Friday, September 11, 2015

The Global Finance University: The Future of the End?

As a member of the UC Investment Advisory Group for the last several years, I have tried to push for socially responsible investing and have had little luck, but September 9th marked a new day.  Out of nowhere, the Chief Investment Officer mentioned that the university was no longer invested in coal and guns.  After I pushed him on what this meant, one of the other members seemed quite bothered, and he wanted to be assured that the university is making investment decisions based on economics and not morality.  The CIO assured him that the move away from coal and guns made economic sense, but still the university was now pursuing a sustainable investment strategy.

Some have called Harvard a Hedge Fund with a school attached, because it has over $36 billion in its endowment, but the UC holds over $100 billion in its retirement funds, endowments, and working capital funds.  This large amount of money can be used for good, or it can be used for darker purposes, but one thing for sure, it makes the university an important global finance player.  Of course, we should all ask what it means when a public university enters global finance.

On my pessimistic days, I remember being lectured by fellow members about the need to focus on returns and not trying to make any social statements by our investment choices.  The argument here appears to be that capitalism is essentially amoral, and so we must think and act in an amoral way.  When you extend this logic to the university itself, a public institution with a public mission is driven by an anti-public ideology.  Moreover, as finance has become globalized and its power and valuations exceed the traditional productive and consumer economies, we must realize that we have entered a new stage of capitalism and social organization.  In this era of multinational corporations and central banks circulating trillions of dollars of credit, we have to understand that the old world of democratic institutions and nation-states is being eclipsed. 

A glimmer of hope emerged for me at the last investment meeting because the CIO was making the argument that we can earn a high rate of return and do good at the same time.  Of course, this combination of profit and moral advancement can be a smokescreen to hide naked greed, but it is possible for people to take advantage of this new rhetoric of socially responsible investing.  In other words, as our economies become globalized and integrated into a financialized market, we can steer the circulation of capital in a positive direction. 

In perhaps one of the most surprising conversations I have ever heard at a UC investment meeting, Regent Makarechian started to drill the CIO about the relation between investing and human rights.  I believe the regent even asked if we are investing in companies with good labor conditions. It was clear that the group was pretty uncomfortable with the discussion, but I see this moment as an opportunity. 

Clearly, individual nations cannot deal with global climate change, tax evasion, international labor standards, migration, or terrorism on their own.  Moreover, our democratic institutions are being transcended by multinational corporations, global elites, undemocratic central banks, and the World Trade Organization.  Is it possible that our only hope is a shareholders revolution where huge pension and sovereign wealth funds transform amoral capitalism into socially responsible investing?

  



52 comments:

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  2. Amen and Hallelujah! Congrats to UC Committee on Investment for dropping coal and tar sands investments. Now on to oil and responsible reinvestment in sustainable energy companies. As an alum from the class of '68 I couldn't be happier and agree more with your analysis. There is no such thing as an amoral investment.

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    1. Just amoral people, or perhaps, immoral people.

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