Though lack of progress towards fossil fuel divestment was the more proximate cause, concerns regarding Harvard Management Company’s agricultural investments were a contributing factor to the recent resignation of a member of the university’s Board of Overseers, Agri Investor has learnt.
In March, Beneficial State Bank co-founder and chief executive Kat Taylor, a Harvard alumna and member of the university’s advisory Board of Overseers, published an op-ed in which she admonished the university for its failure to adopt ethical investment principles. At a minimum, she wrote, the $37.1 billion endowment should join New York City, the Church of England and others representing more than $6 trillion in assets and move to cease investment in fossil fuels.
One day before her six-year term on the body was due to expire last Tuesday, Taylor resigned from her Board of Overseers position in an open letter that described her efforts to raise such concerns internally since 2012.
“Though I have tried to work behind the scenes – including meeting with and convening student and faculty groups, consulting university officials and speaking in open plenary these appeals to consider ethical governance of the endowment – my soft power approach has yielded virtually nothing,” Taylor wrote. “Therefore, in allegiance to the constituents I serve and who represent the sum total of Harvard’s alumni population, I am taking up the last act in my power, which is to resign early in protest of the lack of investment standards for the Harvard University endowment.”
Overseers’ cloudy view
Taylor told Agri Investor that even as a member of the Board of Overseers, she was unable to know definitively what the endowment was invested in and that a recent move to invest a larger proportion of the endowment through external managers has made oversight even more difficult. That said, Taylor added that there has been “some indication” that African land, Amazon River Delta properties and, potentially, water resource assets are among those held by HMC.
“All three of those suggest that we should be aware of whether those holdings are respectful of indigenous rights, the possibility of land ownership that’s not traditionally documented, assets that are particularly sensitive from a climate standpoint and the possibility of water rights being sold out of market to the detriment of local ecologies and local economies,” she said.
“This is another straw, but the camel’s back has been broken for many years”
Joshua Humphreys, Croatan Institute
Such investments were among those discussed internally prior to her resignation, Taylor said, but only as part of efforts attempting to establish ethical investment principles. While Harvard’s official position has been that to impose such principles would help politicize the endowment, Taylor reckons it is the failure to impose such standards that is a political act.
“The endowment’s objective is to maximize return and I think you can’t do that without being associated with the activity that produced that return,” Taylor said. “There are investment activities that we should not be associated with, even if that means that it constrains the management company in producing that return.”
The argument that Harvard would be constrained by the establishment of ethical investment principles, she added, is further weakened by the fact that the endowment’s performance has trailed its peers even without such a code. While many students and faculty have been very supportive of her calls to define ethical investment principles, she added there’s a chance that some have become cynical about the chances of any change in the near term.
“It took Harvard, I think, 10 years to join the world community in divesting from apartheid. I hope it doesn’t take 10 years this time too,” she said. “We are outliers at Harvard with the stance of not investing our assets in concert with our values, including averting climate disaster and social chaos associated with climate change and income and wealth inequality like we’ve never seen before.”
Joshua Humphreys, president and senior fellow at the Croatan Institute, a non-profit research organization focused on ecological resilience, told Agri Investor that Taylor’s resignation is a very important symbolic gesture that advances a public debate about the university’s natural resource investments that has gone on for at least a decade.
In addition to concerns raised recently about HMC’s ag investment in Brazil, Humphreys said, calls for greater scrutiny of corruption allegations and environmental impact related to previous agricultural investments in Argentina, Romania, Chile and elsewhere have likely played a role in a $1.1 billion write-down of the portfolio last year and high levels of staff turnover (including the spin-out of key HMC executives into Folium Capital).
“This is another straw, but the camel’s back has been broken for many years,” said Humphreys. “I think this [Taylor’s resignation] could put even more pressure on Harvard, basically to walk the walk, because right now they talk the talk and purport to integrate environmental and social governance considerations, risk across the whole endowment. The land investments highlight that they aren’t doing a very good job at that.”
“We are outliers at Harvard with the stance of not investing our assets in concert with our values”
Kat Taylor, who just resigned from HMC’s Board of Overseers
Humphreys, who began studying the Harvard endowment after the financial crisis while he was a lecturer at the university and has published widely on endowments and sustainability issues, explained that Harvard has played an important part in a wider movement to encourage divestment from fossil fuels that began to gather momentum in 2012.
That movement, according to Humphreys, was preceded by the establishment of the Coalition for Responsible Investment at Harvard, a group of alumni and students formed in the aftermath of the financial crisis that took a more holistic view of climate change in which farmland and agricultural investments played a bigger role. Though the group has been largely dormant since 2014, its final press release expressed concern about Harvard’s farmland and timber investments specifically.
“There is a background of student and stakeholder engagement at Harvard around land investment and farmland investment that had actually much more of a social and agricultural concern for rural farmers and for the interactions between Harvard and the local farming systems than the fossil fuel divestment movement really has had,” said Humphreys. “They are two different things, but I think Kat Taylor is highlighting that they actually go together.”
Harvard University vice-president of communications Melodie Jackson told Agri Investor that Taylor had expressed her views internally and that her opinion, like those of people across the university, is “respected and welcomed.”
“We agree that climate change is one of the world’s most urgent and serious issues, but we respectfully disagree on the means by which a university should confront it,” Jackson said. “As an academic institution, Harvard will continue to pursue a leadership role in seeking meaningful effective solutions to climate change through wide-ranging research, education, community engagement and dramatically reducing its own carbon footprint.”