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

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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New Report on Campuses and Endowments Investing in Clean Energy

Today the Intentional Endowments Network (IEN) announced the launch of a new report titled “Investing in Clean Energy: Campuses and Endowments” during a Forum at Loyola University Chicago. The report is designed to encourage conversation about the financial and societal benefits of clean energy investments higher education can make – both as a customer and an institutional investor through their endowments. It explores the current opportunities and barriers to such investments.

Clean energy investments include renewable energy generation, energy efficiency, energy storage, combined heat & power, and electrified transport solutions. With over $528 billion in assets, the ability to make illiquid investments, and long-term investment horizons, there are many options for college and university endowments to invest in clean energy. More 650 colleges and universities have committed to going carbon neutral in their campus operations, and many have made significant clean energy investments to move in that direction.

Chris O’Brien, who chairs the IEN Working Group that led the development of the report, said “More than 250 campuses are now voluntarily sourcing renewable energy. Renewables and a growing range of other clean energy investments are delivering benefits to the bottom line, in addition to reducing carbon and creating learning and research opportunities.”  

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Vice President for Advancement at San Francisco State University speaks at CETYS International Seminar on Innovation in Higher Education

On September 19, 2016, Robert J. Nava, The Vice President for Advancement at San Francisco State University, spoke at The CETYS University International Seminar of Innovation in Higher Education. Nava's comments focused on social responsibility within the context of San Francisco State University and the SF State Foundation's commitment to align its core values of social justice and environmental sustainability with socially responsible investing. His full comments are featured below. 

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Press Release: Hank Paulson, Former U.S. Secretary of the Treasury, to speak at Intentionally Designed Endowments Forum at Loyola University Chicago

Hank Paulson, former U.S. Secretary of the Treasury, Chairman of the Paulson Institute, and Co-Chair of the Risky Business Project will be the keynote speaker at the Intentional Endowments Network (IEN) and Loyola University Chicago’s Intentionally Designed Endowments Forum. Paulson and other speakers, including David Blood, co-founder of Generation Investment Management and former CEO of Goldman Sachs Asset Management will address endowment decision makers about climate risk and the growing interest in ESG investing. 

Please read the press release. For additional information about the forum please click here.  

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