Don't Donate To Your Alma Mater
An Exploration of University Endowments & Their Impacts on Climate Change Efforts
If you're like me, you might receive emails, physical mail, and annual calls from your undergraduate institution asking you to donate money. The pleas are made in earnest and emphasize how much your donation of $20 or more can help bring about meaningful change on your former campus and assist future students.
Something that has always confused me is why my alma mater, whose endowment is more than $20 billion dollars, needs money from me. I often wonder -- should I be giving money to an institution that already has so much?
What is An Endowment?
An endowment is:
"an aggregation of untaxed assets invested by a college or university to support its educational and research mission in perpetuity."
Source for Quote: American Council on Education
Source for Picture: Pexels
the size of university endowments
As of 2018*, Harvard University had the largest university endowment in the United States at a whopping $39.2 billion. The national average for university endowments in 2018 was $4.2 billion. Below, you will find a chart of the Top 10 university endowments. The colors represent whether the university is privately or publicly owned.
*Note: The year 2018 is used for analysis here because it is the latest year for which data on university endowments is available from the National Center for Education Statistics.
The Growth of University Endowments Over the Years
It may seem like 2018 may have just been an anomaly in terms of the size of university endowments. As the visualization below shows, however, this is not the case. University endowments have been steadily increasing over the years (from 2012 to 2018*) and appear as though they will continue to grow.
*The National Center for Education Statistics only has data on university endowments from 2012 to 2018 so the visualization below is temporally limited but it still shows a general upward trend in university endowments for those universities whose endowment sizes are in the top 10 nationally.
Just how LArge aRE These Billion Dollar Endowments?
To illustrate the sheer size of university endowments, let's look at how the top 3 university endowments in the United States compare to the GDPs of several countries.
#1: Harvard University's Endowment in Context
#2: The University of Texas System's Endowment in Context
#3: Yale University's Endowment in Context
A common question that comes up in discussions about university endowments is: How are endowments spent?
This question is a little difficult to answer definitively because currently there is no comprehensive database documenting this information. However, from viewing individual university's endowment websites, many universities use their endowments to support their operational budgets, to fund professorships, and to support financial aid efforts. The overarching goal of endowments is often to support the long-term financial health of a university.
As an example, my alma mater reported in October of this year that 60% of its annual operating budget was funded with earnings from its endowment. 80% of this operating budget was then used to cover financial aid efforts for my alma mater.
so, why do large endowments matter?
Large endowments matter not so much because of how they are spent but because of how they are invested.
While it is true that endowments fund necessary parts of a university's operating budget and provide funds needed for financial aid efforts, the money in these funds often directly comes from profits made from companies in industries doing lasting harm to our climate.
Let's take Princeton University, my alma mater, as an example. In line with the investment strategies of comparable universities and as explored in this article, Princeton is likely to invest anywhere from 2% to 5% in fossil fuels. These percentages may seem small but they amount to Princeton spending anywhere between $500 million to $1.25 billion dollars annually on fossil fuel investments.
This article was able to confirm, by looking at publicly available IRS records, three of the specific fossil fuel companies that Princeton invested $3.852 million dollars in during the 2018 fiscal year. More extensive investigative work on Princeton's IRS filings related to its endowment would need to be done to find the additional fossil fuel companies in which it is invested.
Princeton's stated endowment policy is to only spend 5% of the endowment earnings. Using this rule, the university would have spent approximately $1.25 billion of its endowment earnings in 2018. Much, if not all of this money, could have been acquired through investments in fossil fuel companies.
The climate crisis is dire and swift action is needed to put pressure on fossil fuel industries to cease their extractive and environmentally destructive behaviors.
The large size of university endowments enables universities, especially the top 25 universities in the United States, to have an outsized say and influence on financial markets. It is because of this very power that universities wield that alumni need to think carefully about to whom to give their money, particularly if their universities are unwilling to divest from fossil fuels.
University endowments have been a focal point for historical divestment movements. In the 1970s through the 1990s, students at universities across the nation were able to successfully pressure their universities to divest fully from apartheid South Africa.
Universities should not just be interested in their own long-term futures but in the long-term consequences that their investments will have on the communities in which they reside.
So, what can you do?
1. Find out how your alma mater invests its endowment. For tips and strategies for doing this, click the link below:
2. Get involved in a fossil fuel divestment campaign. Visit the link below to find a divestment campaign relevant to you:
ReferenceS
- GDP (current US$) | Data. Retrieved November 30, 2021, from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2020&start=1960&view=chart
- Princeton—News—Endowment Spending Policy Fact Sheet. Retrieved November 30, 2021, from https://pr.princeton.edu/news/01/q1/0127-endowspend.htm
- Princeton’s fossil fuel holdings are not just an abstract concept—The Princetonian. Retrieved November 30, 2021, from https://www.dailyprincetonian.com/article/2021/05/princeton-owns-petrotiger-divestment-fossil-fuel-holdings
- Protest Divestment and the End of Apartheid. Investopedia. Retrieved November 30, 2021, from https://www.investopedia.com/articles/economics/08/protest-divestment-south-africa.asp
- The Integrated Postsecondary Education Data System. Retrieved November 30, 2021, from https://nces.ed.gov/ipeds/Search?query=endowment&query2=endowment&resultType=all&page=1&sortBy=date_desc&overlayDigestTableId=200947
- Understanding Princeton’s endowment: Long term is the mantra. Princeton University. Retrieved November 30, 2021, from https://www.princeton.edu/news/2021/10/04/understanding-princetons-endowment-long-term-mantra
- Understanding-College-and-University-Endowments.pdf. Retrieved November 30, 2021, from https://www.acenet.edu/Documents/Understanding-College-and-University-Endowments.pdf
- Note: The stock images above came from either Wikimedia or Pexels
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