New year, new MITIMCo: MIT’s chance to lead in socially responsible investing
We commend MIT for its actions so far, and hope to see more progress
In 2020, the MIT Investment Management Company (MITIMCo) joined Climate Action 100+ (CA100+), a global investor-led engagement initiative to ensure that the world’s largest corporate emitters take necessary climate action. Among our peer institutions, only Harvard and Brown are part of CA100+. We commend MIT for joining the ranks of more than 545 investors committed to admirable efforts on climate.
In 2015, when students and faculty gathered outside President Reif’s office for a sit-in demanding that MIT divest fossil fuel assets, MIT responded to the protest with an acknowledgment of the climate crisis but with no real policies for institutional change. After five years of ambiguous action, joining CA100+ is especially encouraging. Along with the new MIT Climate and Sustainability Consortium, it is a step towards the “active engagement and bold convening” promised in MIT’s 2015 Climate Action Plan.
A second reason this move is encouraging is because it breaks MIT’s history of complacency in responding to humanitarian and ethical investment dilemmas. In 1986, the MIT Coalition Against Apartheid rallied outside the Student Center, urging the MIT Corporation to divest from South Africa. MIT never responded nor divested its South African assets. In 2004, students began another campaign for divestment from genocide in Sudan. When the MIT Corporation finally convened the ad hoc Advisory Committee on Shareholder Responsibility (ACSR) to discuss Sudan two years later, Harvard, Stanford, Yale, and 45 other peer institutions had already divested. Under the Harvard Corporation’s permanent Committee of Shareholder Responsibility, the decision-making process took five months, finishing 14 months before MIT did. On the other hand, the MIT ACSR’s discussion process took about eight months, including a frustrating two-and-a-half month recess with no explanation, until MIT finally divested on May 14, 2007, based on violations of MIT’s investment principles.
Along with the other leaders of the Sudan divestment movement, Kayvan Zainabadi, a biology graduate student and then-president of MIT Amnesty International, wanted to understand what this vague mention of “investment principles” meant. Furthermore, he sought to set in stone the precedent of making decisions based on these principles. Zainabadi worked with the Undergraduate Association and Graduate Student Council to submit a joint resolution, Establishing Responsible Investing Principles at MIT, to the MITIMCo, Corporation, and administration. This resolution recommended that the MIT Corporation establish ethical investing guidelines and “take actions to establish a Standing Committee on Investment Responsibility” to replace the ad hoc committee that had failed to act efficiently on the Sudan divestment issue.
A five-person panel, including Zainabadi and Seth Alexander, the president of MITIMCo, discussed restructuring the ACSR. This discussion never turned into action. After Zainabadi and his peers graduated, students lost institutional memory of how close we had come to progress. In a January 2021 interview, Zainabadi, soon to be an Assistant Professor at Weill Cornell Medical College, said, “Nothing changed. Knowing what I know, I wouldn’t donate to MIT.”
While his sentiment rang true at the time, MITIMCo joining CA100+ now represents a slow, incremental change in MIT’s approach to investments and Environmental, Social, and Governance (ESG) issues. Some of the central asks of CA100+ are for climate-related financial disclosures, net-zero goals, and frameworks for ESG governance from company boards. The MIT administration also pushes initiatives to research climate scenario analysis, strengthen corporate financial disclosure, and encourage transparency from companies. This is a prudent strategy: Robert G. Eccles, a tenured Harvard Business School professor and the world’s foremost expert on integrated reporting, told Harvard Magazine that an integrated reporting framework for sustainability-related matters “is going to lead to better resource-allocation decisions that will create value over the long-term, while allowing companies to take a more holistic view of their role in society.”
However, we discovered a key difference between thirteen liberal arts peer institutions and thirteen tech schools, including MIT: while 11 out of 13 of the liberal arts schools disclosed explicit ESG investing policies on their websites, not a single one of the tech schools followed suit, despite the clear ties between ESG investing and strong returns. In his Forbes article, “The Curious Case of Engineering Schools and Sustainable Investing: MIT Is Not Alone,” Eccles concluded that “the endowments of these tech schools are far behind their more literary peers when it comes to where the investment world is moving.”
Joining the Climate Action 100+ coalition affirms that MIT is reshaping itself; this MIT is beginning to resemble the MIT that is a global leader of innovation, research, and technology addressing climate change. MIT is perhaps ready to do what Eccles calls for: to be the first tech school to break a tradition of inertia and establish a permanent framework for ESG investing.
Let’s ensure that this is the beginning, not the end, of a movement for change. We encourage MIT to make a fuller commitment to climate action by publicly announcing that they are a part of Climate Action 100+, just as they announced the MIT Climate and Sustainability Consortium and work toward new policies on donations. To build on its continued promises of “active engagement and bold convening,” MIT can take a lead investor role in influencing shareholder resolutions as a part of CA100+, establishing itself as a leader among tech institutions in driving change.
Based on its current investment principles, which are purely focused on generating returns, MITIMCo searches for partners with “motivations beyond money,” claiming to engage only with investors of “the highest standards of ethical behavior and strong reputations of fair dealings with others.” In accord with these statements, MIT should align its value-based investing with values-based commitments, following the footsteps of the modern investment community in accounting for financial risk and ensuring optimal returns. We call on MIT to incorporate three new principles: 1. Transparency and Public Commitments, 2. Climate and ESG-Oriented Portfolio Goals, and 3. A Framework for Accountability and Community Input.
We also outline three simple steps for MIT to make concrete progress towards these principles.
MITIMCo becomes a signatory of the Principles for Responsible Investment (PRI).
The PRI is the global leading advocate of responsible investment. As an independent network supported by the United Nations, it has a long-term goal of creating an “economically efficient, sustainable global financial system.” MIT should become a signatory to publicly display its steadfast commitment to sustainable investing and risk management, joining international organizations and peer institutions such as Brown, Harvard, and Northwestern University. Completing an investment manager application and annual reporting for the PRI also ensures that accountability and transparency are maintained.
MITIMCo releases a statement of purpose.
A statement of purpose is a publicly released memo that expands on MITIMCo’s investment principles and articulates the connection between profits, purpose, and values. A statement of purpose will provide a solid foundation for more transparent and socially responsible governance to guide decision-making. Specificity plays a key role in the goals encompassed by this statement. MITIMCo needs to identify the time frames they use in evaluating its strategy and long-term capital allocation choices. Its standards for investment and engagement must contain concrete metrics to assess progress, such as those suggested in the MIT Alumni Climate Action Plan recommendations. Finally, we expect that the statement of purpose will be followed by measurable goals and accountability to fulfill responsibilities to stakeholders.
The MIT Corporation should reconsider creating a Standing Committee on Investor Responsibility (SCIR).
Unlike its peer institutions, the MIT Corporation does not have a permanent framework to address sustainable investing issues. Its only current form of community input is the Corporation Joint Advisory Committee on Institute-Wide Affairs. While this committee does include undergraduate and graduate student members, it does not deliberate on socially responsible investing. As a sixth Corporation standing committee, the SCIR should: 1. help draft MITIMCo’s statement of purpose, setting clear guidelines for sustainable investing and establishing a framework for effective management and accountability; 2. account for factors such as long-term financial interests, results of stress testing, and uncertainty; 3. represent the interests of undergraduate and graduate students, alumni, faculty, and staff by including at least two members from each group; and 4. make its meeting minutes, voting records, and recommendations, as well as the Corporation’s response, public to the entire MIT community. We do not expect that the establishment of the SCIR will make divestment any more frequent; rather, the next time MITIMCo and the Corporation consider any urgent environmental or humanitarian issue, including the question of divestment versus engagement, the decision-making process will be more systematic, efficient, and transparent.
We — students, staff, faculty, alumni, and administration — are all drawn to MIT by a mission that unites us. We seek to develop in each other “the ability and passion to work wisely, creatively, and effectively for the betterment of humankind.” Our reputation as a global leader of innovation rests on our shoulders. The MIT endowment, ranked fifth in the U.S., is not a publicly traded corporation, but each and every one of us is a stakeholder in our $18.83 billion of influence. We can choose to stand together, leaving an Institute that is better prepared for the next challenge we face.
Sign the petition to support MIT in establishing socially responsible investing principles.
Anushree Chaudhuri (she/her) is a member of the MIT Class of 2024 and involved with the Student Sustainability Coalition, UA Sustain, Terrascope, and the Environmental Solutions Initiative Rapid Response Group.
Jasmine Chen (she/her) is a member of the MIT Class of 2024 and involved with the Environmental Solutions Initiative Rapid Response Group
Daisy Wang (she/her) is a member of the MIT Class of 2024 and involved with UA Sustain and the Environmental Solutions Initiative Rapid Response Group.
Editor’s note: Daisy Wang is a news reporter at The Tech. Her reporting with The Tech thus far has spanned student life and community health during COVID-19; diversity, equity, and inclusion initiatives; and the appointment of MIT faculty to government positions. She has not covered stories related to MIT’s climate action, endowment, or investment practices and contributed to this op-ed as a student.