What is the Yale Endowment?
An endowment is an ongoing "pot of income" for a "non-profit" organization. Established in 1718, Yale’s endowment consists of money donated to Yale, as well as money Yale invests. Because of its status as a university, Yale is considered a non-profit by the legal definition.
In short, Yale has a very large endowment. Yale's endowment is currently $42.3 billion. This is the second largest university endowment in the world, larger than the GDP of 103 countries. For comparison, the City of New Haven's budget in 2021 was $569 million. The endowment's daily earnings were approximately $30 million a day in fiscal year 2021. Crucially, what isn't included in the Endowment is property, tuition revenue, sports (!), and Federal and State Grants.
The endowment funds are designated for the long-term funding of University operations, with the majority of funds going towards “undesignated” expenses, “miscellaneous specific purposes,” and professorships. The remaining quarter of the endowment is designated for financial aid, maintenance and books.
The graphic on the left depicts the Operating Budget Revenue for the Fiscal Year 2017. The graphic on the right depicts the breakdown of how the endowment is intended to be spent.
The present Yale endowment cannot be understood without its history. In Craig Steven Wilder's "Ebony and Ivy: Race, Slavery, and the Troubled History of America's Universities," he wrote "Philip Livingston's generous donation to Yale College occurred at the height of his involvement in the slave trade. Hence, profits from the slave trade funded the endowment of Yale's first professorship."
An understanding of the Yale Endowment's management is crucial for making change. The Endowment is managed by the Yale Investments Office, run by Chief Investment Officer Matthew Mendelsohn, successor to the late David Swensen. Swensen was a major figure in the world of university investing and his investment strategy (called "The Yale Model") has tremendous influence.
Yale's Endowment is highly influential. Due to the structure of the "Yale Model," Yale's investment returns were 11.8% over the past 20 years, and it jumped to 40.2% in fiscal year 2021. The endowment model has been adopted by over 100 other universities, including Harvard, MIT, UPenn, and Princeton.
The graphic above depicts this transformation from mostly investment in "domestic equity" in 1986 to mostly "non-traditional asset classes" in 2020. These non-traditional asset classes are linked to things like fossil fuels and Puerto Rican debt.
If Yale spent just 0.97% more of the endowment on tuition, tuition could be eliminated for all students. If just 1.3% more of the endowment was spent, Yale could contribute New Haven's entire yearly budget.
In 2021, the investments office disclosed that Yale had $800 million invested in fossil fuels. We believe the true number may now be higher. Beyond that one disclosure, Yale has consistently refused to be transparent about the specifics of its fossil fuel investments. We have, however, been able to uncover information through analysis of SEC Form 13F, which, for any company or university, can be found at: https://www.sec.gov/edgar/searchedgar/companysearch.html (U.S. Securities and Exchange Commission - Company Filings).
We also analyze Yale's IRS 990 forms. This is a big form that all organizations exempt from income tax have to submit once per year. There are lots of parts to the form, the most relevant to our purposes being Schedule R. Schedule R is used to provide information on “related organizations”. There are lots of ways for an organization to be “related” to Yale; however, most of the companies in the Schedule R form almost fully controlled by Yale. This form is how we find Yale endowment money controlled by external fund managers. Yale creates shell companies and puts a few hundred million dollars into them, and then fund managers manage those shell companies. This process is purposefully opaque.
Analysis of SEC Form 13F filings reveals a minimum of $317,872,000 invested in the energy sector — including a direct investment of $263 million in EQT Corporation, the largest natural gas company in the United States — and exposure through investments in exchange-traded funds to coal-producing companies and specific oil and gas companies from which the Yale corporation claims to have divested. Similar analysis of Yale’s 2019 IRS Form 990 Schedule R suggests that Yale’s fund managers held portfolios with a minimum of $2,460,186,000 potential exposure to the energy sector.
According to a response provided to the Yale College Council by Andrew Forsyth, a strategic advisor at Yale, the EQT Corporation shares were “a distribution from the winding down of an investment partnership,” yet gave no parameters or timeline for this. Yale’s admission that the winding down of one investment partnership revealed hundreds of millions of dollars invested in EQT Corporation suggests the possibility that other investments of this size may be hidden in any of the 182 other shell companies that manage Yale’s endowment.
Some of Yale’s fund managers are known to make investments in the fossil fuel industry. According to SEC Form 13Fs, the fund managers above were publicly invested in companies such as BHP Billiton Petroleum, Rangely Oil Field, Merit Energy Company, Plantation Petroleum, Denbury, International Seaways, USA Compression Partners LP, Cheniere Energy Incorporated, Archaea Energy Incorporated, Antero Resources Corporation, and Kinder Morgan.
According to the 2021 report on Yale’s endowment, the planned allocation for the natural resources asset class was 4.5%, a figure which remained static from 2020, despite university commitments to reduce financing of fossil fuels in that timeframe. Yale’s earlier financial reports indicate that target allocations have tended to hew closely to the actual allocations, but it is impossible to determine the amount invested without further investigation. As of June 30, 2021, Yale’s endowment was valued at $42.3 billion. A 4.5% planned investment in the natural resources asset class would thus represent $1,915,773,000.
The EJC cannot be certain how many of these investments are held in fossil fuels rather than timber, agriculture, and other natural resources. Based on statements from the investments office, we estimate a minimum exposure of $800,000,000. Given the opaqueness of the university’s investment practices, further exposure to oil, coal, and especially fracked gas is likely.
Clearly, there is more to be uncovered, and further investigation is required to assess the full scope of Yale’s investments and the extent to which they diverge from the Yale Corporation’s stated policy.
YALE HAS THE RESOURCES, POWER, AND RESPONSIBILITY TO LEAD. By cancelling holdings in Puerto Rican debt and divesting from fossil fuels, Yale can influence an entire industry to do the same.
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