The largest academic endowment in the world faced its first financial loss since 2016

The endowment of Harvard University suffered a $2.3 billion loss in fiscal 2022, which the university attributes to both the worldwide market downturn and its dedication to climate goals.

According to the University’s Annual Financial Report, which was released on Thursday, this is the fund’s first negative return since 2016. The endowment is administered by the Harvard Management Company, or HMC, a university-owned investment company that consists of more than 14,000 separate funds invested as a single entity.

HMC experienced investment losses of 1.8% during Harvard’s most recent fiscal year, which ended on June 30. As a result, the endowment’s overall worth dropped to $50.9 billion.

N.P. “Narv” Narvekar, the CEO of HMC, said in a letter on Thursday that the fund’s “most significant impact of the fund was the poor performance of global equity markets”.

In that period, the S&P 500 and Nasdaq both experienced losses of 11% and 23%, respectively, as a result of worries about rising inflation and increased interest rates.

The university’s dedication to achieving climate goals, according to HMC, is another element.

“A number of institutional investors leaned into the conventional energy sector, through either equities or commodity futures, adding materially to their total return,” Narvekar wrote. “HMC did not participate in these returns given the University’s commitment to tackling the impacts of climate change.”

Early this year, energy stocks saw big gains as the conflict between Russia and Ukraine drove up oil prices to multi-year highs. The energy sector of the S&P 500 is still up more than 50% this year even with the following decline in oil prices.

The fund, the biggest academic endowment in the world, had a successful year prior to the loss. The endowment’s worth climbed by more than $10 billion to $53.2 billion in the fiscal year 2021, which is the highest amount ever.

HMC noted the difference in returns from fiscal 2021 to fiscal 2022, but stated that it highlights the need to focus on long-term results.

“We remain confident that the steps we have taken — and those still in process — to construct a portfolio that serves the University’s long-term interests will allow Harvard to maintain and increase its critical support of students, faculty, and research for generations to come,” Narvekar said.

According to Harvard, the endowment provides funds for almost every facet of the university’s operations, including financial assistance, preservation, and staffing and research funding. In fiscal year 2022, the fund provided more than $2.1 billion to the University’s budget, or more than one-third of its operating income.