Socially Responsible Investments: Costs and Benefits for University Endowment Funds

62 Pages Posted: 7 Sep 2019 Last revised: 21 Jul 2020

See all articles by George O. Aragon

George O. Aragon

Arizona State University (ASU) - Finance Department

Yuxiang Jiang

Southwestern University of Finance and Economics (SWUFE)

Juha Joenväärä

Aalto University School of Business

Cristian Ioan Tiu

University at Buffalo; TIAA Institute

Date Written: July 21, 2020

Abstract

We find that socially responsible investment (SRI) policies are more common among the endowments of universities that face greater stakeholder pressure to adopt such policies and depend more on donations to fund operations. SRI policies result in cumulative abnormal donations of 6% of endowment assets following adoption events, and mainly from “socially-conscious” donors. However, SRI policies predict worse investment performance and no overall growth in endowment assets (donations plus investment income). Finally, SRI policies result in enhanced risk management practices, more federal support for research in sustainability science, and higher student applications. Our results support the view that universities serve diverse functions in society and different universities support society better by adopting different goals.

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

JEL Classification: G13, G14

Suggested Citation

Aragon, George O. and Jiang, Yuxiang and Joenvaara, Juha and Tiu, Cristian Ioan, Socially Responsible Investments: Costs and Benefits for University Endowment Funds (July 21, 2020). Available at SSRN: https://ssrn.com/abstract=3446252 or http://dx.doi.org/10.2139/ssrn.3446252

George O. Aragon (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Yuxiang Jiang

Southwestern University of Finance and Economics (SWUFE) ( email )

555 Liutai Avenue
Chengdu, Sichuan 611130
China

Juha Joenvaara

Aalto University School of Business ( email )

Finland

Cristian Ioan Tiu

University at Buffalo ( email )

238 Jacobs Management Center
Jacobs Hall, North Campus
Buffalo, NY NY 14260
United States
7166453299 (Phone)

TIAA Institute ( email )

8500 Andrew Carnegie Blvd
E3/S8
Charlotte, NC 28262
United States

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