Higher Education Endowment Funds Enter a New Area of Vulnerability
As stewards of multi-billion-dollar endowments, colleges and universities face growing pressure to align their investment practices with their academic values, climate commitments, and fiduciary responsibilities. Yet many institutions lack a clear, cohesive strategic narrative or investment thesis that connects their use of environmental, social, and governance (ESG) and climate considerations to long-term portfolio objectives. Once viewed by longer term investors and institutional allocators as a necessary evolution of risk management and long-term value creation, ESG and climate integration has become mired in partisan narratives that distort its original intent: to improve risk-adjusted returns. Facing financial and reputational pressures, investors and endowments are rapidly rebranding how they talk about ESG. Terms like “sustainability,” “net-zero,” and “social impact” are being replaced with phrases like “long-term risk” and “climate-adjusted capital strategy” to emphasize alignment with fiduciary duty and a primary, if not sole focus on financial performance. A 2024 Edelman Smithfield survey found that 54% of investors believe the term “ESG” will disappear within three years, and yet a 2025 Edelman Smithfield survey of LPs found that despite a shifting regulatory landscape, 58% of U.S. LPs say their ESG and DEI expectations have increased.
But without a clear investment thesis behind this shift, this rebranding risks appearing evasive or performative. The danger? Institutions may lose trust—from stakeholders demanding transparency and clarity on the substance behind the changes. This erosion of trust threatens not only reputation, but also the ability of institutional investors—particularly colleges and endowment funds—to steward capital responsibly.
While many institutions reference ESG or climate considerations in broad terms, few possess a clearly articulated, publicly credible thesis that explains how such indicators shape risk assessment, drive allocation decisions, or serve institutional purpose. A fiscal year 2024 NACUBO survey of over 650 US colleges/universities found that 84% of institutions had “ESG” in their investment policies yet 62.5% stated they do not practice responsible investing or implement ESG practices in any form. This suggests a disconnect between aspiration and execution.
This absence of clarity creates three problems:
- Reputational Risk: Without a narrative connecting intent to strategy, schools are vulnerable to criticism from students, faculty, and external watchdogs for perceived greenwashing or inaction.
- Governance Gaps: Boards and investment committees lack a framework to effectively integrate and measure intangible factors such as the physical and transition risks of climate change.
- Missed Opportunity: Institutions forgo the strategic advantage of positioning themselves as climate-forward, long-term investors in a market that will increasingly price climate risks.
Academic institutions, with their dual mandates of open, non-partisan inquiry and financial stewardship, are uniquely positioned to reset the discourse. Yet they face mounting pressure from all sides: students and faculty demanding action on climate, labor and geopolitics, as seen in the Israel/Hamas war in Gaza, policymakers questioning ESG’s legitimacy, and boards wary of politicization. What’s needed is a structured, evidence-based communications strategy that re-aligns sustainable investing with the principles of fiduciary duty, and centers its purpose on the pursuit of financial performance.
Edelman Smithfield and FFI Solutions are collaborating to support institutions to manage this communications challenge. Together, we bring financial depth and narrative discipline to a conversation that urgently needs both. Our joint offering—combining climate investment expertise with strategic narrative development—helps institutions bridge the gap between intent and action, and between financial strategy and public engagement. Through a multistakeholder education and engagement approach—grounded in capital markets experience and trusted storytelling—we can help endowments demystify sustainability for trustees, bridge generational divides, and shift the conversation from values-based investing to value-based investing. By building institutional narratives that emphasize prudence, resilience, and opportunity, we enable decision-makers to confidently articulate how sustainability enhances—not threatens—their fiduciary mandate. Given the growing higher education affordability crisis, freezes to federal research grants, and potential new taxes on endowment assets, the urgency to carefully engage stakeholders on the fiduciary benefits of sustainable investing strategies is timely. In a world of disinformation and polarization, clarity and credibility are competitive advantages. Colleges and endowments must reclaim their voice as responsible stewards of intergenerational capital and societal progress. With the right partners, they can lead a new era of sustainable investing defined not by politics, but by purpose, performance, and long-term risk management.
Lane Jost, MD Sustainability & Governance Advisory, Edelman Smithfield & Josh Joseph, SVP Sustainability & Governance Advisory, Edelman Smithfield
Chris Ito, CEO, FFI Solutions & David Root, Head of Product Management, FFI Solutions