Socially Responsible Investments: Costs and Benefits for University Endowment Funds

We find that university endowment funds experience 6% higher donations following the adoption of socially responsible investment (SRI) policies, providing strong evidence that SRI policies influence capital flows to universities. These effects are primarily driven by donors who derive more nonpecuniary utility from SRI objectives. However, SRI funds have greater management costs and portfolio return volatility than other funds and do not experience higher asset growth rates (donations plus investment income). Finally, SRI policies are associated with other university benefits, including enhancements to the fund’s risk management practices, more student applications, and more funding for faculty research in sustainability science.