Princeton University
PA-14: Sustainable Investment

The University’s holdings referenced above roughly comprise sustainably grown timber, renewable energy, and clean-tech assets, as well as holdings in certain industries such as waste management and water treatment. The $372 million represents the value of Princeton’s holdings in sustainable assets which have been acquired outside of funds focused solely on sustainable investments, while the $422 million represents the value of Princeton’s holdings in such funds. The $291 million invested in businesses selected for exemplary sustainability performance primarily comprises LEED-certified real estate investments.

The fundamental goal of the University’s investment strategy is, and has been, “to maximize the total long-term return on investments” in order to support the University’s core mission of teaching and research. However, the guidelines reflect the Trustees’ belief that it is appropriate to consider investment-driven social responsibility issues in certain limited circumstances. While these guidelines were designed with investment issues in mind, the introduction to the guidelines suggests that they “can be applied more generally in order to help us consider other kinds of social responsibility issues more efficiently.”

The guidelines state clearly: “There is a strong presumption against the University taking a political position or playing an active role with respect to external issues of a political, social, or moral character.” The Resources Committee has the responsibility to determine when the strong presumption not to take a position regarding issues of broader social concern must be tempered by other considerations. The 1997 guidelines contain criteria for considering exemptions from the presumption and reflect the view that exceptions from maximizing return should be considered in limited circumstances.

The key criterion is that there be “considerable, thoughtful, and sustained campus interest” and note that the appropriate level of interest may require repeated raising of the issue over an extended period of time.” The Resources Committee must also consider the “magnitude, scope, and representativeness of campus opinions.” A link to the guidelines and criteria for considering exemptions can be found below.

When the Resources Committee, based on the guidelines outlined above and linked below, decides that it is necessary to place a social or environmental overlay on investment decisions, it makes a recommendation to the University’s Trustees. Upon approval by the Trustees, PRINCO makes any necessary changes to its small amount of direct holdings and communicates the restriction to its external managers.

The most recent example of such a scenario is the Endowment’s divestment from Sudan. In the fall of 2005, the Resources Committee turned its attention to Sudan and conducted a thorough review of the political and economic climate in Sudan, as well as actions taken by other institutions. The Committee found that action by Princeton regarding current or contemplated investment in selected companies conducting business in Sudan was necessary. Ultimately, the Resources Committee proposed that the University divest from assets directly held in any company actively conducting operations in Sudan that supports acts of genocide or renders assistance to perpetrators of genocide. For any such companies held directly by the Endowment, the Committee recommended that the University first engage these companies in dialogue and divest if those efforts failed. For Princeton’s external managers, the Committee recommended that PRINCO request a report on ownership of these companies, suggest that the managers give careful consideration to Princeton’s concerns, and ask for comments on Princeton’s decision. In June 2006, the University’s Board of Trustees adopted this policy of disassociation.

As described above, the Endowment has maintained a negative screen against assets directly held in any company directly or indirectly involved in genocide in Sudan since 2006. PRINCO has avoided any direct involvement in such companies and has advised its investment managers of Princeton’s standards and concerns. In addition, PRINCO has directed the manager of a fund that targets resource-related public equities to exclude companies with the lowest MSCI ESG rating (CCC).

100% of the Endowment is subject to the negative screen related to Sudan. 0.4% of the Endowment is subject to the negative screen related to MSCI ESG ratings.

Princeton participates in regular email surveys, in which various schools provide updates on ESG issues being considered at their respective institutions, and investment staff has recently begun attending small group sessions with other endowments to discuss varying approaches to ESG issues. Investment staff also attends the College and University Consortium on Investor Responsibility, held annually by Harvard.