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Student-led fund proves socially responsible investing can be profitable
The Haas Socially Responsible Investment Fund, which is led by master of business administration (MBA) students at the University of California, Berkeley, has demonstrated that responsible investment doesn’t have to have a negative impact on returns after it beat the market by almost 5% from 2011-2014.
When the fund launched in 2008, it became the first student-led socially responsible investment (SRI) fund and remains the largest.
The student principals have grown the initial investment of $1.1m (£650,000) to $2m (£1.19m), a more than 50% return on investment over a six-year period. The fund has also outperformed all its environmental, social and governance (ESG) benchmarks.
The university says it aims to contribute to the field of social investing by defining and exploring new ideas around “unlocking hidden value” based on companies’ ESG practices.
“As such, fund principles believe that the less conventional their thinking, the more innovative their approach, the less correlation with the activity of established SRI funds, the greater the potential to achieve their goal”, it says.
Writing about the fund in the Guardian, Jeff Leinaweaver, a member of the graduate faculty for Bainbridge Graduate Institute’s MBA programme in sustainability, called it “capitalism with a conscience”.
Currently, 13 students manage a portfolio of around 20 companies. Each student principal monitors the behaviour and management decisions of a few companies. They then assess how this will impact on the firm’s ESG performance in a wide range of areas, including the environment and human rights.
“The [fund] aims to raise new questions about the pedagogy and approach to teaching socially responsible investing”, Leinaweaver writes.
“Ultimately, it suggests, the issue comes down to balance: how will future leaders and managers learn to wrestle with the head and hearth of social-impact investing?”
The students involved in the fund have full responsibility for investment decisions, including conducting their own research on companies’ ESG performance.
One of the challenges the fund faces is a 50% turnover of student managers each year, due to graduation. In order to maintain consistency, students begin recruiting their replacements before leaving allowing applicants to work alongside the current time for a full semester.
Speaking to Leinaweaver, Charlie Michaels, one of the original funders, said that his investment was an attempt to “make a difference in this field, which used to be called business ethics, now corporate social responsibility. It’s just the right thing to do”.
Photo: PocketAces via Freeimages
Further reading:
Triodos head of SRI: invest sustainably to ‘change the world’
A sustainable investment revolution must emerge from the IPCC’s stark warning
F&C: responsible investment ‘continues to gather momentum’
Responsible investment a ‘clear trend’, says AXA Investment Management