Like many other educational institutions in the U.S., Gonzaga utilizes an endowment to fund most of its initiatives on campus.
An endowment is a pool of money that can be increased through investments in bonds and stocks in addition to real estate funds and private equity.
The endowment is under supervision at most universities by the board of trustees, and in GU’s case, it is the investment committee, a panel created by the board of trustees to oversee the endowment.
According to GU’s treasury department, the current endowment as of June 30 is $372 million and GU takes out around 4.5% or $11 million each year to fund the school.
For the last fiscal year (FY20-21) GU used $11.2 million of its pooled endowment to fund a variety of budget items including scholarships, chairs and professorships and other programs.
While many universities utilize this method of financing, GU is unique in the sense that it applies an active management approach to its endowment.
This means that instead of GU investing the money directly into the market, it recruits professional investors to invest the endowment money for them.
These investment managers have a specific knowledge of the market and allow GU to constantly outperform and make a return on its investments. The investment committee has hired 28 investment managers and has divided the endowment money among them.
“The committee selects a manager based on their track record, their style of investments and the approach that they might take,” said Joe Smith, chief finance officer for GU. “We have a number of public equity managers that we have high conviction in terms of what they do.”
According to a study released this past February by the National Association of College and University Business Officers Study of Endowments — one of the top studies in the country focused on college endowments— GU’s net returns was in the top 25% of the institutions in the study.
Although financially beneficial, it does not guarantee that GU will have a say in which investments are being made. The investment committee sometimes does not know which companies are being invested in, and although it receives updates quarterly on investment managers’ operations, the investment committee’s only power over them is its ability to reproportion the money spent and to hire and fire investment managers.
While making money is necessary for GU, the Jesuit mission of the school along with sustainability are also integral to its work.
The investment committee and board of trustees believes that not only should GU’s investments be aligned with the ideas of the mission and sustainability, but that these guiding principles should in turn inform the investments.
These beliefs of the investment committee and board of trustees was explained by Director of Sustainability Jim Simon.
“Sustainability is one of many factors that can inform decision making about a university’s investments,” Simon said. “In my opinion, it is important to examine the intersections of the environmental, social and governance issues that go into an investment. Being informed by these factors can help a decision maker plan for an uncertain future.”
In the past four years, the investment committee has sought to incorporate more of the Jesuit mission and notions of sustainability into its investment strategies and policies.
In December 2018, the board of trustees, in consultation with the investment committee, adopted a series of sustainability measures, including adjusting the language in the investment policy and investing $10 million in funds or companies that reduce carbon emissions and greenhouse gases, promote social responsibility and find solutions for climate change.
“The investment committee, and ultimately the board and its conclusions, indicated that a preferred approach and, in their view, a more impactful approach would be to leverage a number of collaborative approaches,” Smith said. “There are five [plans], and they demonstrate [the board of trustees’s and the investment committee’s] commitment to a variety of fronts.”
GU has followed through on all of these measures and has even surpassed some of them.
As of this year, GU has invested $24 million to green funds and companies. It has met with 13 of its investment managers, some multiple times, about the importance of being socially conscious when investing money.
The investment committee has also incorporated more ways to evaluate the investment managers, having a Morgan Stanley Capital International (MSCI) report done quarterly for each investment manager to see how well they follow the Environment, Society, and Governance (ESG) characteristics adopted by the school in its investment policies.
Fossil Free Gonzaga and other green organizations hope that the university’s next step will be a divestment in fossil fuel companies.
About 5.8% of GU's endowment, with a value of $12.4 million, is invested in fossil fuel industries.
“Trying to profit from the creation of climate change, which destroys the planet and harms those who are most vulnerable, should be seen as inimical to the values that the university espouses,” said Brian Henning, director and founder of GU’s Center for Climate, Society and the Environment. “Not profiting from the sale of fossil fuels is a pretty clear justice concern, and I don’t see why that would be controversial.”
Proponents of divestment see the continual investment in fossil fuel companies as being counter to the Jesuit mission and the ESG guidelines set by school. To affirm this, Henning uses the words of Pope Francis, who has openly decried investing in fossil fuel companies as being contrary to the beliefs of Catholicism.
They also point to data that the margins of divesting in fossil fuels would be financially negligible with chances of larger positive margins in the long-term.
“When I talk to finance experts, they say divestment will have either a marginal negative or marginal positive effect on returns, but either way, it’ll be marginal," Henning said. "So the reason to divest from fossil fuels is ultimately not financial but moral. My own view is that the board of trustees should commit to figuring out a responsible path to fossil fuel divestment at Gonzaga, but, so far, they’re resistant.”
The investment committee remains hesitant to divest after voting No on the possibility of divestment in 2018.