Duke Revises Approach to Socially Responsible Investing

Changes include greater community engagement, new contribution options

Greater community engagement and a new option for donors who wish to direct their endowment contributions to social choice funds will be the result of revisions to Duke University's approach to socially responsible investing, announced Saturday by President Richard H. Brodhead.

"These are the most significant changes to our approach to socially responsible investment in almost a decade," Brodhead said. "And the catalyst for this action has been persistent advocacy by our students. I am grateful to the DukeOpen group for raising questions and highlighting issues that have led to improvements in our approach to socially responsible investment."

The centerpiece of the new plan, which was approved by the Board of Trustees this weekend, is the enhancement of the Advisory Committee on Investment Responsibility (ACIR), which was established to provide oversight and advice on social issues related to endowment assets. The ACIR will expand from 10 to 14 members, adding one trustee, one faculty member, one undergraduate student and one graduate or professional student. The new ACIR will then consist of four faculty, four students, four administrators, one alumna/us and one trustee.

The ACIR will be charged with meeting on a regular basis to monitor trends and activities in investment responsibility that relate to DUMAC, the university's investment company. Members of the ACIR will be given access to information about DUMAC's direct holdings and fund managers (after signing non-disclosure agreements) and will advise the president and DUMAC leadership on proxy voting for investments when applicable.

The ACIR will also establish a public website, issue an annual report and hold a public forum to answer questions and gather feedback from the Duke community on issues related to investment responsibility.

The university will also streamline the process by which investment-related concerns are considered for review. Under the current two-step process, members of the Duke community must first go through the President's Special Committee on Investment Responsibility (PSC), which would then refer specific issues to the ACIR. Under the new process, the PSC will be eliminated, and the ACIR will be the principal advisor to the president and DUMAC on social issues.

In addition to the new oversight policies, DUMAC will make available to endowment donors the ability to have their contributions invested in a social choice fund. Duke will join a growing number of university endowments that provide these kinds of investment options to donors.

"We have a legal and moral obligation to manage the university's assets wisely for the benefit of future generations of students and faculty," Brodhead said. "At the same time, we want to improve our ability to monitor issues of social concern and share those concerns with the Duke community."

Brodhead added that the new policies came about after months of consultation with members of the ACIR and PSC, DUMAC, the Executive Committee of the Board of Trustees, the Executive Committee of the Academic Council, and the University Priorities Committee, as well as experts in finance and investments. The changes cover Duke University's endowment and do not affect The Duke Endowment, a separate private foundation based in Charlotte, N.C., whose investments are also managed by DUMAC.

Built on contributions from donors and investment returns, the endowment is a perpetual source of support for the university. With a market value of $6.0 billion as of June 30, 2013, the endowment will generate approximately $250 million in the current fiscal year. These funds support Duke financial aid, academic programs, faculty, facilities and other activities across the university and health system.

Duke formally adopted guidelines on socially responsible investing in 2004.  The policy noted that while the university's primary fiduciary responsibility is to maximize the financial return on its resources, it could take ethical factors into account when setting investment policies and practices after careful consideration and "substantive discourse" on an issue.

Since then, the university has responded to student concerns. In 2008, Duke ceased investing in companies doing significant business in Sudan/Darfur, and in 2012, the university adopted proxy voting guidelines for investments in companies that might be connected to conflict minerals.