Harvard’s ESG-focused endowment investment lags S&P 500 (2021)
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Harvard University’s endowment, which is run by Harvard Management Corporation, one of the first management companies to make the case that ESG investment would enhance returns, appears to be starting in a hole. Now that the Federal Reserve has promised to begin tapering its stimulus and even to consider raising rates, the ability of funds to do well by doing good is likely to be tested:
| “ | “What investing lessons can be learned from Harvard University’s failure to beat the S&P 500 SPX, 0.57% in its latest reporting period?
It’s a timely question, given the university’s report of its endowment’s investment return in the fiscal year that ended Jun. 30. That return was a gain of 33.6% — 7.3 percentage points lower than the S&P 500’s total return. Lagging the stock market is nothing new for Harvard; the endowment has done so more often than not in recent years. Cumulatively over the past decade it has lagged the S&P 500 by 5.6 annualized percentage points.”[1] |
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HMC insists that its lagging performance is a result of what it describes as its conservative approach. Seven years ago, before ESG was all the rage in the investment world, HMC made a commitment to be on the cutting edge of the socially responsible investment movement:
| “ | “Harvard Management Corporation (HMC) signed up to the UN-supported Principles for Responsible Investment (PRI) less than a year ago, but the company that manages the $36 billion Harvard University endowment is already moving rapidly to build environmental, social and governance (ESG) factors into every investment decision it makes.
Jane Mendillo, president and chief executive of HMC, told the Fiduciary Investors Symposium at Harvard University that its embrace of ESG factors and the PRI was driven by the changing definition of what it means to be a fiduciary investor, and by a conviction that investing sustainably will improve its portfolio returns…. “We want to be forward-thinking. We want to be successful investors and sustainable investors. We are convinced that doing so will be good for our portfolio and for Harvard, and it will also be good for the world.” Mendillo said that “over time, ESG factors will be considered in every part of the portfolio”. “We know there is more we can do as managers to push our thinking about creating a truly sustainable portfolio for Harvard as we choose our investments and manage our risks going forward,” she said…. “Our goal, in pursuing all of our sustainable investment initiatives, in signing the PRI, in seeking more and better information on ESG risks, and on integrating ESG considerations into our investment process, is to reduce risk and to improve economic returns in an ever-evolving world – one where environmental, social and governance factors are becoming more prominent and more economically relevant, and certainly are not going away.”[1] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
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