Assess The Current Portfolio

Once the institution’s mission has been integrated into its investment policy statement to guide the process of aligning the endowment portfolio with the mission, it is helpful to assess the current portfolio in relation to that policy. The assessment can take place at the underlying security level (particularly when avoidance of certain products or services is part of the policy) or at the manager level (when consideration of environmental, social and governance risks and opportunities is the focus).  Institutions may also choose to do both.


1. Assess the Alignment of Your Current Portfolio’s Holdings

Whether endowments have an internal CIO, an investment consultant, or an OCIO, endowment management offices and their advisors seek to have as much transparency as possible into the underlying holdings so that they can better understand the risks in the portfolio. Typically this is fairly straightforward for public equity and public bond holdings, even if held through commingled fund structures (mutual funds, ETFs, commingled trusts etc.).

Some options for security level analysis:

  • Ask your consultants/OCIOs to analyze your portfolio for percentage exposure to specific stocks, industries, or revenue streams
  • Engage a third party provider to analyze your public equity and fixed income portfolios. These ESG research firms provide data on company's revenue streams, history of controversies and, to some extent, positive impact across a number of E, S and G issues. Providers include: Sustainalytics, MSCI ESG Analytics, HIP Impact Investor Rating and Portal, and Bloomberg.
  • To help explain your portfolio's impact to all of your stakeholders, Your Stake can help by translating the numbers to impact everyone can understand.
  • Use a screening tool from experts on social and environmental impact. As You Sow, a nonprofit that promotes environmental and social corporate responsibility, has created a publicly available Mutual Fund Screening Tool to analyze for exposure to fossil fuels, weapons, deforestation, the prison industrial complex and tobacco. In addition, they provide information on gender equality.  The American Friends Service Committee also has a screening tool for companies involved in human rights violations such as mass incarceration, immigrant detention and surveillance, military occupation, or the border industry.
  • For mutual funds, endowments can utilize The Morningstar Sustainability Rating which bases its ratings on an asset weighted analysis of each of the companies held in a fund at a particular point in time.  
  • For less transparent alternative investments such as hedge funds, managers will often provide transparency into sector exposures and top holdings. Such managers will also often respond to requests for exposures to specific holdings or industries.



2. Assess the Alignment of Your Investment Managers’ Policies and Practices

In addition to fulfilling their fiduciary duty, endowment management professionals can play a key role in urging for greater diversity among its managers and spurring the development of ESG analysis skills among asset managers by integrating questions about how their managers perceive and manage environmental, social and governance factors as part of their process.

Here are some resources from which endowment professionals can cull questions as part of their manager due diligence process.



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