Weekly News Round-Up: November 17, 2017

New Reports
 
Hampshire College Case Study l Intentional Endowments Network 
  • We are pleased to share with you our new case study on Hampshire College’s journey in considering social responsibility, sustainability, and institutional mission in its endowment investing. As many schools and nonprofits grapple with these issues, or face scrutiny from stakeholders, this case study offers details on how Hampshire College undertook ESG criteria and aligning with mission. Read the press release outlining the report, and access the full report here.
Responding to Resistance l Farm Animal Investment Risk and Return (FAIRR) Initiative
  • The FAIRR Initiative has just launched a new report titled Responding to Resistance which includes an update on our collaborative investor engagement, the FAIRRGlobal Investor Antibiotics Statement and Best Practice Guidance for Producers and Purchasers. The report shows the growing engagement on this issue from both investors and companies. The FAIRR Antibiotics Overuse collaborative engagement launched in April 2016 with 54 investors with just over $1 trillion in combined assets - this has risen to 73 investors with $2.3 trillion combined AUM in active dialogue with 20 companies.

Tracing Who’s Responsible for Temperature Increase and Sea Level Rise l Union of Concerned Scientists

  • A peer-reviewed study, authored by Brenda Ekwurzel, James Boneham, Mike Dalton, Rick Heede, Roberto Mera, Myles Allen and Peter Frumhoff and published in Climatic Change, analyzed and quantified the climate change impacts of carbon dioxide and methane emissions traced to each company for two time-periods: 1880 to 2010 and 1980 to 2010.
  • This paper makes the case that the opportunities for investing in early stage clean energy technology companies have changed significantly and favorably in recent years to offer the potential for greater risk adjusted returns in the sector than ever before. The authors examine what went wrong in prior cycles of venture capital investing in this sector and how markets, teams, and strategies have changed recently to fundamentally improve the investment landscape.
Upcoming Events
Webinar: Developing Your Cleantech 2.0 Investment Strategy | Climate Solutions Collaborative, Tuesday, November 28th 1:00pm ET
  • The Climate Solutions Collaborative and CREO present a primer for foundations, endowment managers, family offices, and high net individuals to help inform the development of a cleantech investment strategy. Speakers include Rob Day, Spring Lane Capital, Shawn Lesser, Big Path Capital, Ken Allston, CALCEF and Bed Gaddy, Clean Energy Trust.
Investing for Impact Symposium l High Water Women, November 30, 2017, New York, NY

 RI Americas 2017 l Responsible Investor, December 6-7, 2017, New York, NY

  • The topics and themes for the RI Americas 2017 agenda are based around demonstrating sustainability risk and return implications for investors in the light of finding solutions to the major ESG problems of our time including: What the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations mean for corporate and investor reporting, investment strategy, and climate solutions, Disruptive initiatives like the World Benchmarking Alliance, and more.
2018 Higher Education Climate Leadership Summit l Second Nature & The Intentional Endowments Network, February 4-6, 2018, Phoenix, AZ
 
 
Sustainable, Responsible, Impact and ESG Investing
Bloomberg Brief l Sustainable Finance
  • This week's Bloomberg Brief highlights how clean energy stocks have gained in the past year, despite political headwinds; The U.S. met protests at the U.N. climate summit in Bonn; and global growth is creating an opportunity for inclusive finance.
Generation Y Takes The Moral High Ground When Investing l The Times
  • What lies behind the rise in socially responsible investing? The desire among millennials for their hard-earned cash to be put to socially useful purposes. Only a minority of those aged 45 or over want their money invested in a more ethical way, yet this is the ambition of more than a third of those between 25 and 34, according to research by Triodos, the ethical bank.
HSBC Pledges to Invest $100bn In Sustainable Finance l Consumer & Society
  • HSBC has announced plans that it will be investing $100bn on sustainable finance by the year 2020 to help combat climate change. The bank claims that it will “intensify its support for clean energy and lower-carbon technologies, as well as projects that support the implementation of the United Nation’s Sustainable Development Goals”. It has also pledged to “discontinue financing of new thermal coal mines or new customers dependent on thermal coal mining”
As Women Speak Out on Sexual Harassment, Investors Take Note l Marketplace
  • As more and more sexual harassment claims come to light against powerful men, it's been a wake-up call across our culture. Especially for for corporations and investors, according to a recent article from Barron's magazine. In this Q&A, Katherine Bell, Barron's editor-in-chief, joins Marketplace Weekend host Lizzie O'Leary to discuss how sexual harassment is playing out for the stock market, and why investors are now paying more attention to workplace culture. An edited version of their conversation follows.
How Europe Leads the Way on ESG Investing l Professional Pensions
  • Ethical and responsible investment is a much sought-after characteristic for managers of pension fund investments, and this view appears to be strongly shared across Europe. Stark differences in approach to ESG issues between Europe and North America show significant cultural markers, James Phillips writes in this article.
Will ESG Investing Become The New Normal? l Seeking Alpha
  • Even though there is a lot of talk in Europe around sustainable investments, also known as using ESG criteria, it seems the majority of investors still do not invest in sustainable products. In this regard, one needs to question why European investors are so reluctant to use sustainable investments. I was really surprised that the latest research shows that some investors still believe the inclusion of ESG criteria leads to lower portfolio performance. But even more surprising was the finding that professional investors also do not integrate ESG criteria or use such a specific approach in their portfolio management processes, since they feel they don’t understand the differences between the diverging approaches.
ESG Alive and Kicking l Pensions and Investments
  • Total ESG fund assets were about $460 billion as of Sept. 30 across 360 funds. Equity funds make up the majority of AUM, with $400 billion, followed by $52 billion in fixed-income AUM and about $8 billion in multiasset funds. There were 360 ESG funds at the end of 2016, 300 of which were equity funds and 47 that were debt focused.
  • Last week, Swiss bank UBS announced the launch of a new Global Impact Equity fund that’s focused on “long-term growth opportunities which aim to generate a positive social and environmental impact, alongside a consistent financial return”. The bank will invest in somewhere between forty to eighty publicly traded companies that have “positive and tangible impact on human well being and environment quality” — industries like clean energy, clean water and food security.
European Commission Seeks Feedback on How Institutional Investors Can Include ESG l Pensions & Investments
  • The European Commission has launched a consultation on how money managers and institutional investors could include environmental, social and governance factors into consideration when making decisions. The consultation is public, and the commission is seeking comment from beneficiaries and retirement plan participants, pension and insurance providers, insurance companies, money managers, financial advisers, service providers such as those providing indexes and research, and law firms. The consultation paper, "Public consultation on institutional investors and asset managers' duties regarding sustainability," follows up on a recommendation outlined by a High-Level Expert Group on Sustainable Finance in its interim report, published in July.

Impact Investing Can Achieve Market Rate Returns GIIN Report Says l Alpha Q

  • A new report, Global Impact Investing Network Perspectives: Evidence on the Financial Performance of Impact Investments, provides a comprehensive review of available research to date on the financial performance of impact investments. In addition to describing each study, the report synthesises findings across available research by asset class and surfaces implications for the industry. Key findings in the report include the fact that impact investors that target market-rate returns can achieve them, the firm says.
State Street Global Advisors Expands Board Diversity Guidance to Companies in Japan and Canada l Business Wire
  • State Street Global Advisors, the asset management business of State Street Corporation, today announced that the $2.67 trillion asset manager will expand its guidance on corporate board diversity to the public companies in which it invests in Japan and Canada.
Podcast: Three Views on Impact Investing l Goldman Sachs
  • Hugh Lawson, head of Goldman Sachs Asset Management’s Institutional Client Strategy and ESG and Impact investing efforts, is joined by Scott Brown, CEO of New Energy Capital, and Elizabeth McGeveran, Director of Impact Investing at the McKnight Foundation, to discuss how socially conscious investing has become mainstream and where it could be headed.

Investor Analysis Warns U.S. Falling Behind Europe on Antibiotics l Farm Animal Investment Risk and Return (FAIRR) Initiative

  • New investor analysis today highlights a growing policy gap between the US and Europe on action to reduce antibiotic use in livestock – seen as one of the biggest drivers of antibiotic resistance.  A group of 62 concerned investors have backed a new statement urging companies to act to close this policy gap. Antibiotic resistance is one of the world’s biggest public health threats, reported to kill 700,000 people each year; with overuse of antibiotics in livestock production recognised by the World Health Organization (WHO) as an important factor in its emergence.
Measuring Impact, Performance & Risk
 
How To Fix The Biggest Lie In Corporate America l Fast Company
  • Wages for the vast majority of workers have been stagnant for the past four decades, healthcare benefits and retirement security have been steadily shrinking, and most companies offer little, if any, training to the bulk of their employees. R. Paul Herman, CEO of HIP Investor, a firm that rates the human, social, and environmental impacts—and their links to profit—of more than 6,500 global companies, wants to fix that. This week, at the Sustainable Brands New Metrics conference in Philadelphia, Herman will again raise a question that he’s been asking for many years now: Why aren’t investments in employees counted as assets on the balance sheet? In fact, if you put money into upgrading your workers’ skills, that’s recorded as an expense on the income statement.
  • ESG have become critical issues in the way investors judge companies, but corporates face too many ESG measures suffering from too little standardisation. The author of this article  investigated 218 different ESG initiatives and interviewed 45 asset owners, asset managers and companies in the Netherlands, the UK and Germany. I found that reporting fatigue at company level is a substantial cost that is often overlooked. What makes matters worse is the lack of convergence of ESG ratings and rankings.
  • Arabesque announced today an agreement to work with State Street, one of the world's largest custody banks, to integrate ESG data into its service offerings through Arabesque's proprietary technology. State Street's ESG Solutions business will offer Arabesque S-Ray™, an algorithm-based technology that analyzes the sustainability performance of the world's largest listed corporations using self-learning quantitative models and data scores, as a risk management and compliance measure.
  • The UK’s corporate governance watchdog should explore ways to increase transparency in corporate reporting of company contributions towards the UN’s Sustainable Development Goals (SDGs), according to recommendations from an independent advisory group. The group’s report, Growing a culture of Social Impact Investing in the UK, details a number of recommendations—among them a call for companies to reveal how they perform against the SDGs. The report resulted from a perceived lack of progress in enabling individuals to make social impact investments.
 
 
Fiduciary Duty
 
  • The European Commission is considering whether to clarify that institutional investors’ duties include taking into account sustainability risks. The European Union’s executive has decided to start work on an impact assessment to assess whether and how such a clarification could contribute to a more efficient allocation of capital, and to sustainable and inclusive growth. The Commission launched a public consultation today to help it “gather and analyse the necessary evidence to determine possible action to improve the assessment and integration of sustainability factors in the relevant investment entities’ decision-making process”.
Shareholder Engagement
 
Gender Pay Equity: Costco Latest Retail Giant To Take Action, Following Leads Of Starbucks, Nike, And Gap - reports Arjuna Capital l 4-Traders
  • Following the examples of retailers Starbucks, Nike, and The Gap, Costco is taking public steps to be more transparent with investors about its gender pay gap. In response, Arjuna Capital announced today that it has withdrawn a shareholder resolution, co-filed with Zevin Asset Management, calling on Costco to produce a detailed report on measures to help achieve gender pay equity.
Vanguard's Sleepy Proxy Vote OKs Trustees; Human-Rights Divestment Proposal Fails l Philly.com
  • Vanguard Group shareholders voted Wednesday to approve a board of trustees for all its U.S.-based funds, while an activist shareholder group lost on a ballot question proposing that Vanguard divest from PetroChina and Sinopec, two Chinese energy firms doing business in Sudan and allegedly engaging in genocide. The votes came at a special shareholders meeting in Scottsdale, Ariz., the company said Wednesday afternoon.
Green Bonds
 
Money Managers and Greenwashing l Bloomberg Gadfly
  • As ESG issues become embedded in the architecture of money management, the custodians of wealth are discharging the "E" part of their obligations by buying green bonds. Sales of the securities, which promise to fund environmentally sustainable practices, are booming. Moody's Investors Service reckons issuance is likely to pass $120 billion in 2017 after sales in the first nine months of the year beat 2016's total of $93 billion. Returns on the bonds have outpaced those delivered by conventional investment-grade debt in the past year.
Climate Risk, Science & Regulation
There's One Unspeakable Fix That Would Help Pay for the GOP's Tax Cuts l Bloomberg
  • The White House and Congress may need revenue to pay for their tax cuts. Ex-Goldman risk manager and current Crane Institute of Sustainability Board Member Robert Litterman has the perfect solution outlined in this article, a carbon tax.
Keystone Pipeline Spills 210,000 Gallons of Oil on Eve of Permitting Decision for TransCanada l Washington Post 
  • The Keystone pipeline running from Canada across the Great Plains leaked Thursday morning, spilling about 5,000 barrels of oil — or 210,000 gallons — southeast of the small town of Amherst in northeast South Dakota. The spill comes just days before a crucial decision next Monday by the Public Service Commission in Nebraska over whether to grant a permit for a new, long-delayed sister pipeline called Keystone XL, which has been mired in controversy for several years. Both are owned by Calgary-based TransCanada.
  • More resources need to be dedicated to sustainable agriculture if the goals of the Paris Climate Change Agreement are to be met, according to sector leaders and experts speaking at the UN Climate Change Conference. During a session on Friday, a key takeaway was that investing in agricultural climate action, especially in terms of small-scale farmers and those in rural areas, will unlock much greater potential to curb emissions. The livestock sector, for example, could readily reduce emissions by about 30% with the adoption of best practices, according to the UN Food and Agriculture Organization.
A Shadow Delegation Stalks the Official U.S. Team at Climate Talks l The New York Times
  • The dueling American delegations in Bonn mirror a larger division within the United States over climate change. President Trump’s decision in June to withdraw from the Paris agreement was popular with his supporters. On Thursday, the State Department and the Interior Department sent high-level political officials to address a conference in Texas sponsored by the Heartland Institute, which rejects the scientific consensus that climate change is occurring and primarily caused by human emissions. Scott Pruitt, the administrator of the Environmental Protection Agency, sent a video message of support.
Koch-Funded Group Prods Trump’s EPA to Say Climate Change Not a Risk l Bloomberg
  • A lobbying group funded by Koch Industries Inc. and coal giant Peabody Energy Corp.is moving to prod the Environmental Protection Agency to rescind its earlier determination that climate change is a risk to human health and welfare. The American Legislative Exchange Council will consider a resolution that would be offered to state legislatures to adopt as a way of pressuring the Trump administration to uproot his predecessor’s efforts to address climate change, attacking the very science that shows temperatures rising and storms increasing.
General Endowment News
 
Endowment Tax Remains in Play, But Graduate Tax is Off the Table in Senate Plan l The Washington Post
  • Senate Republicans late Thursday released a tax overhaul plan that provides a mix of relief and worry for higher education stakeholders. The GOP senators are backing a Republican House proposal to impose a 1.4 percent excise tax on investment income at private schools with endowments worth at least $250,000 per full-time student. Analysts say the tax would affect some 60 to 70 private schools, from big names like Harvard University to lesser known liberal arts institutions like Agnes Scott College.
It’s Time to Clean Up Public and Non-Profit Endowments l LA Progressive
  • In this opinion piece, the author describes how private equity firms, hedge funds, off-shore investments, tax avoidance, and blocker corporations are not terms and enterprises that the public equates with public and non-profit endowment activities, and how higher education donors need to start asking questions about where their money is invested.
Their View: Taxing Nonprofit Endowments Taxes Our Nation’s Future l Times Leader
  • The tax bill recently introduced by Congress – House Resolution 1 or HR1 – aims to reduce tax rates and to close tax loopholes. As a nation, we often speak of expanding opportunity for the middle class. Current tax law has a number of provisions aimed at doing just that by supporting access to higher education. It is my hope the new bill will preserve and enhance those existing provisions, especially as they apply to endowments and the deductibility of charitable contributions. Higher education is unlike any other venture as it purposely operates at a loss. When we add tuition, fees and room and board to state and federal assistance grants and loans, our revenue typically does not equal our cost of doing business. Donors who give back to their communities by supporting future students most often bridge the resulting deficit. Many of those donors choose to fund scholarships that subsidize students’ education decades after the initial donation. In these instances, donors may never meet many of the beneficiaries of their long-lasting generosity. Universities only spend a given portion of the scholarship earnings, thereby preserving the initial investment or corpus, permanently.
Elite Universities Invest Endowments Via Tax Havens l University World News
  • Elite universities in the United States and the United Kingdom have been investing endowment funds offshore in order to pay little or no tax, according to details revealed in the so-called Paradise Papers, a series of leaked documents from Appleby, a legal firm based in Bermuda.  The Paradise Papers is the term for a global investigation into the offshore activities of some of the world’s most powerful people, companies and institutions. Some 13.4 million leaked files were obtained by the German newspaper Süddeutsche Zeitung and explored by the International Consortium of Investigative Journalists and 95 media partners.
Funds get Needed Bounce But Cautioned to Stay Nimble l Pensions & Investments
  • Strong equity markets and smart asset allocation helped U.S. endowments recover from what was a dismal fiscal 2016. But industry observers noted investment teams must remain vigilant if they want to maintain those strong returns. All 43 funds tracked by Pensions & Investments had positive returns for the fiscal year ended June 30, with all but two — Harvard University and University of Minnesota — posting double digits. "It was a good year. They've had a couple of struggling years, so they needed a good year," said Heather Myers, a partner, non-profit practice leader at Aon Hewitt Investment Consulting, Boston.
Universities to U.S. Senate: Endowment Tax Idea 'Fundamentally Flawed' l U.S. News
  • Tax legislation working its way through the U.S. Senate would put a new levy on endowments held by large private universities and colleges, a proposal that more than three dozen higher-education lobbying groups on Tuesday called "fundamentally flawed." The groups, led by the American Council on Education, wrote that "creating a new and unprecedented tax on endowments" would redirect large amounts of money to the federal government and "away from providing scholarships to our students and supporting research and education."
NEPC: Foundations and Endowments Upping Private Equity Despite Lower Expected Returns l Pensions and Investments
  • Foundations and endowments are increasing private equity allocations despite the expectations of lower returns in the future, according to the latest quarterly survey from investment consultant NEPC. In the survey conducted in October of its endowment and foundation clients, NEPC said 51% of respondents plan to increase their allocations to private equity over the next 12 months, while 39% plan to maintain those allocations and 10% plan to decrease. Almost 44% of respondents, however, expect private equity to generate lower returns going forward, while 39% believe they will be in line with past returns and 17% believe returns will get higher.
Why North Carolina Central University May Shake Up Its Investment Strategy l The Herald Sun
  • Like anyone with a nest egg to protect, N.C. Central University’s trustees and chancellor are wondering how long Wall Street’s bull market can continue to run. And they’re worried enough about the potential answer that, on a consultant’s advice, they appear likely to shuffle the university’ $34.1 million endowment to put more money with a UNC-linked investment manager that by its own admission “tends to play defense better than offense.”
  • In Maryland, the USM Foundation manages endowments, and this type of an endowment is called a quasi-endowment. Quasi-endowments are “accounts invested as an endowment, but funds are earmarked for a specific use.” We’ve created similar endowments for campus capital projects and to facilitate university development efforts, why not tuition? The initial seed money would come from three primary sources; an initial transfer from the USM fund balance, private funds raised from the 12 USM intuitions, and the general fund of the state of Maryland. At the beginning the endowment would support Pell Grant eligible transfer students from Maryland community colleges to a four-year USM institution. As the fund grows we would seek to cover all Pell eligible students in the USM. Eventually every Marylander admitted to a USM institution could attend tuition-free. Under this plan we would be well on our way to implementing a system in which students and families would finally be free from crushing student loan debt that has long handicapped the financial and professional prospects of too many Marylanders.
Fossil Fuel Divestment
 
Medibank to Dump Holdings in Fossil Fuels Over Climate Change Health Fears l The Sydney Morning Herald
  • Medibank, one of Australia's biggest health insurers, has announced it will dump its holdings in fossil fuel companies amid concern over the health effects of climate change. In a statement to the Australian Stock Exchange on Monday morning, Medibank said it would transition to low-carbon investments in its international portfolio within the next year, to reflect the global transition to clean energy.
  • California has seen a slew of calls for divestment this year, including against the DAPL, companies that could help build President Donald Trump’s border wall, and businesses with ties to Turkey. This week, State Treasurer John Chiang has proposed CalPERS and CalSTRS divest from companies that sell firearms used in the Las Vegas mass shooting, and 12 Democratic members of Congress from California called on the funds to divest from Trump Organization properties. But the most ardent opponent of these divestment efforts is often the funds themselves. “Taking us out of a particular company has zero impact to that company,” says CalSTRS chief investment officer Chris Ailman. “Somebody else buys the shares. It’s literally like a boycott of two out of thousands.” Even if divestment doesn’t immediately hit companies in the pocket book, it creates public stigma that can lead other shareholders and then even governments to pull out, too. The common example is when divestments and mass boycotts in the 1970s pressured South Africa to end apartheid. Welch says it’s hard to measure the effect of that kind of pressure, but divestment in South Africa did not put financial stress on the country.
  • Grinnell Student Resistance held a Divest Day of Action on Monday, Nov. 6, which inspired conversation about the controversial issue of divestment on campus through a variety of venues — from rallies to talks in the D-Hall to, quite notably, art. Divest Art took place in the Spencer Grill, and transformed the space into a hub of energy, information and action. The movement decorated the Grill’s walls and windows with banners and posters, including the “Wall,” a large poster covered in notes and sketches related to divestment and the environment. Tables were converted into stations to make signs for the rally later in the day, and to decorate binders for the trustees. Student band TGI Funkies also played, first building energy and drawing attention with their music and eventually transitioning to music-backed divestment chants. Essentially, it was a space for conversation, action and community to manifest through the shared medium of art.
Why the Southwark Council Pension Fund is Divesting £1.2bn Out of Fossil Fuels l The Guardian
  • Data released on 9 November shows that the UK’s local authorities invest more than £16bn into companies that extract oil, gas and coal. In December 2016,following more than a year of consultation, deliberation and work with community groups, Southwark council pension fund announced a decision to divest the £1.2bn fund from fossil fuels. This was a decision based not just on political and ethical concerns, but primarily on the belief that climate change and significant investments in fossil fuels present a long term financial risk to the fund. The action to reduce the carbon exposure of the fund is wholly consistent with fiduciary duties as pension fund trustees.
Oxbridge Must End Dirty Investments – Both Offshore and Oil l The Guardian
  • Students at Oxford and Cambridge are taught about the dangers of economic inequality, climate change, and the limits of burnable carbon. But the Paradise Papers have revealed that behind the scenes, the universities are investing tens of millions in projects that systematically exacerbate inequality and climate disaster. The scandal is not simply tax avoidance. It is the hypocrisy of universities that espouse their commitment to sustainability while financing environmental destruction offshore.
Norway’s Wealth Fund Considers Divesting From Oil Shares l The New York Times
  • Norway’s $1 trillion sovereign wealth fund is considering a divestment of holdings in international petroleum companies, a sign that even Europe’s dominant producer does not have full confidence in oil’s future. The recommendation on Thursday by the Norwegian Central Bank, which manages the fund, is potentially the biggest advance yet for a global fossil-fuel divestment campaign that has been promoted on college campuses and by environmental activists.
Divestment Protesters Keep the Pressure on With March Through Cambridge University l The Varsity
  • Cambridge Zero Carbon Society staged the second protest in a week against the University’s continued investment in fossil fuels, as academics called for discussion of the University’s investments.
  • In June 17, 1985, recent alum Perry Chang wrote a handwritten note to then-president of the College David Fraser. The letter enclosed, written by Chang and a few other students who had graduated in 1985, was a call for divestment from companies doing business in South Africa under Apartheid.  many ways, this process can be seen as analogous to the current movement for divestment from fossil fuels: in April of 1985, before the Committee came to a decision, the College held a referendum in which 79% of the students who voted called for total divestment to replace the Sullivan principles. Mountain Justice held a similar referendum last year. Then and now, divestment is no easy process — hoops must be jumped through; drawbacks must be considered. Even so, morality in investment has been a question the College has been struggling with for decades and will, I predict, for years to come.