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ACCRIP reviews investment policies, advises Corporation

Brown Divest presents divestment targets during monthly ACCRIP meeting Tuesday

By
Senior Staff Writer
Thursday, April 18, 2019

Tuesday afternoon, three members of the student coalition, Brown Divest, shared a presentation before the University’s Advisory Committee on Corporate Responsibility in Investment Policy, which explained their desire for the University to divest from companies allegedly contributing to human rights violations in Palestine.

Amid campus calls for greater transparency around the University’s finances and more clarity on the logistics of targeted divestment, the significance and purpose of ACCRIP has been subjected to greater scrutiny among students and faculty members.

ACCRIP is responsible for considering issues of “moral responsibility in the investment policies” of the University, according to their official charter, which was officially enacted in 2007.

ACCRIP

ACCRIP, which is comprised of faculty, staff, students and alums, discusses issues of social harm in the context of the University’s investment portfolio. The committee receives insight from non-voting representatives of the Investment Office who attend the committee’s meetings, said Chi-Ming Hai, chair of ACCRIP and professor of medical science.

The committee’s responsibilities include assessing proxy resolutions — which the University might issue as a shareholder in a company — that address issues of social responsibility. In addition, ACCRIP considers requests from Brown community members to “examine issues of alleged social harm” committed by corporations in which the University may be an investor.

ACCRIP defines social harm as “the harmful impact that the activities of a company or corporation have on consumers, employees, or other persons, or on the human or natural environment,” according to its charter.

It is within ACCRIP’s power to recommend divestment from a company if an issue raises significant concern of social harm and divestment would “likely have a positive impact toward correcting the specified social harm,” according to the charter. The committee can also recommend divestment if a company contributes to “social harm so grave that it would be inconsistent with the goals and principles of the University to accept funds from that source.” However, in both cases, a member of the Brown community must first raise the issue of harm to the committee for consideration.

To determine whether the University should divest from a corporation, ACCRIP seeks to balance the maintenance of sound financial policy and the Corporation’s legal responsibility to sustain the University’s endowment with divestment’s potential to mitigate a social harm.

If a company “is definitely doing harm, if Brown’s going to have lower (financial) performance, so be it,” Hai said. “But at the same time, you do have to worry about returns, because ultimately (the endowment) is running the University, to a large extent,” he added.

Corporation and Investment Office

But as an advisory committee, ACCRIP is limited in the scope of its divestment recommendations. The Corporation has ultimate authority over whether the University actually proceeds with divestment from a company or industry. After the committee issues a recommendation for divestment from a company, the Corporation votes upon the committee’s proposal. The vote determines whether the University would remove existing investments in that company or prevent future ones from being made, according to previous reporting by The Herald.

After the Corporation’s vote, the Investment Office would change the University’s financial holdings in accordance with the specifications of the divestment decision, said Jane Dietze, the University’s chief investment officer. The structure of divestment depends on the precise wording of the final decision, she added.

The Investment Office follows directions from the Corporation and “theoretically (the Corporation is) listening to this community and to (ACCRIP) to help guide how we should be investing,” Dietze said. But when divestment restrictions are imposed, “that complexity layered on would impair returns,” she added.

Because only 5 percent of the University’s endowment is comprised of direct investments, which the Investment Office oversees, ensuring divestment from the 95 percent of investments run by external account managers is very complicated, Dietze said. The equity funds, hedge funds and private funds managed by these separate investors are not under the direct control of the Investment Office.

The Investment Office regularly communicates with the managers of private funds, so they “know a lot about the portfolio as it’s built over time, but you can’t really sell an individual company or fund,” Dietze said. For instance, if the University wanted to divest from Caterpillar, which is included in the S&P500, the University would have to leave the entire fund.

In addition, since separate account managers can claim intellectual property over their investment portfolios, there is not complete transparency with the Investment Office. The University could file a Form 13F, which would reveal a manager’s investments from 90 days earlier, Dietze said. But because of the rapidly changing nature of some investors’ holdings, the Form 13F still wouldn’t give a completely accurate picture of the University’s investments.

To Dietze, divestment “impairs our returns, which impairs our ability to support the University, which impairs our ability to give scholarships, research grants or salaries for professors,” she added.

The University cannot feasibly withdraw stock in a company controlled by a separate account manager without exiting a portfolio entirely, said Peter Levine ’95, director of the Investment Office. “It’s not an à la carte menu,” he said.

Although the Investment Office is barred from full disclosure of University investments, this should not stop the Brown community from examining issues raised by groups like Brown Divest, Hai said. “There is a lack of detailed information about investments but accepting that on face value is not good enough,” he added.

Obtaining a numerical measure of the social harm that companies might be committing is important in deciding if divestment is appropriate, Hai said. In order to quantify this social harm, the Investment Office could calculate the percentage of University investments compliant with the Environmental, Social and Governance criteria, a set of socially-conscious investment guidelines, he added.

Brown Divest

During the Tuesday meeting, Brown Divest members shared five criteria of social harm, which might warrant divestment from a company facilitating human rights abuses in Palestine. The group recommended divestment from companies that provide products or services that contribute to the “maintenance of the Israeli military occupation,” facilitate the “construction of illegal settlements” in the West Bank, aid the “destruction of existing Palestinian homes” or “maintenance and construction of the separation wall,” they said.

Additionally, the group suggested divesting from companies providing products or services that “contribute to violent acts against either Israeli or Palestinian civilians.” Companies whose practices fall under their criteria include Boeing, Airbus, AB Volvo and RE/MAX.

These five criteria are based upon international human rights law, including statutes from the United Nations and the Geneva Convention, the group said.

The coalition’s presentation follows the passage of a referendum featured on the Undergraduate Council of Students and Undergraduate Finance Board ballot that asked whether the University should “divest all stocks, funds, endowment and other monetary instruments from companies complicit in human rights abuses in Palestine” and also “establish a means of implementing financial transparency and student oversight of the University’s investments,” as The Herald previously reported.

Of the 2,810 students who voted, 69 percent voted yes on the referendum.

ACCRIP has previously examined divestment from companies allegedly complicit in human rights abuses against Palestinians. In 2013, ACCRIP evaluated a petition submitted by Brown Students for Justice in Palestine to “consider divestment from companies profiting from the Israeli occupation of Palestine,” according to BSJP’s Facebook page.

At that time, ACCRIP did not reach a definitive conclusion on divestment from corporations in which the University may have held investments and instead wished “to facilitate further campus dialogue on this issue before making a recommendation,” ACCRIP wrote in a 2013 letter to President Paxson.

Though there was previously no consensus in ACCRIP regarding the social harm of Brown’s investments in companies involved with the occupied territories, revisiting a topic already examined by ACCRIP would allow ACCRIP to make a more informed decision on the issue, Hai said.  “It’s important to look at the new issue that the students have presented because it’s a dynamic scenario,” he added. “But we shouldn’t ignore what has been addressed in the past, because it’s history, and it gives (us) a better understanding of the past as well as the present to help us make a better decision.”

Should Brown Divest choose to submit a request to investigate companies contributing to social harm against Palestinians, Hai hopes that ACCRIP could make a recommendation by the end of the fall 2019 semester. While recommendations on proxy voting are often decided within one ACCRIP meeting, the issue of divestment would take much longer, he said. “With divestment, it takes more time to think about it carefully to make the best judgment for making the recommendation.”

Paxson has voiced her opposition to divestment from companies that conduct business in the West Bank and Gaza Strip, The Herald previously reported. But in a Q&A with The Herald, Paxson said she also told Brown Divest organizers that ACCRIP is “a valid way forward” for the divestment debate.