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Yale invests responsibly—A Commentary by Jonathan Macey ’82

The following commentary was published in the Yale Daily News on November 21, 2008.

Yale invests responsibly
By Jonathan Macey ’82

On Nov. 18, the News reported that 20 students affiliated with the Undergraduate Organizing Committee held a four-hour sit-in at the Yale Investments Office. The students’ goal, apparently, was to schedule a meeting with Yale investment officers to press the case for better working conditions for hotel workers at a hotel management company called HEI Hotels and Resorts.

I write to suggest that the students interested in this important issue, and all other students interested in the ethical component of Yale’s investment process, engage with Yale’s Advisory Committee on Investor Responsibility. The ACIR is the University committee, comprised of students, staff, faculty and alumni, specifically charged with making recommendations to the Fellows of the Yale Corporation who constitute the Corporation Committee on Investor Responsibility about the ethical issues with which Yale is confronted in its various investments. As this year’s chair of the ACIR I can report that we are a very open-minded and receptive group. Moreover, Yale students have had notable success in the recent past in influencing Yale’s investment decisions by working with the ACIR.

The UOC did have one preliminary meeting with the ACIR to discuss the HEI Hotels issue. It is my sincere hope that the UOC and other concerned students will come back and continue the very constructive first conversation we had together. I understand that the students may feel the process set up within the University for dealing with issues of ethical investing is slow and cumbersome. The process, however, has been extremely effective in the recent past, and it represents a successful mechanism for transforming ideas about ethical investing into practice.

With regard to the efficacy of working with the ACIR, it is worth noting that Yale was the first university to address both direct investments as well as those made through its outside investment managers in Sudanese companies contributing to the genocide in the Darfur region of that country. On Feb. 11, 2006, based on the ACIR’s recommendation, the Yale Corporation barred university investments in Sudanese government bonds and in seven oil companies operating in Sudan.

Yale’s divestment decision came as a result of a close collaborative effort between the ACIR and numerous Yale students, particularly those involved in the Lowenstein International Human Rights Clinic. That decision to divest marked the second time that the application of Yale’s ethical-investment principles has resulted in a decision to divest. In 1978, the University rid its portfolio of its investments in many companies doing business in apartheid South Africa.

Yale emerged as a leader in ethical investing in 1972 with the publication by Yale
University Press of a now-classic book by four Yale faculty members called “The Ethical Investor: Universities and Corporate Responsibility.” The book articulated workable criteria and procedures that universities could use to take ethical considerations into account when making investment decisions. These principles have guided Yale’s investment policies and the policies at many other universities for the past 36 years.

Yale continues to be what The New York Times has called “the first major university to … abandon the role of passive institutional investor.” The ACIR looks forward to continuing to promote the principles of ethical investment. I hope that the UOC and other members of the Yale community work with the ACIR to help Yale maintain its leadership role in the world of ethical investing.

Jonathan Macey is the Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law and deputy dean of the Yale Law School.