Annual Report

Policies and Past Actions

Ethical Investor


Policies and Past Actions

Concept of "Social Injury"

At the heart of The Ethical Investor's approach to institutional investor responsibility is the concept of social injury. As defined in the "Suggested Guidelines for the Consideration of Factors Other than Maximum Return in the Management of the University's Investments" contained in the The Ethical Investor (the "Guidelines"), "social injury" means "the injurious impact which the activities of a company are found to have on consumers, employees, or other persons, particularly including activities which violate, or frustrate the enforcement of, rules of domestic or international law intended to protect individuals against deprivation of health, safety, or basic freedoms; for the purposes of these Guidelines, social injury shall not consist of doing business with other companies which are themselves engaged in socially injurious activities."

Guidelines for the Voting of Shares

With respect to the exercise of voting rights, the University relies on the Guidelines, which provide, in relevant part:

"The University will vote for a proposition which seeks to eliminate or reduce the social injury caused by a company's activities, and will vote against a proposition which seeks to prevent such elimination or reduction, where a finding has been made that the activities which are the subject of the proposition cause social injury. This paragraph will not apply to any proposition which seeks to eliminate or reduce social injury by means which are found to be ineffective or unreasonable."

"The University will not vote its shares on any resolution which advances a position on a social or political question unrelated to the conduct of the company's business or the disposition of its assets."

A more detailed summary of Yale’s approach to proxy voting as it relates to social issues can be found at the Annual Report page.

CCIR Statement on Proxy Resolutions

In 1989, the CCIR clarified further the University's policy with respect to proxy voting and advised the ACIR that shareholder action can be taken only in response to issues that involve "substantial social injury" and that are "susceptible to competent evaluation by the University under criteria reflecting broad moral consensus within the academic community." Votes in favor of proxy resolutions "should be preceded by a determination that the issue is one on which it is appropriate for the University to take a formal position as a shareholder."

Past Actions

South Africa
In 1978, the Yale Corporation adopted a policy on investing in companies doing business in South Africa. In subsequent years, Yale engaged scores of companies in dialogue about their responsibilities in the country. When company actions were incompatible with University policy, Yale sold its shares. From 1978 through 1994, Yale divested shares of 17 companies doing business in South Africa, representing a total market value of approximately $23 million. In February 1994, recognizing the positive changes occurring in the country, the Yale Corporation lifted all investment restrictions.

Several times since the early 1990s, the University studied the issue of its tobacco holdings. As a result of the reviews, the Corporation established guidelines on voting of tobacco proxies.

In order to give the Advisory Committee on Investor Responsibility guidance for the 1994 proxy season, the Corporation approved instructing the Advisory Committee to vote in favor of well-constructed proxy resolutions relating to tobacco which:
(a) embody effective controls on the distribution and marketing of tobacco products to minors;
(b) contain appropriate restrictions on, and regulation of, the distribution and marketing of tobacco products overseas; and
(c) encourage public education regarding the risks of consuming tobacco products.

In 1996, the Corporation Committee on Investor Responsibility voted to supplement the instructions provided to the Advisory Committee on Investor Responsibility in February 1994, by instructing the Advisory Committee on Investor Responsibility to vote, additionally, in favor of well constructed proxy resolutions which:
(a) call upon tobacco companies to place health warnings about the dangers of addiction, disease and death caused by smoking on all advertising and promotional items for tobacco products distributed throughout the world;
(b) request companies to cease advertising tobacco products to minors, including all uses of the company's brand names and associated symbols for sponsorships;
(c) request tobacco companies to support enforcement mechanisms at all governmental levels to prevent illegal sales of tobacco products to minors;
(d) request tobacco companies to take actions designed to reduce the health risks to minors;
(e) call upon tobacco companies to report publicly accurate information relating to the ingredients of their products that have probable adverse health effects.

The Corporation voting guidelines stem, in part, from a decision to exercise "voice" with respect to any harmful marketing and distribution practices.

Private Investments and Ethical Oversight

In the 2001-2002 academic year, the ACIR and the Yale Investments Office took up the important issue of ethical oversight of private investments by the Endowment. The University emphasizes private holdings in the Endowment, due to their diversifying characteristics and excess return opportunities. However, the shareholder resolution activity of the ACIR has no analog in private investment holdings. In the realm of private assets, where corporate control rests in a highly concentrated investment group, shareholder resolutions do not exist.

To address this issue, the Yale Investments Office, in consultation with the ACIR, developed a framework to address ethical issues relating to private investment that may arise. In particular, ethical investing policies recommended by the CCIR (as advised by the ACIR) and adopted by the Yale Corporation could be applied to both marketable securities and private investments. The University's response to ethical issues in private investments would differ in some respects from the process employed for publicly-traded securities, due to the varying nature of the investment structures and potential remedies. Oversight of policy implementation would remain with the CCIR for both marketable and private positions.

The Yale Corporation has articulated the following policy with regard to private investments:

"When the Yale Corporation, upon recommendation of the Corporation Committee on Investor Responsibility after its consultation with the Advisory Committee on Investor Responsibility, adopts policies regarding ethical investing, those policies will apply to both public and private investments. In the event that the Corporation concludes that Yale's private investment managers have engaged in socially injurious activity, the University will fashion an appropriate remedy including use of voice, disassociation from the offending investment manager, and, as a last resort, disposition of the tainted partnership interests."

Recent Actions

On January 31, 2006, the ACIR presented a report to the CCIR regarding its findings and recommending a policy of divestment. In February 2006, the Yale Corporation voted unanimously to divest from seven oil and gas companies operating in Sudan, as well as from obligations of the Sudanese government. Click here to read more about the Sudan Divestment.

Climate Change
On August 27, 2014, the CCIR issued a public statement on climate change, which incorporated new proxy voting guidelines for implementation by the ACIR.  Specifically, the guideline provides: 

“Yale will generally support reasonable and well-constructed shareholder resolutions seeking company disclosure of greenhouse gas emissions, analyses of the impact of climate change on a company’s business activities, strategies designed to reduce the company’s long-term impact on the global climate, and company support of sound and effective governmental policies on climate change.”