Op-ed submission: Wash. U. is failing to invest responsibly

Kurt Kaufman

Suppose one day you finally get so bored that you decide to enter the code on the inside of your Snickers bar, and by some miracle or mass marketing you win $378,000.  What would you do? Buy a sports car perhaps or get some famous art.

More importantly, what wouldn’t you do?  I bet you wouldn’t start a coalmine or try to manipulate financial markets with your chocolate windfall. Nor would you start a business which took advantage of poor, desperate children in lawless nations or donate to politicians for business favors.

It turns out that as a student at Washington University, there are approximately $378,000 invested on your behalf  (read: $5.3 billion endowment/14,000 students). The returns from the endowment help fund everything from scholarships to teacher salaries to dorm constructions to planting new flowers every other week: In short, the fund is dedicated to helping further the goals of Wash. U.

Unfortunately, the $5.3 billion endowment is failing to advance the goals of the University in a critical way. Consider the mission statement of the University: “To be an institution that excels by its accomplishments in our home community, St. Louis, as well as in the nation and the world” by “provid[ing] an exemplary, respectful, and responsive environment for living, teaching, learning, and working for present and future generations.” There is no doubt that the school’s treasure chest of $5.3 billion is part of Wash. U.’s institutional accomplishments and should further Wash. U.’s goal of creating an exemplary and respectful environment.

However, these goals are not being fully considered by the Washington University Investment Management Corporation, the body that invests the endowment. The school has never publically considered of the impact of the endowment, and the only publicly stated mandate for the endowment is to “maximize the return against various indices, based on the endowments target allocation.” Only recently has the University even acknowledged the immense power and responsibility carried by the allocation its $5.3 billion. Last year, the Investment Management Company took the step of adopting some of the recommendations provided by WIRAC (Wash. U. Investor Responsibility Advisory Committee), an action that represents movement toward a more responsible pattern of investing. However to bring the endowment into line with the stated goals of Wash. U., the board of trustees and the IMC will need to take greater consideration of the concerns of the students whom the endowment benefits and seriously address the impact of their investments on Saint Louis, American, and global communities.

Skeptics will, and have, deride the call for responsible investment as an attack on the University itself. They claim responsible investing will cost too much and the sacrifice in profitability will be too great to bear, no pun intended. These arguments are fundamentally ideological and inconsistent with examples we can observe in the real world. While Wash. U. has never (publicly) considered the impacts of such investment decisions, Yale University’s Responsible Endowment Project has successfully led efforts to remove funding from a number of holdings deemed irresponsible, such as Vaca Partnerships (irresponsible land management) and the CCA (private prisons), and such activities have been successful at schools ranging from UNC to Carleton College.  

Such efforts have proven that it is possible to invest in a way that does not harm outside communities while maintaining adequate growth. Responsible investing has been proven effective on a large scale: the most notable example is probably withdrawal of investment that helped end Apartheid in South Africa. Responsible investments also encourage companies to behave responsibly by promising an increase in funding for “good behavior,” and a number of renewable energy projects are funded by responsible investment funds like the Appleseed fund.

For many new to this idea, responsible investment may appear to demand too much from a system that, on the surface, works very well. The endowment provides a means for Wash. U. to accomplish a great deal of important work, certainly no one would argue with that. Nevertheless, it is far too easy to overlook the consequences of Wash. U.’s investment decisions, consequences which we cannot immediately see or experience. Like a chain of dominoes that stretches around a corner – there can be no doubt—knocking over the first tile inevitably affects those beyond our sight. If Washington University truly wants to be a top university and measure up to the standard it claims to have, it should start by applying its own missions statement “to judge ourselves by the most exacting standards” and start taking real responsibility for the social impact of the endowment.