IEN’s Roundtable at Total Impact Philadelphia Offers a Framework for Creating Intentionally Designed Endowments

The recent Total Impact Philadelphia Conference brought together investors, educators, and community and economic development leaders. The event is part of a series of events produced by Good Capital Project which explores different ways in which asset owners and managers can drive regional impact through their investments.

The unique characteristics of Philadelphia were an important setting to the challenges brought up throughout the various workshops and panels—the city is the 6th largest city but has the nation’s highest poverty rate. While construction and development projects are booming in Philadelphia, many residents are affected by wage stagnation, lack of affordable housing, high rates of poverty and addiction. On the flip side,  Philadelphia also has a legacy of responsible investing and business going back to the Quaker prohibition of slavery and divestment of enterprises profiting off of the system of slavery, it is home of the B-Lab, and the first city to give tax breaks to B Corporations, and Governor Tom Wolf recently announced that Pennsylvania will join the United States Climate Alliance.

Total Impact Philadelphia panels throughout the first day also included a conversation about the state of ESG and impact investing led by Jackie Vanderbrug of Bank of America, Abigail Noble of the ImPact, Pamela Jacobs of Spouting Rock Financial Partners, and Diederik Timmer of Sustainalytics, and a thought-provoking fireside chat about inclusive entrepreneurship with Brava Investments CEO Nathalie Molina Nino.

Conference attendees spent the final hours of the afternoon viewing the student finalists in the Total Impact Portfolio Challenge. The competition started with 26 teams of graduate students from 19 schools taking on the challenge of putting together an impact investment strategy for either a single-family office with $100 million, or a family foundation with $25 million. A member of the Crane Institute of Sustainability (IEN's nonprofit home) board of directors, Glen Macdonald, was one of the expert judges that evaluated the teams, and joined a panel at the conference to share his experience on "Impact advisors: going beyond risk and returns." The finalist student teams representing Boston University, Columbia University, Fordham University, University of Vermont and Yale University, offered innovative and diverging approaches to investing with an intended environmental or social impact.

Bill Jarvis introduces the fiduciary case and historical precedent of ESG investing

IEN’s Intentionally Designed Endowment Roundtable was held during the second day of the Total Impact Philadelphia conference and brought together colleges and university leaders from the Philadelphia region and beyond, in addition to investment firms offering expertise in endowment management.  William “Bill” Jarvis, a Managing Director at US Trust, kicked off with an introduction to ESG investing and a historical perspective on fiduciary duty and endowment management leading to an engaging discussion of what fiduciary duty looks like in the 21st century. Mr. Jarvis pointed out the changing nature of fiduciary duty, reminding the audience that a hundred years ago fiduciary regulation would have caused you to avoid investments in the stock market.  In today’s world, fiduciary duty is undergoing another shift, taking on a new meaning in light of what intergenerational equity could mean in the face of growing concerns over how climate and rapid technological advancements could affect the economy. Mr. Jarvis concluded by saying that the educational phase for ESG is coming to a close, and the financial industry is transitioning into the implementation stage, which means that asset managers in particular need to be intellectually prepared for the next generation of investing.

Roundtable participants learn about IEN’s distinctive framework for intentionally designed endowments

Following the discussion of fiduciary duty, participants shared the challenges and opportunities of aligning endowment investments with mission at their own institution. They placed themselves on a spectrum in terms of progress along IEN’s Roadmap to Intentionally Designed Endowments.  The IEN Roadmap was recently released as a distinctive resource for the process of intentionally designing and allocating endowment assets. The roadmap is guided by seven core milestones along the journey of endowment management, which are informed by IEN’s extensive work with numerous endowed institutions across the United States. It is an iterative and fluid document where stakeholders can provide feedback and contribute new supporting resources and opportunities for implementation.

Following a discussion of where participants would place their institutions on the roadmap and how that fit into IEN’s experience with their peers, endowment professionals from the University of Sherbrooke and North Carolina State University shared their stories. Each of their presentations was followed by small group discussion.  

Serge Germain who is General Director of the Pension Plan of l’Université de Sherbrooke, reported that direction from the top administration helped catalyze a change in investments toward greater focus on integration of Environmental, Social and Governance (ESG) factors in the portfolio. The University of Sherbrooke has taken a holistic approach to the concept of sustainability which is deeply tied to its mission.  Paying attention to ESG factors was not totally new to the University since the pension plan had been integrating these factors into its proxy voting practice since 2006.  In November 2018,  the University became a signatory to PRI (Principles for Responsible Investing) and Serge reported that he found it to be a good source of resources along with the Intentional Endowments Network for learning about ESG Integration.  The equity strategies in the Foundation and Pension portfolios are fundamentally driven based on bottom up stock picking strategy and ESG risk analysis is a natural extension of that strategy.  l’Université de Sherbrooke is working to incorporate questions about ESG investment practices into its due diligence of its managers.

Libby George who is Director of Investments at North Carolina State University spoke about a $50 million responsible investment fund which resulted from a gift from the Park Foundation.  The Responsible Investment fund has been outperforming the main endowment over its short history. Libby addressed the development of an ESG policy, the changing asset allocation of the fund, the performance history and the challenges of measuring impact for the fund. Asset allocation was initially simple given that the University received the gift in installments.  The fund began with 2 external managers and has grown to 11 as installments of the gift have been received. Since the last donation was received in June 2018, the asset allocation more closely resembles that of the larger North Carolina State Foundation with the exception of private equity where Libby has just begun to make investments.

IEN Principal Alice DonnaSelva and Libby George facilitate an interactive dialogue about how NC State’s mission-aligned endowment gained positive financial returns.

The meeting concluded with participants writing a letter or text or email to themselves about the next steps they would take at their institutions and a group share about these steps so that participants had a collective set of action steps and ideas for advancing sustainable investing conversations and strategies at their respective institutions including:

  • Educate trustees about ESG alignment and investment opportunities to overcome skepticism.
  • Get more involved in the conversations around place-based impact investing as a potential enrichment to either an endowment fund, or institutional cash holdings
  • Engage the board in conversation about mission alignment since the college promotes social inclusion
  • Rethink governance structure
  • Influence the investment committee to consider diversity
  • Recruit millennial alums to the board

As a follow-up to the roundtable on intentional endowment design, IEN’s next planned event is a Community Impact Investing Roundtable at the Center for Responsible Business at Berkeley Haas School of Business on September 6th, 2019. The event will provide more opportunities for meaningful and interactive dialogue about why and how some endowments have benefited and produced positive impact from community investing strategies. Register and learn more here.

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