On this point, students and administrators concur: As a Catholic and Jesuit institution committed to social responsibility, Boston College holds a special obligation to make sure its investments reflect its values.
But the agreements end here. While administrators point to the implementation of various social screens to ensure socially responsible investing, as per BC's investment policy, students within the Global Justice Project (GJP) and BC Divest Darfur movement contend that the policy and screens employed do not reach far enough.
The policy, available online, requires that BC's $1.6 billion endowment "be handled in accordance with the [ethical, social, and moral] principles," which provide the foundation for the University. BC periodically reviews its holdings to "ascertain whether the firms [in which it invests] engage in practices or procedures opposed to the ethical, social, and moral principles deriving from BC's heritage," according to the policy.
As conflicts in the Sudan, especially Darfur, escalated into state-sponsored genocide, BC identified five companies operating in that region and restricted investment in these companies. During the summer of 2006, BC classified Sinopec, Nam Fatt, Oil and Natural Gas Corporation, PetroChina, and Tatneft as companies in conflict with its investment policy.
"What we've done is established a policy for specific companies that operate in the Sudan, so we've prohibited future investment in these five companies," said John Zona, assistant treasurer and associate director of investments.
To identify companies that might possibly conflict with the socially responsible investment policy, BC employs an independent consulting firm called Institutional Shareholder Services (ISS). According to Zona, this firm maintains a reputation for expertise in the field of socially responsible investing. Research and social screens conducted by ISS inform BC's investment management.
"We wanted to look at companies with significant oil operations in the Sudan, and once [ISS] came back with a list of names, we had to systematically try to review our holdings to see if we did invest in them," said Zona. "In fact, we did not." BC did not need to divest from those companies because it did not invest in them in the first place.
"The social screens we put in place had worked," said University Spokesman Jack Dunn. "They had precluded our investment in certain companies whose activities are inconsistent with our values as a Jesuit Catholic university, and ISS has identified companies that we have instructed our fund managers never to invest in."
But while those five companies will not receive future capital from BC, Stephanie Andrews, involved in the BC Divest Darfur movement and A&S '08, said that the restrictions should be extended to more companies. Citing from a list compiled by the Sudan Divestment Task Force and corroborated by analysis from the investment management firm Calvert, Andrews identified at least 15 other companies.
Nick Salter, member of the GJP and A&S '07, said these other companies have their hands in offenses just as grievous as the five restricted by BC. "The social screen on Darfur is a loose one," he said. "By mentioning these five companies, BC is acknowledging that its investments could be doing harm. They should consider adding other oil companies to those five."
Zona plans to meet with Salter and Andrews tomorrow to discuss policy specific to the Sudan. According to Dunn, the additional research brought forth by Salter and Andrews would be taken into consideration. "No one is opposed to taking researched information and running it by our managers," he said.
Zona said the decision to restrict against investing in a certain company is made only in cases where a "clear and unambiguous" conflict exists with BC's values as an institution. "We consider policy to restrict or prohibit investments only rarely, when the evidence is clear and unambiguous. The situation in Sudan fits this profile, as genocide continues to occur that is sponsored by the government," he said. "If you look at oil revenues, it is a major source of income for the government, which funds military operations."
BC's investments are controlled by a hierarchical structure that ensures diversity and dispersion of its multi-billion dollar assets. The Investment and Endowment Committee, on which eight people sit, oversees the implementation of BC's policy through the hiring of fund managers and the dissemination of assets. Financial giants Peter Lynch and Mario Gabelli serve on BC's Investment and Endowment Committee.
According to Zona, BC employs approximately 75 independent management firms that each have a separate mandate. Each firm invests in thousands of different securities, resulting in an extremely diverse portfolio. "We have lots of complex strategies across domestic equities, international equities, emerging markets, private equities, venture capital, hedge funds, and a myriad of asset classes," said Zona. "The firms allocate capital accordingly across these classes."
The funds in which BC invests include many components, resulting in thousands of individual companies in the University's portfolio. "Some companies we hold directly, and some we hold indirectly through commingled funds or hedge fund accounts," said Zona.
But even in its indirectly controlled holdings, like mutual funds, BC does not invest in the five identified oil companies. "The social screens preclude investment in any form," said Dunn. "We value the information provided by ISS, and our investors use this company to review social screens that are set in place to make sure investments are consistent with our values as a Catholic university."
The social screens essentially act as filters, assessing companies based on criteria established by ISS. They can be formatted to focus on specific issues, from environmental affairs to workplace policies, and BC uses this information to further examine the ways in which companies operate.
"The social screens are used as a starting point to systematically evaluate our holdings," said Zona. "But just because a security shows up on a screen doesn't mean we're going to automatically prohibit investment in it." He said that BC uses the broadest screens available, which are updated regularly by ISS.
For companies identified by the social screens, BC reevaluates the company's disclosures and proxies to see if there are significant reasons that would preclude investment. In most cases, said Zona, BC finds "another side of the story" - a counterargument that clears the company.
"Rarely do we see an unambiguous case of a company that would affront the values of the University," he said. "We're very careful; we don't want to restrict investment in securities if indeed it may not be worthy of a restriction." This caution in restricting investments, he said, is a common practice across universities.
While Salter and Andrews will address other issues pertaining to BC's investments, like the role BC plays in the overseeing of proxy votes by its money managers, the University will never fully disclose its investment strategy. "Public universities are required by law to make their holdings public," said Dunn. "But very few private universities do. We chose not to because providing the details of our investment strategy would put us at competitive disadvantage."
Salter advocated for a reconsideration of the current policy, which has not been revised since 1990. "The endowment then was a fraction of what it is now," he said. "It has grown in areas without the policy changing. The policy recognizes the need for investments to meet the moral mission of the University, but is vague enough to allow for investment in companies that could be doing great harm."
Zona said an investment policy of some form has been in place since the mid 1980s. "That's 20-plus years that the University has been concerned with investing in ways consistent with its values." In fact, BC has had to divest in the past because of conflicts between companies' operating procedures and University values.
While divulging of specific companies remains out of the question, Zona maintains that the office of the treasurer will accommodate dialogue with students interested socially responsible investing, provided the students have conducted research regarding the issues. "We have a mechanism for students or others who make inquiries with regard to our holdings. But when students inquire, we ask them to pick a specific social issue to stay focused," he said.
Salter said he and Andrews submitted a 30-page report earlier this semester. "Our academic research won't give them any new information," he said. "I don't know why it's the students' responsibility to provide a research paper on why an issue is questionable for investing."
While transparency is strategically undesirable, the fluidity of the investments also makes it logistically difficult, said Zona. Not only do BC's investments encompass thousands of securities, the allotment of its assets change day to day.
Dunn said the proof of a "winning strategy" is in what BC has been able to do with its endowment. "There are 20 universities in the United States that meet full demonstrated financial need of all its students and that are also need blind in admissions policy," he said. "We are one of them. By far we're the poorest. But we're able to do it because we have built successful investment strategy, because we are the best managed university in the United States. We don't apologize for having a $1.6 billion endowment. It makes that financial aid possible, among other things." n
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