Designing an Endowment Portfolio for a Sustainable Society
April 8, 2014
Jack Byrne, Middlebury’s Director of the Office of Sustainability Integration and Patrick Norton, Vice President of Finance attended the Intentionally Designed Endowments Conference in Cambridge, MA on April 3 and 4, 2014. About 130 people from higher education institutions, foundations, NGO’s and investment management firms attended. The discussion revolved around exploring ways that these communities can work together to advance investing for a more sustainable society.
Well over a third of the attendees were from the investment community including Investure, the firm that manages Middlebury’s endowment (and those of eleven other members of the investing consortium Middlebury is part of). If there was a clear message from that sector it’s that investments that are guided by principles of environmental, social and governance (ESG) performance do just as well as those without, especially when one is invested for the long term. There were plenty of long-term comparisons of performance proving the point. The harder to answer question is whether a voluntary shift to ESG related investing will make a significant difference in reducing climate and other risks that threaten to destabilize society.
Much of the discussion touched on the risks of climate change and how ESG investments could help reduce this risk – with an emphasis on putting the right incentives in place since voluntary efforts, voluntary divestment from fossil fuels for example, are not going to do it. Pricing the costs of carbon emissions correctly, i.e., a science-based approach, would provide the right incentives for quickly addressing the problem through markets and investments. Though it’s hard to imagine that happening given the current political situation in the US, it’s a solution worth pushing because of its systemic impacts.
Several of the higher education institutions present at the conference, like Middlebury, have been engaged in serious consideration and action around the questions of divestment from fossil fuels and/or socially responsible investing. They located themselves on a spectrum from “barely on the radar” to “ESG investment policy with track record” with most falling on the lower end of the spectrum. Middlebury falls more right of center at “developing an ESG investment policy.” Patrick Norton shared his perspective as Vice President for Finance and point person on the evolution of the student led effort to divest and to increase ESG related investments within the endowment. He noted that Middlebury students have been determined and smart about the way they have pushed the issue and he expects this will be an evolving conversation for the long run.
Other higher education institutions who shared their stories about dealing with this issue seemed to all have a similar pathway of “pressure, learning and dialogue, and change” as one of the conference co-chairs remarked. That’s been the case for Middlebury as well as evidenced by President Liebowitz’s recent announcement that the College will direct $25 million of its endowment into investments that generate long-term social, environmental, and economic value including “investments focused on sustainability business such as clean energy, water, climate science, and green building projects.” He also announced that $150,000 of endowment funds will be placed under the management of a subgroup of the student-run Socially Responsible Investment Club to invest in companies that meet certain environmental, social, and governance criteria.
Attendees ended the conference in small groups developing next steps for what they will do to try to advance the ESG investing of their endowments. These were shared among the group as a whole and people had the opportunity to “sign-up” where they wanted to be of help for a particular action. The conference was sponsored by Hampshire College and Second Nature.