ESG and Private Schools

The rise of environmental (E), social (S), and governance (G) criteria as important bases for investors making decisions as to where to allocate capital is a trend that continues unabated by the pandemic, renewed interest in racial equity and justice, and the winds of politics in the United States. If anything, the movement is taking on new energy from a growing global realization that the modern corporation—Milton Friedman notwithstanding—exists for a greater good than mere investor returns alone.

Though they do not have investors seeking a return, private, independent schools should also consider ESG factors in making the case as to why they exist in the first place and then why they are worthy of philanthropic support. Like investors and rates of return, contemporary donors to nonprofit entities such as independent schools are interested in more than just perpetuating the school’s existence. Rather, they are also (perhaps even more) interested in how the school impacts the world.

McKinsey, in a recent article entitled, “The corporation in the 21st Century,” by Michael Birshan, Sean Brown, and Clarisse Magnin-Mallez, makes the point that “One forecast [we] have for the next few years is a continuing focus on the ’S’ in ESG. That does not mean the focus on the ‘E’ will go down, but if one wants to be ahead of trends, think deeply about your company’s role in society.” (Emphasis mine.)

Private schools risk becoming country clubs absent a purpose to make the world different in some way. More than a few of our clients admitted to feeling stung by Caitlin Flanagan’s critique in The Atlantic earlier this year. The rebuttal is in affirming a purpose beyond mere private benefit. What is yours?