The Future of Investing is Impact Investing

(Originally posted on the U.S. Impact Investing Alliance website, available here. The Intentional Endowments Network is proud to sit on the Alliance's 8-member Industry Advisory Council of leading impact investing network organizations. Together the organizations on the Council represent over 800 members representing trillions of dollars of assets under management.)

By:  Darren Walker, President, Ford Foundation and Chair, U.S. Impact Investing Alliance

Fran Seegull, Executive Director, U.S. Impact Investing Alliance

The United Nations estimates that achieving its 17 Sustainable Development Goals by 2030 will require trillions of dollars. The global goals aren’t the only way to measure our challenges, but they do paint a clear picture: given the scale of the problems the world faces, it’s clear that traditional sources of capital, like government aid and philanthropy, simply won’t be enough.

That’s why we must reimagine how we invest. Increasingly, many of us have begun to consider the role of private capital, with billions of dollars now being allocated to impact investments each year. But this is just a small fraction of the total assets available, with global capital markets today valued at well over $200 trillion. If we redirected even a small portion of that sum towards new investments with positive social and environmental impact, we, quite literally, could change the world.

That is why we are thrilled to introduce the U.S. Impact Investing Alliance

The U.S. Impact Investing Alliance is a field building organization that works with partners across the American impact investing ecosystem. We’re working to transform finance by putting measurable social and environmental impact—alongside risk and financial return—at the core of every investment decision. And to make that vision a reality, we have developed a three-pillar strategy.


1. The Alliance will advocate for a policy environment that enables the impact investing industry to mature and grow. 

Already, the Alliance has benefited from the tremendous work done by our precursor organization, the U.S. National Advisory Board on Impact Investing. As documented in the report, “Private Capital Public Good,” the National Advisory Board was able to help catalyze energy into action, joining a number of existing advocates in pursuit of long-standing policy objectives.

Now, the Alliance looks to build on those successes as we continue to champion the cause of impact investing with federal policymakers. We will build on the momentum of recent policy advances— modernizing fiduciary duty, advancing outcomes-based funding, and empowering shareholder engagement—and we will seek out new opportunities to unlock impact capital.

 

2. The Alliance will mobilize the supply of impact capital, with an initial focus on institutional investors such as foundations and pension funds. 

To spur more impact investment, the Alliance will partner with existing organizations to help amplify their work, coordinate across networks where appropriate, and fill gaps where needed. We will continue to convene the Presidents’ Council on Impact Investing, which comprises the heads of 20 U.S. Foundations deeply committed to practicing and promoting impact investing. And we are excited to be launching the Industry Advisory Council, which brings together networks of committed impact investors to help guide and advance our mission.

Working together, we can break down barriers in the public and private capital markets to promote collaboration and engage new investors. We believe it is possible to find impactful investments at scale globally and across asset classes, but doing so will require developing new strategies, tools, and allies across the industry.


3. The Alliance will bring together leaders across the ecosystem to help advance the impact investing movement.

 If we want to take advantage of the opportunity before us, the time to act is now. In the next 30 years, $40 trillion in wealth will transfer to women and millennials, two segments of the population that strongly believe in aligning their investments with their values. This represents a tremendous opportunity, and can serve as a call to action to those in the financial industry and beyond.
We need to communicate to every investor what it means to make impactful investments—and how they can join our movement. We need to move innovations to market with technologies and products that enable impact transparency. And we also need to refresh our understanding of what drives long- term value, especially as we move from the paradigm of maximizing shareholder value to one that seeks to maximize stakeholder value. Most of all, we need to recognize that while we’ve progressed a great deal, impact investing is still a nascent field—and we still have a lot to learn. But together, by supporting a powerful network of institutions, individuals, and ideas, and with careful experimentation and radical thinking, we can ensure that the impact investing movement will continue to grow.

The shift toward impact investing is already well underway. If we engage with government proactively, mobilize institutions to action, and empower bottom-up movement building for impact, we can unlock the potential of private capital to help address the world’s greatest problems.

Read the full press release on the Alliance, here.

 

 

 

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Intentional Endowments Network and Cambridge Associates Outline a Blueprint for Action for Investors Wishing to Uphold Aims of Paris Climate Agreement and Implement Environmental Factors Into Portfolios

Though the US government is no longer supporting the Paris Climate Agreement, many endowments, foundations, and other US institutions remain committed to aligning their investment policies with the goals of the international accord. In response, the Intentional Endowments Network and Cambridge Associates have outlined a blueprint for action for investors wishing to uphold the aims of Paris Climate Agreement and implement ESG factors into portfolios.

Specifically, we have outlined considerations for incorporating environmental, social, and governance (ESG) factors into the development of investment policy statements (IPS), as well as a blueprint for incorporating language around the Paris accord into an institution’s IPS. 

Articulating PurposePriorities, and Principles in a well-designed investment policy can help interested institutions effectively incorporate social and environmental concerns into their investment portfolios. As long-term investors, endowments should consider material ESG factors. In doing so, they can more closely align investments with institutional mission, values, and sustainability goals, while serving as models for the rest of society. 

Please read today’s full press release with more details at:  

Cambridge Associates and the Intentional Endowments Network Outline a Blueprint for Action for Investors Wishing to Uphold Aims of Paris Climate Agreement and Implement Environmental Factors Into Portfolios

To access the new resources, please visit: 

 

 

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Intentional Endowments Network Builds Momentum

Last year, 77 Founding Members launched IEN’s membership program. Founding Members included: Arizona State University Foundation, Becker College, California State University, Calvert Investments, Carleton College, Hampshire College, Hanley Foundation, Lane Community College, Lewis & Clark College, Litterman Family Foundation, Middlebury College, Portland State University, San Francisco State University Foundation, UBS Asset Management, University of Maine and University of Massachusetts Foundation.

Through the membership program, IEN facilitates connections with experts and peers to support administrators and trustees in enhancing their institutions’ approach to sustainable investment and addressing stakeholders’ concerns. Some of the major accomplishments of the Network over the past year included:

  • Producing several guides and resources to facilitate knowledge exchange and peer to peer networking

  • Hosting multiple events, which included a total of seven interactive, action-oriented forums for senior decision makers with partners around the country. Recent keynote speakers includeformer Treasury Secretary Hank Paulson, David Blood of Generation Management, Jeremy Coller of Coller Capital and the Farm Animal Investment Risk & Return (FAIRR) Initiative, Ira Ehrenpreis of DBL Partners, and Jagdeep Bachher, CIO of the University of California, Regents. 

Read more about IEN's membership program and Network accomplishments over the past year by reading the full press release here.

 

 

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Fiduciary Duty & Divestment at Unity College

In the fall of 2012, the Unity College Board of Trustees voted unanimously to divest from investments in fossil fuels, making the College the first institution of higher learning in the United States to divest. Stephen Mulkey, President of Unity College at the time of divestment, made the moral case for divestment to the college community in an open letter. “The colleges and universities of this nation have billions invested in fossil fuels. Like the funding of public campaigns to deny climate change, such investments are fundamentally unethical,” President Emeritus Mulkey wrote. “The Trustees have looked at the College’s finances in the context of our ethical obligation to our students, and they have chosen to make a stand.”

The Board of Trustees, keeping true to their fiduciary duty to the College, wanted assurances that fossil fuel divestment would bring an appropriate return to the endowment-- and so far there has been no negative impact. “Over the past five years, the portfolio has met or exceeded market benchmarks despite the shift away from fossil fuel holdings,” stated a 2013 article updating the community on the progress of fossil fuel divestment. “Our investment performance was in no way negatively impacted by this strategy.” Catching up with President Emeritus Mulkey five years later, we discussed how fiduciary duty considerations played into the initial conversations to divest.

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Transforming Investing for a Climate Safe Future - Plenary Panel at the 2017 Second Nature Summit

While at the Second Nature 2017 Presidential Climate Leadership Summit this February, members of the Intentional Endowments Network held a plenary panel focused on aligning higher education endowment investments with climate leadership goals. Speakers discussed the investment risks and opportunities posed by climate change, what the higher education sector can do in this area, and trends in business and the finance industry related to climate. 

Panel Speakers: 

  • Wim Wiewel, President, Portland State University
  • Bob Litterman, Chairman of the Risk Committee, Kepos Capital; Board Chair, Commonfund; Board Member, WWF
  • Geeta Aiyer, President, Boston Common Asset Management
  • Seren Pendleton-Knoll, Program Director, UC Berkeley Haas School of Business Center for Responsible Business 

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Reflecting on 2016 and Looking Ahead - Update on the Intentional Endowments Network

Dear IEN members and friends,

Thank you for being a part of the Intentional Endowments Network. As we move toward implementing our 2017 priorities – of growing the network and advancing intentionally designed endowments – we’d like to take a moment and provide you with an update on an active and productive 2016.

The threats of climate change, toxins, extreme wealth inequality, oppression, human rights violations, water scarcity, breakdown in trust, loss of topsoil, failed states, political instability, and other sustainability challenges represent risks to investments in all sectors. Understanding the short- and long-term risks and opportunities of these trends is essential for prudent endowment management. Joining the conversation on these topics also serves as a tremendous leadership opportunity for endowed institutions.

The potential for a bright future is very much alive. Sustainability leadership from higher education foundations, corporations, social entrepreneurs, non-profits, and cities is inspiring and opening up new possibilities.

Perhaps most hopeful is the continued growth in investment capital aligning for positive social and environmental impact. Data from US SIF: The Forum for Sustainable and Responsible Investment shows assets in some form of Sustainable, Responsible, or Impact (SRI) investment strategy grew another 33% from 2014 to 2016 to account for 22% of all US institutionally invested funds. This is a continuation of a strong, accelerating trajectory since they started their survey in 1995.

Growing interest in SRI/ESG investing at endowments is widespread – it seems there is activity and conversations at just about every institution – and we expect to see interest and conversations translate to action more and more over the next two years.

With this background, we are pleased to share below the highlights of our work together in 2016, supporting alignment of endowment portfolios with the institutional mission, values, and sustainability goals:  

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Strategies for Investing in a Climate-Safe Future

By: Ken Locklin, Director, Impax Asset Management

Conventional wisdom can be seductive.  Pundits are quick to predict that even the slightest shift in public policy breezes augur for imminent, wholesale change in direction.  But, as fiduciaries we are called upon to make investment decisions grounded in reality, and based on rigorous, rational analysis.  Reality is typically more resilient, and not necessarily deflected by policy zephyrs.

One reality that investors and policy makers alike face is the increasing impact of climate change.  It increasingly impacts our physical world and significantly heightens investment risk.  While these impacts impose challenges for investors in general, they simultaneously offer compelling opportunities for investors in climate solutions.

The incoming administration campaigned as pro-coal, climate change sceptics.  But against these political headwinds, we see more powerful economic forces at work. The underlying drivers advancing many environmental technologies are increasingly beyond most regulatory intervention. And consumers are progressively seeking more sustainable products and services.

The broader environmental markets sector is in fact composed of 30 discrete sub-sectors.  In our estimation, opportunities in all of those sub-sectors are set to expand as the broader economy inevitably responds to the challenges of climate change.

The new Administration appears to be all for lightening the burden of unnecessary regulation for American businesses, while reducing corporate taxes.  Such changes could provide general economic uplift for all US investors.  Rollbacks of more fundamental environmental laws such as the Clean Air and Clean Water Acts would prove more difficult, bolstered as they are by settled law and judicial precedent.  There does not appear to be broad Congressional support for significant legislative shifts of this sort, and unwinding these laws cannot be undertaken by Executive action alone. 

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Navigating the Sustainable Investment Landscape: A New Paper by WRI

A new paper by World Resources Institute finds strong interest and opportunities and key barriers for sustainable investing within the US institutional investor marketplace. 

A survey of over 100 investment professionals shows that institutional investors - including pensions, foundations, universities, and NGOs - are increasingly considering the material importance of environmental, social, and governance (ESG) factors in constructing their portfolios. Stakeholder pressure and economic drivers are making sustainability an issue that long-term investors simply cannot ignore.

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Holiday Reflections from the IEN Team

With the arrival of the holiday season, we are reflecting upon our shared success during the past year in advancing the conversation around sustainability among endowments, investors, students, companies, and the general public. We are filled with gratitude for the engagement of IEN members, event attendees, and all that have shown interest in this critical work.

We appreciate the support so many of your organizations have provided to make IEN possible -- and as you think about your own personal year-end charitable giving, we invite you to consider supporting IEN with a personal donation

You can also help IEN by setting "The Crane Institute of Sustainability" as your charity when you shop online at Amazon Smile and GoodShop

Our society faces many interrelated challenges - climate change, food security, water, income inequality, forced labor, terrorism, mass-migrations - that threaten to undermine the very viability of our civilization if we are unable to summon bold and tireless leadership from every sector. Investors and businesses have a powerful role to play. Done right, creating the solutions we need to can drive tremendous opportunity and prosperity.  We are honored to be exploring and supporting the path forward with you. 

We have a big vision: As a peer network designed to support endowments in aligning investments with sustainability goals without sacrificing returns, we seek to create a healthy, prosperous, sustainable society -- powered by clean renewable energy, where materials are well managed in closed-loops, and neither natural systems nor people's capacity to meet their needs are undermined. By working at the intersection of finance, business, and education, we can transform the sectors that allocate capital, produce the goods and services we rely on, and educate our professionals and leaders. 

Together we’ve accomplished much: After an 18-month pilot phase, IEN formally launched in March 2016 with nearly 80 Founding Members, and now has nearly 100 members, including higher education endowments, foundations, non-profits, and industry leaders. We have hosted seven interactive, action-oriented forums for senior decision makers with partners around the country, with former U.S. Secretary of the Treasury Hank Paulson speaking at the latest one earlier this month.  We are advancing initiatives in the Network to support shareholder engagement, student-managed investment funds, implementation of the Paris Climate Agreements, and more. We are publishing articles and reports and delivering webinars designed to quickly educate trustees and other decision makers on sustainable investing topics such as fiduciary duty, clean energy investing, and financial performance.

But that’s just the beginning: Within the next three years, IEN aims to expand the network of hundreds of institutional decision-makers and stakeholders, industry practitioners and academic experts, and 300 member colleges and universities to make intentionally designed endowments the norm in higher education and beyond.  

This is an ambitious goal, and we need your help to reach it! 

Please help support IEN with a holiday donation today. Online, tax-deductible contributions are quick and easy: www.intentionalendowments.org/donate 

And setting "The Crane Institute of Sustainability" as your charity when you shop online at Amazon Smile and GoodShop is an easy, free way to help that can really add up. 

Thank you for all you do to make our world a better place for people everywhere today and generations to come!

Warm regards, 
Georges, Tony & the IEN Team 

 

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Intentionally Designed Endowment Forum at Loyola University Chicago


Former U.S. Secretary of the Treasury, Hank Paulson, discussed the economic risks associated with climate impacts, his work leading the Risky Business Project, and the importance of improved disclosure of climate risk by corporations
Paulson-IEN-LUC-Forum.jpg

On November 1-2, 2016, a dynamic group of endowment leaders convened at Loyola University Chicago to connect with their peers and learn from investment experts about the fast-evolving field of sustainable investing -- covering a broad range of concepts and strategies including ESG integration, impact investing, mission-aligned investing, shareholder engagement and more. 

Participants heard from a variety of high-level speakers, including Former Treasury Secretary Hank Paulson, as well as David Blood of Generation Management, Jeremy Coller of Coller Capital and the Farm Animal Investment Risk & Return (FAIRR) initiative, and more.  See the program agenda page for a complete list of speakers. 

The 131 participants included representatives from 28 colleges, universities, and philanthropic foundations, including Georgetown University, DePaul University, the Pratt Institute, Hampshire College, Benedictine University, the London School of Economics, the University of Dayton, and the University of Winnipeg.  Many of the leading non-profits and investment management and consulting firms in the sustainable investing field space also brought their expertise to the conversation. A list of participating institutions is available here

Participants advanced conversations that have been ongoing in the Intentional Endowments Network -- at previous events, and through Working Groups, webinars, and resource development -- and also introduced new areas of focus for the Network. Topics covered included:

  • Financial performance of sustainable investment strategies 
  • Fiduciary duty
  • Opportunities to demonstrate leadership by aligning investments with institutional mission, values, and sustainability goals
  • Portfolio construction and considering ESG across asset classes 
  • Student-managed investment funds
  • Investing in clean energy 
  • How to have constructive conversation on these topics at the Board level 

Felicia-Davis-IEN-LUC-Forum.jpgIEN's Clean Energy Working Group announced the release of a new white paper titled -- Investing in Clean Energy: Campuses and Endowments, and members of the group presented a panel conversation about the variety of ways institutions can drive the shift to a clean energy economy, realizing significant costs savings and strong returns in the process. 

Several action-plans were developed at Forum. Endowment participants shared plans to bring materials back to their investment committee meetings and have deeper conversations on sustainable investing strategies. A group of trustees and investment committee members formed a working group and tasked themselves with finding ways to facilitate more peer-to-peer networking among trustees at different institutions working on these issues. Another working group was proposed to connect student-managed investment funds from various campuses to share their learnings and develop guides to help students at others schools create new funds. 

The Forum proved to be another valuable step in advancing the conversations around intentionally designed endowments, that aim to protect and enhance financial performance by better aligning investments with institutional mission, values, and sustainability goals. 

Visit the Forum page for more details on the event including links to presentations and videos of speaker sessions. 

We are very appreciative of all of the Forum Sponsors who made this event possible, and the host institution, Loyola University Chicago for their leadership in catalyzing this conversation. 

If your institution is interested in hosting an IEN Forum or another type of event convening on these topics, please contact us. 

 

IEN-Forum_LUC-participants.jpg 

Thank you to our Generous Sponsors:


Host Sponsor

Loyola University Chicago

 

Gold Sponsor

Boston Common Asset Management

 

Silver Sponsors

Etho Capital

Prime Buchholz

UBS Asset Management

 

Bronze Sponsors

Aramark

Breckinridge Capital Advisors

Brown Advisory

Cambridge Associates

Caravel Management

Impax Asset Management

 Praxis Mutual Funds

South Pole Group

Trillium Asset Management   

 

 

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