Responsible Investing: Costs and Benefits for University Endowment Funds

62 Pages Posted: 7 Sep 2019 Last revised: 23 Mar 2022

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: March 22, 2022

Abstract

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

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

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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