Charity Urges Colleges to Focus on ‘Sustainability’ of Their Endowments

Colleges are increasingly focused on sustainability — by erecting environmentally friendly buildings

and reducing their use of electricity — but relatively few institutions are applying the same environmental awareness to their endowment holdings.

Mark Orlowski is out to change that. Three years ago, Mr. Orlowski was a college student. Now, as founder and executive director of the Sustainable Endowments Institute, in Cambridge, Mass., he is grading some of the wealthiest and most-prestigious colleges in the country on how well their actions and policies help achieve sustainability.

In January, the institute released the “College Sustainability Report Card,” which gave a letter grade to the 100 colleges and universities in the United States and Canada with the biggest endowments. The majority of colleges earned a C+ or worse. The report was cited in dozens of campus and local papers, and it put Mr. Orlowski’s two-year-old institute on the map.

Four of the seven categories in the report — administration, food and recycling, green building, and climate change and energy — focus on campus activities related to sustainability.

But Mr. Orlowski’s institute is primarily concerned with the other three categories in the report, which all focus on endowment policies. Those categories are: endowment transparency (does the college make its holdings public?); investment priorities (does it put money into investments that are good for the environment, like renewable-energy funds?); and shareholder engagement (does it handle its own voting on proxies that come before shareholders, or does it leave that responsibility up to its investment managers?).

“We wanted to put out a report that looked at both sides of the equation — the campus side and the endowment side,” Mr. Orlowski says. “The report card has done it in such a way that you don’t need a Ph.D. to understand it.”

‘Unified Vision’

More attention has been paid to such issues in the foundation world — perhaps because, unlike at most colleges, the endowment is central to almost everything grant makers do.

Several foundations, like the Nathan Cummings Foundation and the Jessie Smith Noyes Foundation, both in New York, have developed policies to ensure that proxies are voted in line with the foundation’s mission. In January, an article in the Los Angeles Times argued that the Bill & Melinda Gates Foundation’s investments were contravening their good works in African countries, which led to much discussion about whether a foundation’s mission should be a factor when managers choose investments.

The nation’s colleges and universities have more than $350-billion sitting in endowments. Yet many people interested in issues of sustainability on well-endowed campuses give no thought to what their academic institution is doing with its endowment. Through his organization, Mr. Orlowski is trying to get students, professors, and administrators to realize that a college can potentially have as much impact on the environment through its endowment practices as it can by making changes on campus.

“It’s about having a unified vision for the university,” Mr. Orlowski says. “To not connect the dots is a real missed opportunity.”

‘A Very Smart Guy’

Mr. Orlowski got a taste of endowment activism while still at Williams College, where he majored in political science and graduated in 2004.

While a junior, Mr. Orlowski, a Quaker, was asked to serve on the board of managers of a group that handles investments for 30 Quaker congregations in New England. That board, composed of Quakers, regularly submits its own resolutions, many of them focused on the environment, to companies in which it owns stock.

At Williams, Mr. Orlowski served on a committee that conducts research on shareholder proposals at companies in which the college owns shares. The committee then provides recommendations to Williams’s Board of Trustees on how it should vote on the resolutions.

Also while at Williams, Mr. Orlowski pursued a research project on college endowments and sustainability, which he was asked to present at a conference in Vermont on investor responsibility.

He shared his idea of a report card on sustainability and endowments with others in the field, and soon he was meeting with executives at Rockefeller Philanthropy Advisors, a nonprofit group in New York that helps foundations and individuals manage their giving. Each spring, Rockefeller produces a “proxy-season preview” that outlines resolutions that are coming up for shareholder votes at major corporations.

After meeting with Mr. Orlowski, Douglas Bauer, a senior vice president at Rockefeller, agreed to create the Sustainable Endowments Institute in early 2005 as a special project under the Rockefeller umbrella.

“He’s a very smart guy for someone as young as he is,” Mr. Bauer says. “He spent a lot of time talking with college students across the country, trying to get sense of what would be a useful tool. What kept coming back was that there was no benchmark tool that laid out where everyone was in a straightforward kind of way.”

Mr. Orlowski and a research assistant — the institute’s only two employees — maintain an office in Cambridge, Mass. Rockefeller Philanthropy Advisors provides administrative support at a subsidized rate, but Mr. Orlowski is responsible for raising money to cover the institute’s low-six-figure budget.

Several foundations, including the Foundation for Civic Leadership, in Cambridge; the Roy A. Hunt Foundation, in Pittsburgh; the Jessie Smith Noyes Foundation; the Rockefeller Brothers Fund, in New York; and the Rudolf Steiner Foundation, in San Francisco, have provided small annual grants to the institute ranging from $5,000 to $50,000.

Mediocre Grades

A year ago, the institute released a survey of shareholder practices at 331 colleges that used only aggregate data. But the institute didn’t catch the news media’s fancy until last January’s release of the report card shone a direct spotlight on practices at 100 institutions. (The report is available free at http://www.endowmentinstitute.org.)

The highest overall awarded grade was an A-, and only four institutions — Dartmouth College, Harvard University, Stanford University, and Mr. Orlowski’s alma mater, Williams — earned that mark. All four institutions received solid grades for their endowment policies, and, incidentally, all four also have earned strong returns on their investments in recent years.

Most grades the institute handed out were mediocre, and its findings angered some administrators and students.

Oberlin College earned a C+ overall, with failing marks for openness about its endowment (the Ohio college did not disclose its holdings) and shareholder involvement (Oberlin had not indicated whether it has a proxy-voting policy).

Colin Koffel, a member of the Oberlin Student Senate, says that in the past year, Oberlin students have persuaded the college to agree to build “green” buildings when constructing new campus facilities, and helped persuade Nancy Dye, the college’s president, to add her name to the American College & University Presidents Climate Commitment, a pledge signed by more than 180 academic leaders to reduce and eventually eliminate emissions on their campuses that contribute to global warming.

“Oberlin’s report card does not reflect the great things happening at the college,” Mr. Koffel says.

Mr. Orlowski responds: “We recognize Oberlin is doing some amazing things. But the endowment part of the sustainability equation has not been addressed.”

Mr. Koffel and others say that the Sustainable Endowments Institute has done a good job of bringing endowment issues to the fore. “I hadn’t even thought about shareholder engagement until I saw the report,” says Katherine Michonski, a senior at the University of Chicago (which earned an overall grade of D+) and the founder and co-chairwoman of the university’s Sustainability Council.

Visiting Campuses

Mr. Orlowski travels a lot — through the first four months of 2007, he had been to 30 campuses in 15 states. He tries to encourage colleges to create committees like the one he served on at Williams, so that the college can make informed decisions when casting proxy votes. Such committees also provide a learning experience for students and show alumni that the college is a serious steward of donations, he says.

“Like a lot of 24-year-old evangelicals, Mark has a message that is awfully hard for the jaded vice president of finance to completely ignore,” says Gordon C. Winston, a member of the institute’s advisory board, and an economics professor at Williams College. “And it’s even harder to ignore when Mark has arranged for the student-body president, along with two political scientists and a poet, to go into the vice president’s office and say, ‘Why do we not do it that way?’”

Relatively few colleges bother to vote their own proxies; most leave such voting up to outside managers. One problem in the push for more thoughtful proxy voting is that with the growing proportion of endowments in hedge funds, some of which are highly secretive about their holdings, the colleges themselves may not be exactly sure what companies they own.

Even so, Neva Goodwin, a member of the institute’s advisory board, and co-director of the Global Development and Environment Institute at Tufts University, believes that when enough pressure is exerted on endowment managers, a solution will be found.

“At some point, people will see that it isn’t that difficult,” says Ms. Goodwin, who is also vice chair of the board of the Rockefeller Brothers Fund. “But right now there just isn’t the interest among those who could do it to figure out how to do it.”

In 2008, Mr. Orlowski plans to release a new edition of the report card, with profiles of more institutions. The institute also hopes to publish research that highlights best practices among college endowments. The institute will need a bigger staff to accomplish those goals, and Mr. Orlowski is soliciting grants to cover the cost of new workers.

In time, he hopes, the report card will prompt more institutions to use their endowments to add momentum to the environmentally friendly changes that they are already making on campus.

“The old expression ‘money talks’ surely applies to endowments,” Mr. Orlowski says. “Yet few endowments choose to exercise that voice.