Tags: activist | Harvard | social | causes

Harvard Says the Goal of Investing Is Making Money

Friday, 11 Oct 2013 11:04 AM

By Michael Carr


Students at Harvard thought the school's investment policy could stop global warming. Administrators decided the school's investment policy should focus on making money rather than advocating for social causes.

While it might seem to be obvious, Harvard has told its students that the university will continue to manage its $32.7 billion endowment fund to make money.

Even through investment returns provide more than a third of the school's annual operating budget, student activists wanted the fund to actively avoid investments that could provide large gains. Students felt that the fund should stop investing in fossil fuels even though these investments deliver income and capital gains.

Energy stocks make up 10.4 percent of the Standard & Poor's 500 and account for 44 percent of the index's earnings per share. Ignoring such a large sector of the market would most likely doom a fund to underperformance.

Harvard President Drew Faust told activists, "The endowment is a resource, not an instrument to impel social or political change." His decision shows that there are limits to what activists can expect when there is real money at stake.

Activist investors often present a cost to corporations that must respond to their unreasonable demands about fossil fuels or other social issue campaigns.

Harvard may be taking a step toward allowing companies to focus on improving the wealth of shareholders, which is the original reason most investors bought stock.

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