Next Steps: Socially Responsible Investment Committee Report Response

Dear Pitt community members:    

In January 2018, amid growing interest from our university community, I established a committee to examine socially responsible investing (SRI) as it relates to the University of Pittsburgh’s endowment.

SRI is a relatively new and evolving approach to managing financial assets that considers the nature of an activity supported by an investment—and not just its potential financial return. Our goal in exploring this approach was to determine if we could better align activities in our endowment’s investment portfolio with the values that are important to our university community.

Specifically, I asked the SRI committee to review and assess:

  • how nonprofits and other universities have assessed and adopted SRI strategies;
  • the pros and cons of different approaches, including commercial SRI funds; and
  • considerations in developing an effective SRI strategy.

The SRI committee submitted a report at the end of last semester with analysis and findings for the university’s consideration. Specifically, the committee identified three factors meriting careful consideration: 1) the importance of an identified social issue to the University community; 2) if and how an SRI decision would affect an identified social issue; and 3) if and how an SRI decision would impact the institution’s long-term financial health. 

The committee’s report notes that 13 of the 15 largest university endowments in the nation explicitly discuss SRI considerations in their disclosures of endowment policies. It also acknowledges a critical trade-off, since SRI strategies can potentially reduce long-term returns on the endowment’s investment portfolio and thereby undercut the University’s ability to advance its mission. This risk is significant because the University relies heavily on its endowment—its largest financial asset—to permanently support and sustain our mission by funding student scholarships, faculty positions, research activities and more. It is for this reason that Pitt’s Board of Trustees is obligated to oversee and safeguard this asset for the benefit of current and future generations of students and faculty members. 

Even in light of this risk, the SRI committee’s report provides a useful foundation for the University to develop an approach that incorporates and expands the use of SRI principles into its investment activities.

Accordingly, I have asked our Office of the Senior Vice Chancellor and Chief Financial Officer to pursue the following strategies:  

  • Develop Environmental, Social and Governance criteria to positively screen for potential investments that align with our endowment’s investment objectives and our institutional values. Once developed, the criteria will be presented for consideration by the Board of Trustees Investment Committee.
  • Establish a clear approach for screening and presenting proposed investment exclusions to the University’s Board of Trustees. Since these exclusions pose the most serious threat to long-term returns, the authority to limit activities in our endowment’s investment portfolio rests solely with the Board of Trustees. This process must carefully weigh the importance of the social issue prompting an investment exclusion against the potential harm caused to future students and faculty members if the endowment fails to maintain its investment value. One model attributed to the University of Michigan—and highlighted in the SRI committee’s report—identifies factors to consider. These are: 1) the presence of a persistent and pervasive community-wide concern; 2) actions or behaviors that are contrary to the institution’s core mission and values; and 3) an organization, industry or entity that appears to be uniquely responsible for an identified set of problems.     
  • Expand and leverage the University’s long-term sustainability plan, which is designed to promote lasting change that will enable future generations to thrive in a world that is environmentally responsible, socially equitable and economically robust. This strategy focuses more broadly on two important topics—sustainability and global climate change—that are not specifically identified in the SRI committee’s charge. The Pitt Sustainability Plan calls for dramatic, University-wide sustainability improvements—especially in the areas of energy and transportation—by 2030. While participation in the two prior strategies is limited, everyone in the Pitt community has a role to play in supporting the Pitt Sustainability Plan’s success.

To the community members who have participated in this process to date, including members of our socially responsible investment committee and University Senate, our Office of Sustainability, and our Office of the Senior Vice Chancellor and Chief Financial Officer: I want to reiterate my deepest appreciation for your thoughtful contributions. Your work has given us a wonderful starting point—one that enables us to better align activities in our endowment’s investment portfolio with our University’s core values.

I look forward to continuing our conversations around this topic as we move to now implement some of these approaches.  

Respectfully,  

Patrick Gallagher