Stanford received a failing ‘D’ grade in human rights due diligence for its investments into venture capital firms, according to an April report by human rights organization Amnesty International USA.
The 2023 report graded the human rights due diligence processes of 10 of the largest university endowments in the United States: the University of California (U.C.) system, the University of Texas system, Harvard, Yale, Stanford, Princeton, Duke, the Massachusetts Institute of Technology, the University of Pennsylvania and the University of Chicago. As of 2020, the universities collectively possessed $426.9 billion in assets under management alone.
Only three of these universities — Harvard, Yale and the U.C. system — scored a ‘C’ or higher, while the remaining seven universities received a failing grade. Stanford and UPenn tied with a score of 18/40, while the lowest was UChicago’s score of 0/40.
Scores at 20 were considered a passing grade, while any score below was considered a failing grade.
Michael Kleinman, the director of Amnesty International’s Silicon Valley Initiative, said venture capital has a critical influence on startups that end up becoming larger companies.
“The startup ecosystem is vast, fractured and opaque,” Kleinman said. He suggested the institutionalization of human rights priorities in venture capital firms investments as an efficient way to “influence startups at scale.”
Amnesty equated the universities’ failing grades to “failing their responsibility under the U.N. Guiding Principles to respect human rights.”
Grades were calculated by evaluating public data sources like university endowment websites and external databases. The report derived data for Stanford from the Stanford Management Company (SMC), an office of the University “responsible for investing the University’s long-term financial resources, including the University’s endowment,” University spokesperson Luisa Rapport wrote in a statement to The Daily.
Through analyzing public statements, human rights integration into investment decisions and transparency of investments, Amnesty “developed metrics that tried to capture all … aspects of measuring whether a university investment office wasn’t just paying lip service to human rights due diligence, but was conducting it in a way that was effective,” Kleinman said.
These metrics included the U.N. Principles for Responsible Investment (UNPRI) signatory directory, which lists firms that agreed to uphold six internationally recognized holistic principles to integrate environmental, social and corporate governance in investment management. Stanford is not a signatory, while 3400 investment firms — including Harvard and the U.C. system — are.
Jamie O’Connell, a lecturer in residence at the Stanford Law School who specializes in business, social responsibility and human rights, stressed the importance of the related U.N. Guiding Principles on Business and Human Rights.
“The guiding principles are the most authoritative guidance on social expectations of business in relation to human rights,” O’Connell said.
The report’s scorecard outlines three major impacts that the lack of human rights due diligence may cause: investing in companies involved in ongoing human rights violations, supporting companies following a business model that undermines human rights and funding companies that develop technologies harmful to human rights.
O’Connell said these existing human rights violations are widespread. From the forced labor supply chain in Xinjiang that supplies 95% of the silicon-based solar modules in our solar panels, to pro-anorexia content promoted by Instagram’s algorithms, human rights violations are also harming the communities closest to us, according to O’Connell.
“I am not a fan of the privileged assertion that my human rights are getting violated just as much as someone else’s rights are getting violated — I do think there are more and less severe violations occurring in the world,” O’Connell said. “But there are more than enough violations of human rights to go around. And there is plenty of work to be done.”
While Amnesty gave Stanford points for its public commitment to sustainability, public engagement policies and the existence of a Committee on Investor Responsibility, the report stated that the University was particularly lacking in disclosure and transparency.
Amnesty identified that the U.C. system discloses its investment holdings to the public, including venture capital and private equity fund managers. O’Connell stressed this peer-institution comparison, especially looking to Harvard and the U.C. system, as a driver for change.
“What we’re talking about is not going to tank the endowment return, what we’re talking about is respecting the basic expectations of society about how an institution should behave,” O’Connell said.
“SMC’s investment practices meet or exceed the guidelines issued by parties such as UNPRI,” Rapport wrote, referring The Daily to the University’s 2018 Ethical Investment Framework.
However, the report directly criticizes aspects of these documents, stating that “Stanford’s policy is designed to limit actions on addressing human rights” — referencing the University’s claim that while they ask their “partners to demonstrate strong moral sensibility, it would not be appropriate to insist they advance a particular social or political agenda.”
“What we’re really looking to see is how … those statements [are] integrated into actual investment decisions,” Kleinman said. “For instance … there is no language in the endowment that explicitly requires a focus on human rights within ESG,” or environmental, social and governance concerns.
O’Connell said these documents are likely not SMC’s internal guidelines, but rather responses for external audiences like students and Amnesty, “who tend to be pushing them toward more ethical investment.”
“You should ask yourself, is human rights a matter of a strong moral sensibility? Or is human rights a particular social or political agenda?” O’Connell said.
Rapport wrote that Stanford’s success in investment is directly correlated with its partners’ adherence to moral investing.
“We work with investment partners that demonstrate a strong moral sensibility and who understand that the businesses in their portfolios are far more likely to succeed when they behave with due regard for the welfare of their stakeholders and the communities in which they operate,” Rapport wrote.
Kleinman said the report’s researchers were “forced to rely on public information,” unable to extract information from Stanford despite repeated requests for comments and clarification.
“Stanford never responded, so the lack of engagement just in terms of the University being willing to discuss these issues was incredibly disappointing,” Kleinman said.
Confidentiality is the general practice of Stanford’s peer institutions, Rapport wrote. “We do not make public detailed information about our portfolio and our investment partners because it would both erode our competitive position and violate our confidentiality obligations to our partners.”
Community concerns for ethical investment are not new to Stanford or universities as a whole. O’Connell said he distinctly remembers the movement to divest from companies enabling South African apartheid in the 1980s as a wave that hit many college campuses at the time.
Demonstrations, sit-ins and pressure from protesting students, faculty and staff prompted many universities to fully divest from companies affiliated with the South African government — but not Stanford. Documentation shows that while the University adopted a selective divestment process, the full divestment of these companies never occurred.
O’Connell said that while Stanford’s record of “resisting sustained pressure” to divest in the 1980s was “dispiriting,” he urged continued pressure for the administration to pay attention to human rights.
“Justice takes struggle,” O’Connell said. “It’s not easy, and progress doesn’t come fast. But it doesn’t happen if you don’t try.”