Investment Disclosures by Asset Class: Current Practice at Harvard Compared to Other Large Funds
Harvard has the largest university endowment in the world. Its investments are run by the affiliated Harvard Management Company (HMC), which operates under the Treasurer of the University and the Harvard Corporation. The University has committed that the endowment will be net zero greenhouse gas emissions by 2050. The stature of both the University and its endowment mean that real innovations in investment tracking, measurement, and selection would have enormous ripple effects across many other large investors. At present, however, there have been no interim milestones publicly announced, little external transparency, a small staff dedicated to achieving net zero, and other limitations that raise concerns about whether Harvard’s net zero commitment can or will be met.
Disclosure of line-item investment holdings across all asset classes is a simple interim step HMC can do now to improve confidence that they are progressing toward decarbonization in a comprehensive manner and at an adequate pace. This would also engage external parties in evaluating the carbon impact of investments, which in the long run will help HMC achieve carbon reduction goals sooner, even with limited staff.
At present, Harvard reports individual holdings to the public only as required by the Securities and Exchange Commission -- a slice comprising roughly 1% of endowment value. While opponents of disclosure argue publication could telegraph Harvard’s investment strategy and dampen returns, this seems unlikely. Delaying disclosure by 6 to 18 months (depending on asset class) can address most of the strategic concerns while still generating a large improvement in carbon accountability. Further, as shown in Table 1, other pension and endowment managers already publish much more detail on holdings across many asset classes, and have continued to do so for years without any reported ill-effect. Line-item holdings in Harvard’s private equity, real estate, and venture capital are also already largely available to subscribers of private databases (e.g., PitchBook and Preqin); making that data more widely available should not be problematic since competing investment managers likely already have it.
In Harvard’s – and the global – investment effort to reach a goal of net-zero ghg emissions by 2050, it is important to put in practice a few foundational principles. First, sharing the means of assessing carbon impacts, and publicly comparing across metrics and measurement systems to allow iterative improvements, are pre-requisites for a functional evaluative mechanism without which widespread portfolio decarbonization can’t work. Second, much greater transparency on investment holdings and associated climate impacts will, in the end, help everyone to make better decisions, price in carbon risk more accurately and more quickly, accelerate innovation towards low carbon alternatives, and build confidence with other stakeholders that the process is effective. And third, there are quite workable ways to implement increased transparency to the public (i.e., not just confidential reporting to third-party organizations) without jeopardizing strategic investment strategies or long-term portfolio returns.