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Before exploring avenues for aligning the endowment with institutional mission, trustees will want to have a common understanding of the institution's mission and to understand how that mission might be better reflected in the endowment's investments. They will also want to understand sustainable investing in the context of today's capital markets.

What is Sustainability?

There are many, often inter-related environmental, social, and governance factors that are material to investments.  The materiality of such considerations varies by sector and asset class.  However, a broad, comprehensive understanding of what "sustainability" means and the major themes is an important part of the learning process and a prerequisite to building consensus, establishing policy, and implementing sustainable investment strategies.

Sustainable Development Goals (SDGs) - The SDGs provide a framework for understanding key sustainability themes, that has been widely agreed-upon and adopted by businesses, investors, and governments.  This page provides links to resources related to themes in each of the 17 SDGs, such as climate change, gender, inequality, cities and communities, and responsible production.

Future Fit Business -  The Future-Fit Business Benchmark offers a holistic framing for companies and investors to consider all their social and environmental impacts. It provides a robust scientific definition of sustainability, enabling a strategic approach for achieving sustainability, and it aligns with the SDGs. 

What is Sustainable Investing?*

Sustainable investing for endowments broadly means investing to meet the financial needs of the institution that is served by the endowment through companies and other assets that create a thriving, sustainable economy in which the institution's mission continues to be advanced.  The Intentionally Designed Endowments Primer and the articles that follow provide more detailed descriptions, case studies and guidelines for sustainable investing.

Primer: Intentionally Designed Endowments

Investing With Purpose l by Anthony Cortese, Co-Founder and Principal, Intentional Endowments Network, NACUBO's Business Officer Magazine, March 2018

"The Intentionally Designed Endowment"| by Anthony Cortese, David Dinerman, and Georges Dyer, AGB's Trusteeship Magazine, Sept/Oct, 2017

Text Box: Making Sense of the Terms
SOCIALLY RESPONSIBLE INVESTING (SRI)
Can use both positive and negative investment criteria but many now use the term only to refer to negative screening
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
ESG investing aims to create a more complete picture of potential investment risks and opportunities by factoring environmental, social, and governance criteria into investment decisions
IMPACT INVESTING
Involves investing in projects or companies with the purpose of generating a positive societal or environmental change as well as generating a financial return
NEGATIVE SCREENING
Excludes companies, industries or countries that the investor considers irresponsible.
DIVESTMENT
Refers to selling holdings in a company or sector for ethical or political reasons in order to reduce risk, avoid being complicit, or make a statement.
POSITIVE SCREENING
Involves investing in companies that meet certain ESG criteria as determined by the investor, can involve selecting “best-in-class” companies within a sector
SHAREHOLDER ENGAGEMENT OR ADVOCACY
Uses ownership in a company to improve the company’s environmental, social and governance practices through proxy voting, filing shareholder proposals or establishing dialogues with company executives.


What is Sustainable Capitalism?

Sustainable capitalism, as outlined in the resources below, is a re-imagined capitalism for the 21st century.

Companies Must Take The Higher Road Toward A Sustainable Future | Ceres, February 2018

Turning Point: Corporate Progress on the Ceres Roadmap for Sustainability l Ceres, February 2018

Responding to Megatrends: Investment Institutions Trend Index 2017 | PRI, December 2017

The Transformation of Growth: How Sustainable Capitalism Can Drive a New Economic Order l Generation Foundation, June 2017

The Value of Corporate Purpose: A Guide for CEOs and Entrepreneurs| KKS Advisors &  The Generation Foundation, May 2017

CFA Institute Resources - a full library of over 100 papers and presentations addressing sustainable investing topics such as CEO pay to clean energy, green bonds and board diversity.

 

Prudent Endowment Management

Trustees, in their responsibility for the prudent management of endowment assets, will want to understand how sustainable investing aligns with their fiduciary duty.  The most frequent concerns that trustees want to address are:

Fiduciary Duty

Can sustainable investments meet fiduciary requirements of care and diligence?

Financial Performance

Can sustainable investments meet performance requirements?

Peer Examples

Is this consistent with what my peers are doing at other colleges and universities

Learning with Others

Join Investor Initiatives

Join investor groups and initiatives to access resources, learn from experts and peers, and signal to stakeholders that the institution is engaged in this process. Membership and participation in these various initiatives are complementary and not mutually exclusive. 

 

Work with your Investment Consultant

Many, but not all, endowments work with an investment consultant, who may have full or partial discretion over investment decision making. Though your particular consultant may not have expertise in aligning your endowment with your institution's mission, it is likely that there is a group at the consultant's firm that is dedicated to developing expertise in this area.  

 

 


 *A word about our terminology...

We use the term "sustainable investing" broadly to mean aligning investment practices with institutional mission and values and/or explicitly integrating environmental, social, and governance (ESG) risks and opportunities in the investment process, regardless of the strategies used to do so. These strategies may include but are not limited to responsible investing (RI), socially responsible investing (SRI), impact investing, mission-aligned investing, shareholder engagement, positive or negative investment screening, and community investing.

 


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