Values and Value: University Endowments, Fiduciary Duties, and ESG Investing

42 Journal of College and University Law 247 (2016)

74 Pages Posted: 5 Sep 2015 Last revised: 18 Aug 2016

See all articles by Susan N. Gary

Susan N. Gary

University of Oregon - School of Law

Date Written: February 1, 2016

Abstract

The trustees managing university endowment funds must comply with fiduciary duties that require the trustees to act in the best interests of the university and to act as prudent investors when managing the funds. This article shows that these fiduciaries may adopt investment policies that consider material environmental, social, and governance (ESG) factors as part of an overall investment strategy. The article explains why older arguments that fiduciaries should avoid “social investing” are no longer relevant and how the prudent investor standard has evolved to include ESG investing. The article discusses the changes in socially responsible investing since the anti-apartheid era and reviews a significant number of empirical studies that show that ESG investing has had a neutral or positive effect on financial return. Based on the empirical work, evidence of the financial industry’s growing use of extra-financial factors in investment analysis, and recent guidance from the Department of Labor, the article concludes that a trustee responsible for a university endowment will not breach the duty of loyalty or the duty to act as a prudent investor by directing the endowment’s use of ESG investing as part of an overall financial investment strategy..

Keywords: prudent investor, ESG, SRI, trust, endowment, sustainability

Suggested Citation

Gary, Susan N., Values and Value: University Endowments, Fiduciary Duties, and ESG Investing (February 1, 2016). 42 Journal of College and University Law 247 (2016) , Available at SSRN: https://ssrn.com/abstract=2656640 or http://dx.doi.org/10.2139/ssrn.2656640

Susan N. Gary (Contact Author)

University of Oregon - School of Law ( email )

1515 Agate Street
Eugene, OR Oregon 97403
United States

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