Higher education is investing in ESG

Like many organizations, higher education institutions are increasingly prioritizing environmental, social and governance (ESG) initiatives and planning for related disclosures. Whether enhancing access and affordability, achieving more diverse student populations, setting net-zero emissions targets or publicly denouncing racial injustice, colleges and universities have been engaging in ESG for some time, demonstrating that they share the values and motivations of their students, their faculty and the investment community at large. Now more than ever, these institutions are inventorying their ESG activities and developing more formal and comprehensive strategies to ensure they have adequate processes and controls to manage risk and promote environmental and financial sustainability.

However, ESG reporting in academia has been much more qualitative than quantitative thus far because of inconsistent data and definitions, limited reporting from investees and peer institutions and no current reporting mandates or guidance from governing bodies. The lack of a universal ESG reporting framework has been an obstacle for all sectors. When institutions employ different definitions and methodologies for measuring ESG data — such as employee turnover and material cyber breaches — it becomes challenging to glean data that are reliable, comparable and decision-useful.

Despite these challenges, colleges and universities are placing ESG at the forefront of their investment agendas as they advance environmental initiatives, advocate for diversity, equity and inclusion (DEI) — in boards, faculty, staff and students — and seek to mitigate emerging risks.

Endowments as a vehicle for climate action

Endowments are the lifeblood of higher education. The income generated from donors and investments often determines the financial viability of an institution and its beneficiaries for decades to come. Endowments are an opportunity to invest in future students, research, innovation and state-of-the-art academic facilities. They are also an opportunity to invest in the long-term financial stability of the environment and economy — one in which entities are increasingly decarbonizing their operations, value chains and portfolios. Investing with sustainability in mind can not only generate greater financial returns but also greater societal returns, benefiting the future generations of students these colleges and universities seek to serve.

Colleges and universities are increasingly tying environmental criteria to their endowment investment strategies. Interest from asset managers is growing too. In fact, one prediction is that more than a third of the projected $140.5 trillion of global assets under management will be sustainable investing assets by 2025.[1] But without consistent standards, frameworks and definitions, colleges and universities cannot effectively execute sustainable investment practices. This complicates environmental strategies for institutions that have set overall concrete targets, such as net-zero emissions.

With new regulations concerning public companies and asset managers from the U.S. Securities and Exchange Commission (SEC) on the horizon, as well as the recent establishment of the International Sustainability Standards Board (ISSB), college and university endowments stand to benefit from an increasing level of ESG data that will help them make more informed decisions with respect to climate and social risks and opportunities within their portfolios. Still, for colleges and universities with large endowments (i.e., > $1 billion), getting to the right data will be a particularly rigorous process. Institutions will need to parse the data of each entity in their portfolio, including any underlying entities, to ensure each investment conforms to their climate and sustainability commitments. As regulation continues to take shape, we expect to see extensive education about the use cases for climate data to facilitate this intense process.

Broadening the pool of DEI data

While higher education continues to find its footing on the E of ESG, colleges and universities are well-versed in the S. The COVID-19 pandemic and its disproportionate impacts on minority students and staff, as well as heightened calls for racial justice at campuses across the country, have spotlighted social issues in academia. Colleges and universities are experienced in tracking and reporting student diversity data, but diversity data for faculty and staff are usually less available and often not reported. When it is reported, the data are often inconsistent or outdated.[2] While some higher education institutions have board-level committees focused on DEI, this governance structure varies across institutions, and many lack expertise in interpreting ESG data and identifying related risks and opportunities.

As it has done for climate reporting, the SEC is expected to propose disclosure rules for public companies on human capital management. Additionally, ratings agencies are indicating that ESG factors are becoming a material credit consideration for higher education institutions,[3] and the Municipal Securities Rulemaking Board is currently evaluating ESG practices in the exempt bond markets. In the absence of uniform reporting, higher education leaders should assess the scope and quality of their institution’s internal and external disclosures, the ways their ESG commitments and metrics are defined and the evidence and processes in place to support such disclosures.

For example, higher education leaders may ask themselves how they consider ESG factors, such as DEI, in:

  • Admissions
  • Student wellness and safety
  • Employee recruitment and retention
  • Endowment management and fundraising
  • International activities
  • Board composition

For universities with academic medical centers, health equity should be top of mind as well.

Tackling existing and emerging risks

Embedding ESG risks into higher education’s enterprise risk management (ERM) profile is critical to ensuring its success in the long term. Colleges and universities are uniquely vulnerable to cyberattacks because of their open and decentralized information technology environments, strained bandwidths from the unexpected shifts to hybrid learning and remote work, insufficient investment in cyber security and highly valuable data: research intelligence, student information and patient medical records.[4]

Beyond cyber threats, reputational risks can arise from controversial investments tied to companies employing forced or child labor, operating in war zones or other geopolitically complex areas, or championing ideologies that strongly conflict with the values of students, faculty and staff. At the endowment level, while certain ESG data remain difficult to source and assess, institutions can apply an ESG lens to diligence reviews of investment targets and monitor their existing portfolio holdings for potential red flags.

As U.S. public companies and registered investment entities expand the scope of their ESG reporting, we expect it will become easier to assess the impact of these less conventional risks previously hidden within college and university endowments. Institutions should prepare now to ensure they have processes in place to identify and address these risks.

Employing a cross-functional approach to governance

Mitigating higher education’s physical, transition and reputational risks requires a cross-functional approach in which finance and operations leaders, school administrators and trustees work together to use objective measurements that drive long-term, risk-adjusted investment success while advancing ESG priorities.[5] In addition, bringing in a third-party auditor to assure ESG data can further build trust from key stakeholders.

A good starting point for cross-functional collaboration is to consider the following questions:

  • Does our institution have an ESG strategy, and who is responsible for its execution?
  • How are material ESG risks identified? Are risks in the ERM profile evaluated through an ESG lens?
  • What metrics will be used to measure progress against stated goals, and how are such metrics defined? Who within the institution will be responsible for generating and tracking such data and ensuring its conformity with applicable standards?
  • What internal controls and procedures are in place to ensure the quality of ESG data and disclosures? Is such information reviewed with the same rigor as financial results?[6]


Today, the higher education sector is in the early stages of the ESG reporting journey. A few institutions have begun to publish formal ESG reports. Others are making public commitments around student access and affordability, faculty diversity and divestment of fossil fuel holdings in their endowment portfolios. Still, many are just beginning to inventory existing ESG activities and considering how to develop a comprehensive strategy. At all stages, there is ample room for alignment on and understanding of ESG definitions and a critical need for quantitative, reliable data. College and university endowments are a significant source of ESG risk and opportunity, and a cross-functional approach to governance will help institutions satisfy their fiduciary responsibilities to donors and other stakeholders.


[1] Adeline Diab and Gina Martin Adams, “ESG Assets May Hit $53 Trillion by 2025, a Third of Global AUM, Bloomberg Intelligence, February 23, 2021.

[2] KPMG U.S., On the 2022 Higher Education Audit Committee Agenda, accessed May 2022, https://institutes.kpmg.us/government/articles/2022/higher-education-audit-committee.html.

[3] Moody’s Investors Service, “Research Announcement: ESG Factors Material in 50% of Public-sector Rating Actions in 2019 and Q1 2020,” November 18, 2020.

[4] KPMG U.S., Higher education is on high alert for cyberattacks, May 2022, https://info.kpmg.us/news-perspectives/advancing-the-profession/higher-education-high-alert-cyberattacks.html.

[5] KPMG U.S., Three Lesson Plans for Higher Education Boards in 2021, June 2021, https://info.kpmg.us/news-perspectives/advancing-the-profession/three-lessons-plans-for-higher-education-boards-2021.html.

[6] KPMG U.S., On the 2022 Higher Education Audit Committee Agenda.

Higher education is investing in ESG
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Media Contact

Elizabeth Lynch

Elizabeth Lynch

Manager, Corporate Communications, KPMG US

+1 201-505-6316




David Gagnon

David Gagnon

Partner, Audit, National Industry Leader, Higher Education & Other Not-for-Profits, KPMG LLP

Elizabeth Ming

Elizabeth Ming

Asset Management/ESG Audit Partner, KPMG LLP

+1 214-679-8368

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