University boards are rethinking their investment approach. In light of growing concern about fossil fuels and greater awareness about impact investing, more institutions of higher learning are shifting toward an investment strategy that excludes fossil fuels. Go Fossil Free reports that out of 851 organizations that have publicly committed to fossil fuel divestment, 16% are educational institutions.
The story of Becker College’s shifting investment strategy illustrates why colleges and impact investing can go so well together.
Becker College Realigns Its Portfolio
Becker College is an institution committed to using its endowment for good. A private college in Worcester, Massachusetts, Becker has 2,000 undergraduate and graduate students and an endowment of more than $5 million. In March 2016, the school announced that it would adopt an impact investing strategy and move 100% of its endowment into ESG-aligned investments by June 30, 2017. Dr. Robert E. Johnson, Becker’s then-president, also said the school would look into directing 25% of its endowment toward local initiatives or ventures founded by students or alumni.
Johnson said that socially responsible investing was a good fit for Becker College’s mission of preparing students for global citizenship. Becker College aims to create leaders who can tackle social and environmental challenges, so it makes sense for its endowment to contribute to solving global problems, too.
Writing in the Huffington Post, Johnson noted that the decision was a proactive step in favor of social impact—and an ambitious one, given the brief timetable.
Becker’s Success Challenges Traditional Thinking
It’s still somewhat unusual for a college to invest 100% of its endowment for social impact. The college is small, and its endowment reached the multimillion-dollar level only relatively recently. Sticking to conventional investment strategies might have seemed to be the safest course of action for a school that’s working to grow enrollment.
But as Becker College’s experience suggests, that thinking is based on the common misconception that impact investing requires giving up high-return holdings for less financially profitable (but more socially meaningful) investments. Becker College decided to pursue impact investing with the hope of earning competitive returns. Aligning its portfolio with ESG standards turned out to be quite achievable. In fact, 80% of its endowment was found to be allocated in socially responsible investments already, so just 20% needed to be redirected.
Beyond Becker: A Broader Trend toward Impact
Becker is not alone in these efforts. Other colleges are divesting from fossil fuels or rethinking their portfolios with an eye toward positive social impact. In 2017, Johns Hopkins University in Baltimore announced it would divest from coal companies, and Université Laval in Quebec City committed to fossil fuel divestment.
Advocates for connecting colleges and impact investing strategies can now build on these victories, using the growing data available, to educate universities about the opportunities they have to catalyze positive change without necessarily sacrificing their investment goals.