Responsible Investing: Costs and Benefits for University Endowment Funds

We examine the adoption rates of responsible investment (RI) policies among university endowments. Adoption rates are more common when universities face stakeholder pressure and are donation-dependent. Policy adoption predicts greater abnormal donations totaling 6% of endowment assets, primarily from “socially conscious” donors. RI endowments are associated with greater management costs and return volatility, but RI and non-RI endowments produce similar asset growth rates (donations plus investment income). Universities also experience greater student applications and external grants for sustainable science research following adoptions. We conclude that RI policies are an important part of the optimal contract between universities and their stakeholders.

Keywords: Endowments, social responsibility, charitable donations, fund performance

JEL Classification: G13, G14

Suggested Citation: Suggested Citation

Aragon, George O. and Jiang, Yuxiang and Joenvaara, Juha and Tiu, Cristian Ioan, Responsible Investing: Costs and Benefits for University Endowment Funds (March 22, 2022). Available at SSRN: https://ssrn.com/abstract=3446252 or http://dx.doi.org/10.2139/ssrn.3446252