Guidelines on Responsible Investing
Status: Adopted by Investment Committee on May 10, 2019
Introduction
The purpose of these guidelines is to define the approach taken by the Investment Committee, on behalf of the Board of Trustees and the University, to responsible investing. Specifically, these guidelines provide an overview of how the Investment Committee should seek to integrate environmental, social and corporate governance (“ESG”) factors into its investments, and to engage with external investment managers.
The Board of Trustees and Investment Committee have a fiduciary obligation to oversee the investment of the University’s endowment assets and to maximize the financial return on those resources, taking into account the amount of risk appropriate for the University. The Investment Committee recognizes that ESG factors, in addition to many other factors, may have an impact on investment performance over the long term and, as a result, believes such factors should be considered in its investment process.
What is ESG?
ESG is used to describe environmental, social and corporate governance factors that, when material, may have the potential to impact the value of investments. ESG factors include, but are not limited to, such issues as energy consumption, greenhouse gas emissions, climate change, resource scarcity, water use, waste management, health and safety, employee productivity, diversity and non-discrimination, supply chain risk management, human rights (including respect for worker rights), and effective board oversight.
The degree to which ESG factors are relevant and material to an investment depends on the company or asset, the industry in which it operates and the type of investment strategy. For instance, ESG factors may have a direct impact on a company's profitability through increased regulation, such as changes to environmental laws or governance codes, which can lead to rising operating costs, or an indirect impact by affecting a company's long-term performance, such as its ability to attract talented employees, retain customer loyalty and protect its reputation and brand.
Engaged Ownership
The University’s endowment is managed by its outsourced Chief Investment Officer (“CIO”), one of the primary responsibilities of which is to select investment managers to manage portions of its endowment. The CIO and the Investment Committee leave the specific security selection decisions to these managers hired to invest portions of the University’s endowment.
Through the CIO, the Investment Committee engages with its investment managers, including with respect to how such managers consider ESG factors in their investment processes. The CIO seeks to integrate and manage ESG issues throughout the endowment’s s lifecycle with each investment manager. The CIO incorporates ESG factors in its due diligence framework to assess prospective investment managers. After making investments with external managers, the CIO continuously monitors identified ESG risks and maintains dialogue with its managers to ensure effective oversight.
The Investment Committee will work with the CIO to provide an ESG-specific investment vehicle for donors to the University’s endowment who want to direct their contributions to a fund focused on such investments. The Investment Committee will provide the University’s Development office with information regarding the ESG-specific investment alternative(s) that can be provided to prospective donors.
Advocacy and Collaboration
The Investment Committee, on behalf of the University and the Board of Trustees, will endeavor to remain up to date on responsible investing issues and the impact of ESG factors on the University’s endowment. The Investment Committee, both directly and through the CIO, will liaise with other institutional investors and industry associations to discuss such issues.