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Students press for socially responsible endowment fund

A group of students wants Stanford to give donors a chance to direct their contributions to a separate endowment fund that invests in socially responsible companies.

But university officials say the student proposal won't work.

In a six-point response rejecting the proposal, Roger Clay, chair of the trustees' Special Committee on Investment Responsibility (SCIR), noted in January that the main purpose of Stanford's fundraising is to support the university's educational mission ­ not to support political positions.

Student-activists now have responded by setting up their own temporary fund. It will be maintained by the Associated Students of Stanford University (ASSU) and managed by Progressive Asset Management, a San Francisco-based socially responsible investment firm.

Last week, the students took their campaign to White Plaza, collecting more than 1,000 signatures in support of the fund and approximately 100 donations, ranging from $1 to $100. An anonymous donor also has agreed to contribute matching funds for the cause, they said.

"We probably haven't raised that much money so far," said Nick Thompson, ASSU vice president and co-author of the original proposal that was submitted to the SCIR, "but a substantial number of people have shown their support for this cause."

'University for Students'

The student effort coincides with the beginning of the senior gift fundraising drive and is part of a larger student-government campaign ­ University for Students ­ aimed at opening up the lines of communication between students, the administration and the Board of Trustees.

Thompson said students hope to show university officials that socially responsible investing is an important issue for many students and alumni. Money raised through the fund, he said, will be held by the ASSU until university administrators agree to three "proposed solutions" or offer an alternative set of solutions that meet students' concerns.

The proposed solutions, he said, include assigning student representatives to the SCIR; appointing a task force to look into issues of communication; and allowing students to submit a revised proposal for a socially responsible endowment fund.

Once these conditions are met, Thompson said, the fund will be discontinued and all its money will be given to the Stanford Fund, an annual fundraising program that encourages undergraduate alumni to give money to the university to support current undergraduate needs.

Proposal rejected

According to the proposal that students submitted to SCIR in October, money earmarked for the socially responsible endowment fund would be solicited primarily through the Stanford Fund. Alumni contacted through the Stanford Fund's donor appeal program would be told about the new fund and asked if they would like to contribute to it.

If they want to contribute, their money would be pooled in the Stanford Fund. An amount equal to their donation would be transferred from the regular endowment and put into the socially responsible investment fund.

But campus officials say that strategy won't work. They point out that there is a significant difference between annual gift-giving programs like the Stanford Fund that raise yearly expendable dollars for undergraduate programs and scholarships and endowment gifts that focus on the long-term financial health of the university.

"We have concluded that the proposal would confuse the central message of the Stanford Fund's marketing strategy," Clay said in his memo rejecting the proposal.

The Stanford Fund, which was established in 1994-95, encourages undergraduate alumni to give back to the university. It carries a two-pronged message: Small donations play a significant role in the overall fundraising picture, and the money donated to the fund will go solely to support undergraduate education.

The message seems to be paying off, Clay said. The Class of 1996 reached a record participation rate of 58 percent and alumni participation rates have increased by 42 percent since 1991-92.

Students contend that giving donors the option of contributing to a socially responsible investment fund would help boost the Stanford Fund's participation rate even higher.

But Chris Ponce, director of the Stanford Fund, disagrees.

"There is no evidence to really suggest there are people out there withholding support for the Stanford Fund because of the university's endowment fund investment practices," Ponce said.

Further, Ponce said, using the Stanford Fund as a vehicle to raise money for an alternative endowment fund isn't a financially sound strategy because endowment funds need to be large enough to generate substantial interest to remain viable over the long term.

"You don't get significant dollar amounts via annual giving programs, like the Stanford Fund, which encourage small donations from a lot of people," he said. "To raise an endowment fund, you need to concentrate on raising large amounts of money from a few people."

Thompson concedes that there may be faults with the student proposal. But he says the principles behind it are valid.

"We don't understand all of the balances and flows of the university's financial system," he said. "But the university has a number of very, very smart people working for it. I don't think they can legitimately say there is no way for us to do socially responsible investing.

"We have offered them one proposal. We think it's a good proposal, but it's probably not perfect. If they put their heads together for an hour and look at it, I bet you they can come up with a way to make it work and we'd like to help them with that."

Socially responsible funds

According to Linda Kimball, a staff member of the SCIR and the University's Advisory Panel on Investment Responsibility, an SCIR advisory group that is made up of faculty, staff, students and alumni, Stanford's endowment already has substantial investments in socially responsible companies and industries.

The Stanford Management Company, Kimball said, reviewed eight of the top socially responsible funds recognized by the Investor Responsibility Research Center (IRRC) and compared Stanford's holdings on a company-to-company basis. It found that 35 percent of Stanford's public equity investments matched those socially responsible funds, company for company. That means $1 billion of Stanford's $3.4 billion endowment is invested in these companies, she said.

In addition, the university's venture capital investments are in socially responsible industries such as health care and pharmaceutical companies, as well as communication and computer products and services, she said. As of Sept. 30, close to $350 million of Stanford's endowment was invested in venture capital opportunities.

But Thompson and other students contend that Stanford has invested in these companies because of their strong economic performance and not because of a sense of social responsibility.

While economics may be the overriding factor in investment decisions, Kimball said, Stanford nevertheless has invested significant amounts of money in these companies.

In those cases where Stanford has investments in companies that aren't considered socially responsible, she adds, the university can flex its muscle as a shareholder to help bring about change.

"Stanford has a reputation and prestige," she said. "When we say something by letter or by [shareholder] vote, people tend to listen."

Campus officials say that tying politics to university fundraising can be a risky strategy.

"It opens up the potential for utilizing fundraising to support particular political or social statements, rather than education, which should be our focus," Kimball said.

She added that giving people an opportunity to contribute to a socially responsible investment fund could be seen as forcing them to take a political stand.

Brian Babcock, who is helping to organize the new student endowment fund, is confident that students and alumni will rally to the cause.

"I think what we are asking for is very reasonable and the Board of Trustees would be in agreement with us if we could have a chance to talk it over with them," Babcock said.

SCIR's Clay is less optimistic. He said SCIR's concerns with the proposal "are so fundamental that it is difficult for me to see how they could revise it so we would feel comfortable with it."


By Marisa CIgarroa