Harvard Management Company

Sustainable Investments

Investing for the Long-Term

As a long-term investor, HMC is focused on material environmental, social, and governance (ESG) factors that may impact the performance of our investments, now and in the future. ESG factors are conditions, circumstances, or issues that can be found in areas such as energy consumption, greenhouse gas emissions, climate change, resource scarcity, water use, waste management, health and safety, employee productivity, diversity and inclusion, supply chain risk management, human rights (including workers’ rights), and effective board oversight.

We believe that considering ESG risk factors in our investment analysis and decision-making processes is aligned with our mission to help ensure that Harvard University has the financial resources to confidently maintain and expand its preeminence in teaching, learning, and research for future generations.

Approach to Sustainable Investment

A three-pronged approach guides HMC’s sustainable investment work and priorities:

1. ESG Integration — incorporate material ESG factors into manager selection, appointment, and monitoring
2. Listed Equity Active Ownership — exercise our client’s shareholder voting rights
3. Collaboration — work with global investors and endowments to develop and define sustainable investment best practices

This approach is reflected in our engagement with the Principles for Responsible Investment (PRI), an initiative supported by the United Nations that works with a global network of investors who are committed to integrating ESG issues into their investment practices.

HMC, with the support of Harvard University, is the first university endowment in the United States to become a signatory to the PRI. As a signatory, HMC is committed to implementing the PRI's six Principles in our management of the University's endowment and related financial assets. HMC reports to the PRI on an annual basis about our sustainable investment activities, and the resulting Transparency Report is published by the PRI.

ESG Integration

HMC applies its due diligence framework to its commingled funds in absolute return, private equity, and public markets. The due diligence process includes reviewing the ESG policies and governance of potential fund investments, identifying how the fund integrates ESG factors into its investment decisions, and determining how the fund communicates ESG information to its limited partners. Depending upon the nature of ESG issues identified, we may also seek to include ESG terms in the investment fund term sheet.

Throughout the life of an investment, we monitor identified ESG risks and work with managers to ensure effective oversight. We also write letters to our team of external managers to inform them of our focus on sustainable investment and commitment to the PRI principles. The letter encourages managers to open a dialogue with HMC about their own approach to sustainable investment and how ESG factors impact its investment analysis and decision-making processes.

ESG integration also plays a significant role in our natural resources investments.

Listed Equity Active Ownership

Harvard University regularly exercises its right to vote on shareholder resolutions, many of which present issues related to ESG matters. In considering proxies on environmental and social matters, we work closely with the University’s Corporation Committee on Shareholder Responsibility and Advisory Committee on Shareholder Responsibility. Through the work of those committees, the University provides instructions on voting proxies related to environmental and social issues. Shareholder resolutions related to corporate governance matters are typically addressed by HMC. The University issues a publicly available annual report on the work of shareholder responsibility committees in regard to the voting of proxies.


We have joined initiatives that are aligned with—and help guide—our approach to sustainable investment, and we actively work with peers and investors to advance shared goals. For example, HMC is an active member of the PRI Investor Working Group on Corporate Climate Change Lobbying. This initiative urges businesses to take action on climate change, including through lobbying actions that are consistent with the goal of preventing climate change. As a lead investor of this working group, the Harvard endowment is a signatory to the Investor Expectations on Corporate Climate Lobbying, setting out expectations for company practice and disclosure on climate change related policy activity.

Harvard is also a signatory to the PRI’s Global Statement on Investor Obligations and Duties. This statement calls for policymakers to clarify investors’ obligations and duties, in particular, in relation to the integration of ESG issues into investment practice. In turn, the statement calls for investors to take account of ESG issues in their investment processes and decision-making, encourage high standards of ESG performance in the companies or other entities in which they are invested, and support the stability and resilience of the financial system.

Members of HMC’s Compliance team have joined the PRI’s Hedge Fund Advisory Committee. This Committee aims to develop tools to facilitate the implementation of ESG factors in the investment process across the hedge fund industry. Current projects include a responsible investment due diligence questionnaire for hedge funds, as well as an industry guide for asset owners.

We are also a signatory to the CDP's climate change program. The CDP, formerly known as the Carbon Disclosure Project, is an international non-profit organization that works with governments, public companies, and over 800 institutional investors to drive environmental disclosure and performance of publicly listed companies.

Ethical Considerations and Investment Exclusions

As an academic institution, Harvard holds its endowment funds in trust to advance its programs of education and research, which constitute the University’s distinctive way of serving society. These funds have been given to Harvard by generous benefactors over many years to advance academic aims, not to serve other purposes, however worthy. As such, the University maintains a strong presumption against divesting investment assets for reasons unrelated to the endowment’s financial strength and its capacity to further Harvard’s academic goals. Harvard conceives of the endowment fundamentally as an economic resource, not as a lever to advance political positions or to exert economic pressure for social purposes, which could entail serious risks to the independence of the academic enterprise and the ideal of free inquiry.

At the same time, the University recognizes that very rare occasions may arise when companies’ activities are so deeply repugnant and ethically unjustifiable as to warrant the University’s institutional dissociation from those activities. In recent decades, such ethical considerations have led the Harvard Corporation to instruct HMC not to own shares in certain companies involved in the perpetuation of apartheid in South Africa, in the manufacture of tobacco products, and in enabling genocide in Darfur.

When, on rare occasions, the University issues investment restrictions, limitations, and instructions to HMC, we extend these restrictions to direct holdings by our internal portfolio managers, as well as to direct holdings by investment advisers trading in the name of President and Fellows of Harvard College through separately-managed accounts. We do not extend these restrictions to investment advisers of commingled funds where Harvard is not the sole investor.

Kathryn Murtagh
"We believe that considering ESG risk factors in our investment analysis and decision making is aligned with our goal of providing strong long-term investment results to Harvard University." Kate Murtagh
Managing Director, Sustainable Investing