilian Visscher, asserts that her fund watches American endowment funds with interest, although legislation there is different and the RoI generally significantly higher. She recognized that the donations her fund receives are aimed at “realizing an impact” and her goal is therefore “to start a conversation with donators in order to spend their donations within a few years, which is a trend also evident in the U.S.” (personal communication, May 16, 2018).
33 The Ubbo Emmius Fonds collected more than €2 million in the fiscal year 2016 (Ubbo Emmius
The former paragraph showed that the donations, grants and bequests to Dutch university funds have increased greatly in the past years, and that they have simultaneously become more active in the investment market. While the discussion of becoming an endowment fund is lively within the management of the university funds, the Erasmus Trustfonds is the only one that shows a tangible outcome. This means that the funds still hesitate to become active asset managers, and Figure 4 illustrates this. Since 2012, the total amount of income from private donations has grown faster than the (un)realised financial benefits on the investment market.
2012 2013 2014 2015 2016
(un)realised investment gains donations, grants and bequests
Figure 4 – The total income of seven Dutch university funds divided in the share of donations,
grants and bequests and the share of financial benefits.34
This paragraph exemplifies the policy dilemma in which Dutch university funds find themselves. On the one hand, becoming an endowment fund implies a structural flow of funds and could make the organization more efficient. On the other hand, donators could turn out to be sceptical about the lack of direct impact. This hesitance is still noticeable among Dutch university funds, considering the situations in Amsterdam, Groningen and Leiden. The following paragraph briefly looks into the famous endowment funds of American universities, as some Dutch university funds deliberately adopt the Anglo-American type structure (M. van Calmthout, personal communication, May 15, 2018).
2.4 University endowment funds in the U.S.
The previous paragraph disclosed developments in the Dutch higher educational sector that show resemblance with the Anglo-American status quo. While expressing the ambitions of
34
Leids Universiteits Fonds, VU-Vereniging, Erasmus Trustfonds, Amsterdams Universiteitsfonds, Groninger Universiteitsfonds, Universiteitsfonds Delft and Universiteitsfonds Delft.
his university fund to become an endowment fund, Miggelbrink referred with a nod to Harvard: “although they possess a few billion” (personal communication, May 2, 2018). This paragraph briefly looks into the university endowment funds in the U.S., focusing on their explosive growth in the last century.
The American culture of contribution
The amount of private capital contributed to American and British university endowment funds has increased dramatically in the last century, particularly in the former.
American alumni who made a fortune started to endow capital to the universities that
educated them in the 20th century. The share of the total university income covered by
endowment therefore rose to a quarter on average, and to almost half in the case of Harvard (Gottfried & Johnson, 2006: 268). A study by Monks and Ehrenberg discovered a positive correlation between university rankings and the amount of university endowment (1999). At the same time private universities with a greater financial capacity are able to pay their professors and presidents more salary, which makes “the best academics tend to seek employment there” (Salmi, 2009: 25). Such a vicious circle would increase the assets of the biggest universities funds even more, which creates domestic inequality and international inequality between universities. Some American universities became the best of the world, but the unequal distribution of private money has caused a great imbalance between higher education institutions in the U.S. (Dearie & Geduldig, 2013). The average university fund from the U.K. does not match up with the American endowment funds, and only the universities of Cambridge and Oxford are able to compete on a global level in terms of endowment (Salmi, 2009). These are the only two British universities that manage endowment funds over $1 billion, while there are 97 American universities that surpass this
sum.35
U.S. endowment funds as progressive asset managers
Besides the fundraising activities, the American endowment funds have magnified their assets by using clever investment policies.
Before the thirties, the universities were bound by law to solely invest in obligations and real estate. It was Stanford University by name of former U.S. president Herbert Hoover
35 Supplementary data on the American endowment funds are available in the press release (NACUBO,
2018). For more information on the trends in philanthropic support for UK higher education see the Ross-CASE Survey:
to ask a federal judge to give permission for integration of stocks into the investment portfolio. Hoover argued in 1936 that the financial freedom of endowment funds was needed to create a hedge against inflation, which the judge agreed on. (Graham, 1949: 8) Lerner, Schoar and Wang describe how many of these funds have outmatched average institutional investors, reaching net real returns of 12% in the nineties and therefore tripling the mean return (2008:
208).36 They were often early adopters of certain asset classes, following the results of
economic research. They began investing in venture capital already in the 70s, while
corporate pensions only followed in the 80s and public pensions just in the 1990s.37 (Lerner,
Schoar & Wang, 2008: 221).
The large endowment funds in the U.S. are professional organizations that can afford own personnel, which is why they relatively resemble the best financial performance (Cejnek et al., 2014: 32). Endowment funds that are actively managed have between three and six percent more return than passively managed funds (Brown, Garlappi & Tiu, 2010: 291). While the management of the endowment fund has developed into a cardinal element of the financial management of American universities, governing boards of colleges and universities
have been rarely involved in its strategy (Cary & Bright, 1974: 24). 38
2.5 Conclusion
This chapter sets out the historical and regulatory context of the fourth flow of funds to Dutch universities.
The first paragraph demonstrated that although this is not the first time that universities are stimulated to attract donations, Dutch higher education was for a long time
regarded as a national affair and a public good during the second half of the 20th century. This
changed in the 1980s and since then public funds have decreased in relative terms in order to
36 The mean return was calculated on the basis of the Standard & Poor’s 500 index (Lerner, Schoar &
Wang, 2008: 208).
37 At that time, venture capital firms had already raised equity stakes from outside investors to
professionalize many start-up companies. Ivy League endowment funds had invested in new tech companies as Apple, Microsoft and Google in an early and extremely profitable stage by virtue of their keen eye for venture capital (Dearie & Geduldig, 2013). After the 1990s, funds consist mainly of public equity and fixed income, and the venture capital’s share of the portfolios has dropped (Brown, Garlappi & Tiu, 2010: 273).
38 According to the NACUBO-Commonfund Study of Endowments, a nationwide study of the
endowments of 809 US colleges and universities, the funds returned an average 12.2 percent in the 2017 fiscal year. Despite this impressive return, the average of the last decade dropped from 5.0 to 4.6 percent return, because the pre-crisis fiscal year 2007 had a return of no less than 17.2 percent. To bring this percentage into vision, the 809 endowment funds represented $566.8 billion in asset management. (NACUBO, 2018)
cut expenditures. The second paragraph explains how developments in the early 21st century
indicate a change towards the ‘culture of contribution’. The fundraising activities only just began, but the aggregate of donations, grants and bequests has shown an increasing trend. This growing amount of private capital implies a policy dilemma for Dutch university funds, as the third paragraph outlines. Transforming the organizational structure into an endowment fund implies a structural flow of funds, but some funds are still hesitant. The last chapter paints a view of how American endowment funds have attracted and accumulated assets in massive volumes.
After all, the share of private funding that Anglo-American universities need in order to stay competitive is still far away for Dutch universities. The government remains the most important supplier of research budgets, and will stay that in the foreseeable future. However, it will become increasingly relevant to research other flows of funds. This thesis looks into the accumulation of the fourth flow of funds, attracted capital by way of endowment. The following chapter addresses the moral considerations policymakers of university funds should take in mind when increasing investment activities.
3. Moral considerations for the university fund as socially responsible
investor
The previous chapter demonstrated how Dutch university funds have become more active in the investment market, and that this upward trend will presumably continue to develop. The endowment funds of American universities have been active investors ever since the thirties, as 2.4 pointed out. This chapter looks into the unique position a university fund has as an investor, and the moral considerations the executive policymakers should take in mind when the university fund enters the investment market.
Universities are usually diverse entities that consist of students, researchers and staff who are educated to think critically. Rens van Tilburg, director of the Sustainable Finance Lab, identifies more and more Dutch universities that change their official mission from the sole purpose of knowledge creation to a positive impact on society: “this means they cannot get away anymore with an investment policy purely based on financial returns” (personal
communication, May 23, 2018).39 Simon, Powers and Gunneman were the first scholars to
analyse the costs and benefits that ethical investing would represent for American endowment
funds. Their assessment is summarized in the first paragraph of this chapter. The second looks ahead to the future of investment and the unique role of universities. As all institutional investors have come under public scrutiny for the environmental and social outcome of their investments, this is certainly the case for the investment practices of universities. It also explains why SRI strategies of universities could catalyse systemic change.
3.1 Costs and benefits of ethical investment by universities
This paragraph first gives a prudent insight into the costs and benefits that ethical investing implies for universities, before we look at the systemic change certain policies of universities could bring.
Yale scholars Simon, Powers and Gunneman were the first to publish a book about the social aspects of the policy dilemma in 1972: ‘The Ethical Investor: Universities and
Corporate Responsibility’.40 This cost-benefit analysis is essential to an understanding of this
thesis, since it examines the social complications and advantages of SRI strategies used by universities and their funds. They also mention the “polluting practices of corporations”, although Simon et al. wrote their book before environmental concerns became genuinely
prominent (1972: 106).41 What they advocate is a ‘basic policy’ that ensures a ‘moral
minimum’ for the financial management of universities (Simon et al., 1972.) They refrain from a detailed definition of that moral minimum, aside from the notion that the “responsibility of the shareholder to take such action as he can to prevent or correct corporate social injury extends to the university when it is a corporate shareholder” (Simon et al., 1972: 65). They notice possible costs and benefits of their basic policy for universities.
Costs
On the one hand there are the costs of ethical investment strategies, which are divided into the non-fiscal and fiscal costs. First, the non-fiscal objections, which involve the endangerment of the academic freedom within a neutral institution, by Simon et al. referred to as the ‘Academic Context’. Certain ethical investment strategies would mean a politicization of the university as an institution, and would thus harm an open debate of conflicting opinions.
40 Barleus however dictated the merchants who founded the University of Amsterdam as early as 1632
that they ought to distinguish honest profit from dishonest profit (Van der Woude, 1967: 62).
41
It was six years later that J.F. Black, an Exxon researcher, presented an accepted climate model that predicted that a doubling of the CO2 concentration in the atmosphere would produce a mean
(Simon et al., 1972.) Simon et al. refer to Irving Kristol, conservative critic of ‘liberal universities’, who acknowledged “no university is merely a community of scholars” and it needs an administration “which manages money and real estate and employees and relations with the world outside” (Kristol, 1970: 234). That is why the organizational administration of a university cannot avoid participation in an economic system and its position within that system always reflects particular values (Simon et al., 1972: 72). Concerning the investing activities this means that holding a stock suggests approval and, as some would argue, “simply approving of an immoral action is immoral” (Larmer, 1997: 400). Existing investment policies that do not reflect social and moral considerations could therefore impose an even greater cost. Simon et al. perfectly clarify how in a situation like this insensitivity to
students and faculty members could turn out to be counterproductive to universities42 (1972:
156-64). In order to protect the institutional neutrality of the university, Simon et al. propose principles that require ‘distance’ and ‘minimal distraction’ of the academic community towards investment policies. Those outside the academic community should have final decision-making authority, because otherwise investment values would establish orthodoxies within the academic community. (Simon et al., 1972: 76-77).
Simon et al. subsequently outline possible fiscal costs regarding administrative expenses, reduced endowment returns and decreasing contributions from private donors. Firstly, the objection that an ethical investment policy costs money is acknowledged albeit put in perspective. Additional administrative manpower in terms of personnel that executes due diligence and engages with companies would improve the SRI performance (Simon et al., 1972: 103). Nowadays, investment banks have formalized and professionalized their ESG finance activities (Sparkes, 2003: 110). This makes more administrative manpower for the university less necessary. Secondly, the financial impact of ethical investment policies represents another common objection. Simon et al. stress that it is not clear whether it would
enhance or hurt the endowment’s RoI (1972: 192).43 Thirdly, the objection that implies
shrinking private donations is rebutted by means of empirical research, which points out that most alumni would approve a ‘basic policy’ (Simon et al., 1972: 104). Current research on this subject reveals the same proof, which means university endowment funds that integrated
42 At the same time, an ethical investment policy could be experienced as a starting signal for even
more political actions by the university in the future. If this does not follow critical students might be disappointed, whilst institutional neutrality can be put in real danger when the university follows this course. Although Simon et al. do not identify this a likely scenario, they emphasize that a university must be precise in its communication why a certain policy is developed to prevent misinterpretation. (Simon et al., 1972: 103)
SRI strategies into their portfolio do not suffer an endowment reduction (Smith & Smith, 2016; Swann, 2015). However, Miggelbrink of the ‘Amsterdams Universiteitsfonds’ indicated that his alumni constitute a “fairly homogeneous group that does not care much for sustainable goals but truly wants to see financial returns” (personal communication, May 2, 2018). Altogether, the fiscal costs are not easily to ratify or to refute.
Benefits
On the other hand, Simon et al. also presented the benefits of an ethical investment policy. The most obvious one is the ‘reduction of social injury’, which is the actual reason a basic policy is demanded from institutional investors such as university funds. However, this is not a static concept, because social injury is “contingent upon both the degree and nature of the society’s problems” (Simon et al., 1972: 99). The authors recognize the benefits of both divestment and shareholder engagement as SRI strategies, but prefer the latter. They believe voting on shareholder resolutions and raising formal or informal questions with corporate management is a more effective approach, since this is a way to constructively correct the socially harmful practices of a company. (Simon et al., 1972: 105) Divestment could nevertheless be helpful for the cause of awareness. If a university, even with a relatively small fund, would inform the company or sector with a public statement of the reasons for divestment, this “may have some effect on management attitudes” because “such action could bring home to the company a sense of outrage felt by at least one responsible constituent” (Simon et al., 1972: 92-93). It could also remain the only remaining option, for instance when a company refuses to improve its social impact or when the RoI significantly decreases after a company has precisely done so (Simon et al., 1972: 95).
There is however a more rational interpretation of ethical investment policies of university funds aiming at the reduction of social injury. The actual reduction of social injury ought not to be considered as the primary purpose, but the public image might give universities an incentive towards ethical investment. Smith and Smith argue that less selective schools in the U.S. are much more likely to use SRI strategies than elite schools, because they use ethical finance as a branding instrument (2016). Simon et al. put an emphasis on the fact that a university will outweigh competing universities in social effectiveness if it is “not compelled to participate in necessitous economic activities” (1972: 106).
After all, Simon et al. conclude that the ‘moral minimum’ obligation for universities should prevail in the absence of proof that the costs of ethical investment strategies would outweigh benefits. Considering the pros and cons of ethical investment strategies for university funds almost half a century later, it is difficult to come to another conclusion. The costs are still impossible to calculate fiscally, but most of them can be averted following the
