ANN ARBOR, Mich. (Michigan News Source) – The University of Michigan’s new President, Santa Ono, has prioritized DEI (Diversity, Equity and Inclusion) in his presidential goals and investing in ESG companies is part of that.
ESG stands for Environmental, Social and Governance and it relates to analyzing certain standards for a company’s behavior in order for socially conscious investors to judge them.
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Environmental issues include climate change policies, energy use, waste, pollution, greenhouse gas emissions and more. Social can include charitable donations, health and safety policies, diversity, inclusion, social justice and gender issues. Governance concerns include things like transparency of accounting, leadership diversity and political contributions.
Ono, who became president in October, gave his first major speech to the campus at the Ross School of Business on November 17th. He outlined his priorities in the speech by saying, “When we talk about DEI, we don’t always think about university finances. Yet ESG investing and supporting small, local banks are among the many ways we can work more strategically to reinforce and uphold our obligations to create a better and more just world.”
In addition to the ESG investing, he pledged to deposit tens of millions of dollars into local banks in an effort to incentivize local lending. Part of the plan is to work with the local banks to grow programs that will provide additional benefits to disadvantaged communities.
The money used for these endeavors is from short-term working capital and is not from their $17 billion endowment.
The ESG investment money is to be used only in the debt securities of high-performing companies that meet a certain ESG threshold according to the university’s news release. Geoffrey Chatas, Executive Vice President and CFO said in a statement, “We can make a difference. We just need to find creative ways to use the tools we have.”
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In May of this year, the U of M’s Ross School of Business hosted a “Reporters’ Bootcamp” on ESG and Ethical Investing to offer journalists information on what they “need to know to report the truth.” They presented three sessions for journalists to understand and evaluate industry claims about ESG and how to dig into data and “bring transparency to this complex and often politicized topic.”
Nationally, Democrats, including President Joe Biden, are pushing ESG investing. Just recently, the president announced that the federal government will allow employers to invest pension money into ESG companies even though it might result in lower returns for investors.
A rule previously imposed by the Trump administration that forced employees to prioritize profits when making 401(k) investments is being reversed. Companies will soon be allowed to put ESG priorities ahead of profit making in their employees’ retirement plans. Maximizing returns for their employees no longer needs to be a priority of business owners in approximately 60 days.
BlackRock, which handles the retirement plan assets of about 35 million Americans and their $10 trillion dollars, thinks preparing for a net-zero economy is a good business decision even though the average 401(k) is already down about 25% this year already according to Fidelity Investments.
