For the past nine months, DukeOpen, a student group, has petitioned senior administrators to increase the transparency of Duke’s endowment and promote socially responsible investment practices. Although we take issue with a few areas of DukeOpen’s platform, we commend the group’s overall goals and, in particular, its well-reasoned and moderate stance.
In 2004, The University’s Guidelines on Socially Responsible Investing established the Advisory Committee on Investment Responsibility and gave the Board of Trustees the power to instruct DUMAC, the University’s endowment manager, to take appropriate action, such as divestment, if specific investments are deemed ethically questionable.
The DukeOpen platform is threefold: to ensure regular meetings of ACIR, to establish a “social choice fund” that donors can opt into and, most importantly, to increase endowment transparency for the Duke community.
The first point makes sense. In its almost decade-long existence, ACIR has convened only twice and is required to meet only on an ad hoc basis. Quarterly or annual meetings would allow ACIR to actively monitor the endowment’s portfolio and keep Board members up to date while minimizing administrative burden.
The call for a “social choice fund”—a portion of the endowment contributions marked for socially responsible investments—begs the question of the endowment’s primary purpose. According to the guidelines, the Board’s primary fiduciary responsibility in overseeing the University’s investments is to maximize returns subject to risk-exposure constraints. This is an incredibly important responsibility, given that many of Duke’s most valuable features are funded by returns on the endowment. But these guidelines also rightfully acknowledge that the Board can and should take ethical considerations into account when approving investment choices. The existence of a social choice fund, especially if it is actively advertised to donors, would go a long way toward the goal of ethical investment.
While DukeOpen’s research shows that socially responsible asset classes do not suffer from systematically lower returns, this subject should be studied further. We also want additional clarity as to which investments qualify as “socially responsible.”
Transparency, however, is DukeOpen’s primary goal. The anatomy of the University’s investment portfolio is complex and strategically important, so disclosure of indirect investments—such as those actively managed by hedge funds—is not feasible. Direct investments in companies are arguably less strategically sensitive. Dartmouth College offers a time-delayed, hard copy disclosure of its direct investments, and Duke should implement a similar practice.
Although it is unclear that students have an intrinsic right to know how Duke’s money is invested, the University would be better off if students and faculty had limited access to this information. First, students and faculty collectively have more specialized expertise—and more time and energy to act on it—than ACIR or the Board. Second, more transparency can only serve to raise the standard of discourse in divestment debates. In the past, student-led divestment movements have relied on stylized facts about entire industries. With partial disclosure, more company-specific complaints could be raised.
We see no reason why some incarnation of DukeOpen’s vision should not be implemented. Students should see endowment transparency as more than a campus issue: Soon enough, we may be donating to Duke, and we should lay the groundwork to responsibly support our University.
Board Chair Casey Williams recused himself because he is a member of DukeOpen.