Two Years After Sustainable Investing Act, IEN Study Shows the U of I System Flagship Sustainable Investment Returned 47% on Annualized Basis, Outperforming Benchmarks.
CHAMPAIGN, IL – MARCH 2, 2022 – U.S. college campuses are at the forefront of a major investing sea change, and the University of Illinois (U of I) System is a leader in exemplifying how sustainable endowment investments can outperform traditional ones, according to a new study by the Intentional Endowments Network (IEN). The study details how two years after establishing a program to incorporate environmental, social and governance (ESG) factors into investment decisions, an initial allocation of $160 million has grown to $252 million, returning 47% on an annualized basis and outperforming its benchmark (Russell 3000) by 1.2%.
In 2020, U of I System President Tim Killeen announced the Empowering Excellence: Financial Stewardship through Responsible Investing program. The program was formed based on the U of I System’s Guiding Principles and the Illinois Sustainable Investing Act after engaging with students, faculty, alumni and other key stakeholders such as IEN.
“The University of Illinois System is a model colleges and universities can consider as pressure from students, faculty and alumni mounts to clean up endowment portfolios,” said Georges Dyer, executive director of the Intentional Endowments Network. “Not only is it the right thing to do for people and the planet, but the U of I System shows that it makes good financial sense as well. It’s my hope that other institutions follow Illinois’ lead and begin to create sustainable value for their endowments and future generations.”
The University of Illinois System’s program includes six core initiatives across asset classes:
seeding an ESG Insights strategy managed by BlackRock, active ownership, sustainable farming practices, private market impact funds, industry advocacy and student engagement. The program also builds on the U of I System’s long-standing commitment to increase allocations to diverse-owned and -led investment management firms. The new IEN report takes a closer look at each of the core initiatives, concluding that the program “provides a compelling approach for endowment leadership on mission aligned investing.”
“Our process has shown that there are opportunities to move toward mission-aligned investing across the portfolio in ways that protect and enhance financial returns,” said Geri Melchiorre, senior director of investments for the University of Illinois System. “We are pleased to share our progress to date in this new report from IEN as we continue to engage with our students and the broader community on these topics.”
The U of I System’s process provides another example of the many ways endowments can follow the steps laid out in IEN’s Intentionally Designed Endowment Roadmap to educate and learn, build consensus, develop policies, implement those policies and communicate to stakeholders. The system’s process also provides one model of how endowments can design sustainable investing strategies to protect capital, enhance returns, and contribute to a more healthy, just and sustainable economy.
IEN’s new publication comes on the heels of two other annual reports from endowments on their sustainable-investing progress. Arizona State University published its inaugural Sustainable, Responsible, and Impact Investing Report, highlighting ASU’s commitment to a net-zero portfolio, integrating justice, diversity, equity and inclusion (JEDI) considerations into the investment process, and progress on shareholder engagement on ESG issues. Separately, Harvard Management Company released its second annual Climate Report, providing updates on its progress toward meeting a net-zero portfolio goal by 2050.
“No two endowments will approach their sustainable investing journey in exactly the same way,” added IEN’s Dyer. “The U of I System’s program shows how this can be done working through its investment managers by seeding the BlackRock strategy and leveraging unique attributes of its asset pool by advancing sustainable farmland practices. Sharing the journey so far is a valuable contribution to IEN’s peer-learning network.”
The Intentional Endowments Network is a peer-learning network of colleges, universities and other mission-driven institutional investors working together to achieve their risk and return objectives through investment actions that create a thriving, sustainable economy. IEN has more than 165 network members including endowments, asset managers, investment consultants, nonprofit partners and individuals. www.intentionalendowments.org
The University of Illinois System is a world leader in research and discovery, and the largest educational institution in the state with more than 94,000 students, about 26,000 full-time equivalent faculty and staff, and universities in Urbana-Champaign, Chicago and Springfield. The U of I System awards more than 24,000 undergraduate, graduate and professional degrees annually.
CONTACT: Alex Frank, (703) 276-3264 and [email protected].