Assess The Current Portfolio

Once the institution’s mission has been integrated into its investment policy statement and guidelines have been established to guide the process of aligning the endowment portfolio with the mission, it is helpful to assess the current portfolio in relation to those guidelines.  The assessment can take place at the underlying security level (particularly when avoidance of certain products or services is part of the implementation plan) 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.


At the security level

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 in the portfolio. 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 consultants/OCIOs to analyze 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: SustainalyticsMSCI ESG Analytics HIP Impact Investor Rating and Portal and Bloomberg.
  • As You Sow, a nonprofit that promotes environmental and social corporate responsibility has created a publicly available Mutual Fund Screening Tool for fossil fuel, weapon, deforestation, and tobacco free funds.

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.


At the manager level

In addition to fulfilling their fiduciary duty, endowment management professionals can play a key role in 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.

At PRI's "Investor Tools" tab, there are diligence tools available for each of several asset classes including listed equity, fixed income, hedge funds and private capital.

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

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.  


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