UPDATED: December 13, 2012, at 10:45 p.m.
Following months of pressure from students and alumni and similar decisions at other schools, Harvard announced on Thursday that it will create a social choice fund.
When the new fiscal year starts in July, contributions will be invested into one or more mutual funds that “take special account of social responsibility considerations,” according to a University press release. The Corporation Committee on Shareholder Responsibility—a part of the Harvard Corporation, the University’s highest governing body—will be responsible for selecting those mutual funds.
The press release also stated that every year, 20 percent of the fund’s initial market value would be allocated to support student financial aid. The fund will support this allocation with investment returns and donations, according to University spokesperson Kevin Galvin.
University President Drew G. Faust said in a statement that potential donors had approached her about a socially responsible investment option.
“I have heard from many students and alumni who have asked for additional avenues to support both the University and broader social interests,” Faust said.
In establishing the fund, Harvard follows the lead of several other colleges, including Hampshire, Williams, Vassar, Mount Holyoke, as well as Brown University, which in 2007 became the first Ivy League institution to start a social choice fund.
Responsible Investment at Harvard, an organization of students, alumni, faculty, and other community members, has been lobbying the University to establish such a fund for nearly a year. To this end, members of the organization created their own Fair Harvard Fund, which they hoped would be taken over by the Harvard Management Company, which invests the University’s $30.7 billion endowment.
The Undergraduate Council officially endorsed the Fair Harvard Fund in April, and a referendum endorsing the creation of a social choice fund passed with 80.5 percent of the vote in the November UC presidential election that drew more than half the student body.
Several weeks ago, University leaders met with student advocates to discuss the possibility of a social choice fund. Faust said at the time that she had approached the Corporation about creating a fund and was exploring best practices at other universities.
S. Krishna Dasaratha ’13, Responsible Investment at Harvard’s treasurer, said he was “very happy” when he learned of Thursday’s announcement.
“I was glad to see that the University had responded so quickly to the referendum,” Dasaratha said. “We hadn’t expected it to happen so soon.”
Dasaratha added that he was particularly pleased that unlike similar funds at other schools, Harvard’s fund will not have a minimum gift amount, which will allow even small donors to make contributions.
However, Dasaratha said that he and his organization would have preferred that HMC, instead of an external mutual fund, manage the money.
“They’ll be missing a chance to build up socially responsible investing expertise at the Harvard Management Company, which would prove beneficial to the entire endowment,” Dasaratha said.
Dasaratha also voiced concern about the University’s plan to re-allocate a portion of the fund to financial aid, questioning how the fund would be able to grow if such a large piece of it would be removed annually.
Along with calling for the creation of a social choice fund, Responsible Investment at Harvard has also advocated for transparent money management.
“That’s one of the major factors in making sure the investments are socially responsible,” Dasaratha said, adding that Thursday’s announcement was unclear about what level of transparency would accompany Harvard’s fund.
Galvin said that members the Corporation Committee on Shareholder Responsibility would work out “operational details,” such as the determination of which mutual funds would manage the money and whether they would be transparent to the Harvard community, by July.
—Staff writer Samuel Y. Weinstock can be reached at firstname.lastname@example.org.