Board of Trustees announces new ethical investment policies, dissolves former advisory panel

Dec. 4, 2018, 5:05 p.m.

The Board of Trustees amended its Statement on Investment Responsibility and approved the Stanford Management Company’s (SMC) first-ever Ethical Investment Framework in its Tuesday morning meeting. In addition, the Advisory Panel on Investment Responsibility (APIRL) — which previously recommended that the University not divest from private prisons and fossil fuels — was dissolved and replaced by committees that will be appointed and convened on an ad-hoc basis. 

The new Ethical Investment Framework outlines SMC’s commitment to “social and ethical considerations” but does not identify discrete criteria that will be factored into that calculus.

These changes come after APIRL — a panel of students, faculty, staff and alumni that formerly assessed University investment and divestment decisions — reviewed the Board’s Statement on Investment Responsibility (SIR) and recommended multiple changes, including its own dissolution. APIRL will now be replaced by ad-hoc committees that will advise the Special Committee on Investment Responsibility (SCIR), a subsidiary of the Board of Trustees.

“While the disbanding of APIRL removes one step in an already bureaucratic process, the ASSU (through NomCom) had the ability to recommend students to be on APIRL and we hope that any ad hoc committees that are formed will have clearly delineated processes for student involvement and input,” ASSU President Shanta Katipamula ’19 wrote in a statement to The Daily.

Going forward, SCIR will be in charge of reviewing divestment proposals from community stakeholders — a task for which it will use the updated SIR and new Ethical Investment Framework as guiding documents.

The updated SIR affirms the University’s high threshold for divestment as requiring that investments rise to the level of “abhorrent and ethically unjustifiable,” listing apartheid, genocide, human trafficking, slavery and violations of child labor laws as examples of company actions that could trigger divestment.

Like the Ethical Investment Framework, the SIR does not reference specific criteria pertaining to ethics. To this point, Board of Trustees Chair Jeffrey Raikes emphasized that the framework is not intended to be “formulaic.”

For issues that require more specialized review, the SCIR will be able to appoint “ad-hoc fact-finding committees” with subject-matter experts who will research the issue at hand and perform campus outreach to inform the Board’s final decision in a more timely manner than before. These committees were recommended in APIRL’s 2018 report, which also indicated that committees should include students, staff and faculty along with at least two field experts — effectively serving as subject-specific equivalents of the now-dissolved APIRL.

When choosing external partners to make investment decisions about specific securities on Stanford’s behalf, SMC said in the Ethical Investment Framework that it considers the partners’ “moral framework” — but adds that it “would not be appropriate” to tell partners to invest with the goal of advancing particular political or social agendas.

“SMC is obliged to place proper weight on ethical issues that can have a bearing on economic results, but not to use the endowment to pursue other agendas,” the Ethical Investment Framework reads.

This sentiment echoes SMC CEO Robert Wallace’s statement last spring that the endowment is not meant to be used as a “tool for social activism.”

Some students on campus, however, feel like the changes fall short. Students for the Liberation of All People, an organization which previously protested the University not deciding to divest in private prisons, said in a statement that Stanford’s actions “are more than enough for us to be morally horrified with them.”

“The good Stanford creates from educating its students cannot outweigh the harm done by continuously investing in companies that egregiously violate human rights,” the organization said.

The Board also announced that it will be allocating $10 million over the next 10 years to a new education and research initiative focused on responsible and sustainable investment. The initiative will include classes, workshops, lectures and other educational events aimed at both students and alumni.

“I’m excited by the possibilities presented by the new $10M fund around responsible social impact investing and governance, which mirrors the ASSU’s own initiative over the past year as we remodel our Cardinal Fund class to be more focused on social impact [and] environmental impact investing,” Katipamula wrote.

New and amended documents

APIRL recommended that the Board of Trustees implement the United Nations-supported Principles of Responsible Investment, which state that investors should take questions of environmental, social and corporate governance into account when considering investment options. Over 20 universities, including many of Stanford’s peer institutions — such as Harvard and Northwestern — have adopted the Principles.

But APIRL also said that Stanford “need not specifically adopt the [United Nations’] principles;” instead, the University could draft its own, custom ethical framework. SMC opted for the latter option and drafted the Ethical Investment Framework.

The goal in drafting a document separate from the UN-backed Principles of Responsible Investment was to be “more explicit and direct about [Stanford’s] own standard”, according to Raikes.

In the framework, SMC makes clear that ethical and social considerations play a part in their consideration of investment options, saying that businesses that show little regard for ethics or “consistently and willfully mistreat stakeholders” are usually “poor long-term investments.”

“We want the Stanford community to have the confidence that ethical considerations are explicitly factored into the investment decision-making process,” Raikes said.

Similarly, the Board of Trustees amended its Statement of Responsibility to explicitly include mention of “environmental, social and governance factors into investment decisions.”

“A key part of what the Statement [on Investment Responsibility] does is to outline the endowment’s role as a central source of financial support for the University’s mission,” Raikes said. “Then, it articulates the abhorrent and ethically unjustifiable behavior that would warrant the University’s dissociation from an investment.”

Katipamula added that she believes the Ethical Investment Framework is a step in the right direction. 

“I’m also glad that the [Board] approved an ethical investing framework for SMC for the first time,” she wrote. “While a lot of attention has rightly focused on issues of divestment, it’s really important that investments are properly made to begin with.”

APIRL review

The Advisory Panel on Investment Responsibility’s (APIRL) review of Stanford’s Statement on Investment Responsibility (SIR) was announced last fall in response to concerns about ambiguities in divestment criteria and inefficiencies in the divestment process. These complaints were made by both APIRL members and student groups that submitted divestment requests.

Principally, the report suggested that the University should be more proactive and less reactionary in its investment policies.

“The University’s current policy arguably leads to the worst of all worlds: rather than taking the lead in deciding how best to factor social and environmental issues into its investment decisions, the University waits for formal divestiture requests,” the report read.

The report also stated that, under the former process, APIRL wasted months investigating investment petitions only to eventually discover that the University had no relevant stocks in the companies under review.

The final concern voiced by the panel was that prior investment and divestment policies lacked transparency, as petitioners received few to no status updates regarding investigation proceedings.

“The non-confidential information collected as part of the investigation of the petitioners’ claims deserves wider dissemination and discussion,” the report said.

In 2018, APIRL — with support from the University’s Office of Investment Responsibility and Stakeholder Relations — conducted focus groups, surveys, web forms and interviews with divestment groups to solicit community feedback on Stanford’s investment and divestment practices.

Based on that outreach the group devised recommendations aimed to rectify the identified areas of concern. The first recommendation was for the University to adopt a more explicit standard for divestment since, according to APIRL, the initial SIR included ambiguous phrasing.

“Inevitably, any standard will rely on subjective language,” the group wrote. However, they added that phrases such as “social injury,” “significant number of individuals,” “foreseeable future” and “unusual circumstances” led to confusion due to their hatheir having multiple possible interpretations.

APIRL further advised that SMC make the standards for investment and divestment more accessible by creating public-facing materials explaining them. Specifically, the group recommended that the SIR explain that the bar for divestment is so high due to the Trustees’ strict mission of managing the endowment “to maximize the risk-adjusted financial return on endowment assets and the President’s stance that the University will not take partisan or political stances on issues that divide the campus.”

APIRL added that the SIR should also clarify that the majority of Stanford’s endowment is not directly invested and that only a small portion of direct investment is subject to divestment proposals.

Finally, the panel recommended that Stanford reform its divestment request process to be more time efficient, given that formal proposals were frequently taking over a year to process before a final Board decision was made. APIRL added that more mechanisms for student engagement with the SCIR, Board of Trustees and SMC be put in place.

A number of these recommendations were ultimately implemented in the Board’s revision of its investment policies.

“I’m looking forward to hearing more information from the President’s office regarding implementation details, such as when community members will be able to begin submitting proposals [and] how members will be selected for the ad hoc committees that may be formed,” Katipamula wrote.

This report has been updated with additional information about the new and amended documents and the 2017-2018 APIRL investment review. It has also been updated with comment from ASSU President Shanta Katipamula ’19 and Students for the Liberation of All People. 


Contact Adesuwa Agbonile at adesuwaa ‘at’ and Claire Wang at clwang32 ‘at’


A previous version of this article stated that the APIRL will  be replaced by the new SCIR. In fact, the APIRL will be replaced by the ad-hoc committees, and the SCIR is not a novel group. The Daily regrets these errors. 

Claire Wang is The Daily's Vol. 254 magazine editor, and previously served as Vol. 253's managing editor of news. She's a fan of anything with tomatoes in it, and her favorite poet is Ocean Vuong. When she's not biking, her second-favorite mode of transportation is by rollerblade. Contact Claire at clwang32 'at'

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