Vice Chancellor explains Investment Committee Stance on SRI

In this letter to, and reply from, Dr John Hood, Vice-Chancellor of Oxford University, an outline of the current investment policy of the central University’s Investment Committee is given.

After reading the speech made by the incoming Vice Chancellor to Oxford University, John Hood, I wrote the following letter….

Dear Dr Hood

In your inaugural address as Vice Chancellor of Oxford University, you rightly address the need for Oxford to be on a strong financial footing in order to maintain it’s status as a ‘world class’ university. You comment that “endowments…must be wisely invested for capital growth”[1] which I also concur with. However, as one of many students interested in seeing the University acting as an institutional leader in its ethical, as well as its academic, decisions, may I encourage the University to also look to invest in line with clear and open principles of social responsibility investment.

A number of Universities in the United Stateshave made commitments to Socially Responsible Investment[2] , creating advisory committees on Socially Responsible Investment or Shareholder Responsibility, to provide input into University investment decisions. By following their example, and engaging with local and international businesses through ethically motivated active shareholding, OxfordUniversityhas the potential to be a powerful force for social responsibility, as well as academic excellence.

I would be interested to hear your views on the potential for Oxfordto make a clear commitment to Socially Responsibly Investment.

Yours sincerely

Timothy Davies
PPE Undergraduate, Oriel College

Less than 7 days later, I received this reply (any typos are probably my errors from transcription):

Dear Mr Davies

Socially Responsible Investment

Thank you for your letter of 7 October in connection with the above. The investment management of the University’s endowed funds is the responsibility of its Investment Committee, chaired by the Provost of Queen’s College, Sir Alan Budd. Broadly speaking, their remit is to implement an investment strategy which seeks to maximise investment returns within laid down risk parameters, but which also recognises the ethical or socially responsible issues to which you refer.

This was recognised most recently in a report that went to Council on 17^th June 2002, which whilst recognising the difficulty of defining what constituted an ethical or socially responsible investment (SRI), nevertheless wanted to demonstrate that the University has a desire to support a SRI approach if possible. At this meeting, Sir Alan Budd advised Council of the moves being made within the business community to tackle the issues surrounding SRI, one such being a Good Corporation Charter, which has been developed with the help of the Institute of Business Ethics.

Council agreed to endorse the approach contained within the Good Corporation Charter and asked the Investment Committee to instruct fund managers to pursue the adoption of the core principles contained within it, when speaking to companies in which they were investing. In brief, the principles being those associated with:

the dignity and rights of a company’s employees, its customers, suppliers, sub-contractors and shareholders as well as the community and environment in which it works

This is therefore the framework in which the Investment Committee now seeks to work when managing the University’s investments. The University’s investment portfolio is diverse and (inter alia) includes holdings in equities, government bonds, “seed” or venture capital schemes, property and cash. Within the equities’ portfolio the investments can be divided between passive funds which “track” an index such as the “FTSE 100”, to those which are move actively managed and thus more reliant upon the skills of a specific fund manager. The former attract much lower fees and are commonly used by charitable organisations such as ours.

In terms of meeting the requirements of Council in applying the principles contained within the Charter, the Investment Committee sees its role primarily as one of ‘engagement’ with its fund managers, who in turn are encouraged to seek the adoption of the principles contained within the Charter from the organisations in which they are investment. Although options of these principles is relatively recent, the process of engagement has already begun. The Investment Committee aims to interview each of its fund managers at least once a year as part of its due diligence process and in doing this it also seeks to establish which of the companies within the managers’ portfolios have signed up to the GCC or similar principles. For the Good Corporation there are two types of member: a full Good Corporation Member needs to have passed an independent verification assessment and an Associated Member is deemed to be one who although using the GCC framework has not yet undergone assessment. Through its fund managers the Investment Committee looks to determine which companies are either members or who operate on similar principles. It also asks the fund managers to bring these core principles to the attention of those who are not members thereby encouraging those who have not yet joined to do so.

In summary, therefore, the process the Committee has been asked to adopt does not look to exclude companies per se. Implicit in it is the perceived need to both discuss and encourage companies to sign-up to a process based on sound principles, which for good commercial reasons (if nothing else) will benefit them as well as their wider stakeholders. Although the principle of engagement is in its relatively early stages, I feel that it is in line with the remit given to the Investment Committee by Council and one that should be continued.

Yours Sincerely

John Hood

[1] Source: http://www.admin.ox.ac.uk/po/vc/hood_speech.pdf

[2] Harvard, Yale, Brown, Columbia & StanfordUniversity, alongside Smith, Swarthmore, Vassar, Williams & BarnardCollege. Source: http://www.sriendowment.org/schools.php

Posted on 21/10/04 by admin