Saving the planet with a sustainable investment strategy
Chief Investment Officer Jeff Mindlin shares five ways the ASU Foundation for A New American University is working toward building a more sustainable and resilient future through socially responsible investing.
Arizona State University is a leader in the global movement to fight climate change and address the world’s most pressing sustainability challenges. The university demonstrates its commitment not only through its pioneering sustainability education and research but also its operations and practices.
At the ASU Foundation, we’re trying to align with the university’s climate-positive goal not to have the least impact possible, but rather the greatest net positive impact possible through our sustainable investing efforts. This includes supporting the education of the next generation of sustainability leaders who will drive transformational change for the environment.
In light of the 50th anniversary of Earth Day, I’ve listed five ways the ASU Foundation is working toward building a more sustainable future through our socially responsible investing practices.
№1: Abiding by our fiduciary responsibility
Our investment committee and staff have a fiduciary responsibility to act in the best interest of the ASU Foundation’s beneficiaries. We also must consider the environmental, social and governance (ESG) impacts of our investment decisions.
We align capital in a manner consistent with the mission of ASU, while advancing globally recognized sustainability goals and accomplishing financial objectives.
Through our strategy, we invest in ways that promote the economic, social, cultural and overall health of the communities we serve.
As stewards, we invest prudently to drive superior, risk-adjusted returns, diversify the portfolio and use a sustainability lens at every point in the investment decision-making process. Our strategy is not predicated on where we don’t invest, but rather where we choose to allocate capital — to advance a sustainable, equitable future.
№2: Implementing sustainable investing strategies
We started out by creating an ESG subcommittee to elevate analysis and recommendations in the portfolio with both faculty and student representation. We use a proprietary scorecard to evaluate corporate sustainability metrics and carbon exposures as “you manage what is measured.” This helps ensure we’re investing in sustainable businesses and fully understand what we own in order to plan an appropriate course.
We currently have no direct exposure to thermal coal companies and expect to have no direct exposure to tar sands by the end of the next fiscal year. Over 40% of our portfolio is overseen by managers with a high degree of ESG integration in their processes, meaning that a non-financial environmental, social and governance lens is explicitly utilized in security selection and/or corporate engagement.
In 2019, we established a $100 million Sustainable Responsible Impact Pool to proactively deploy money to dedicated sustainable strategies. This pool helps us evaluate the efficacy of innovative sustainability approaches while giving donors a dedicated ESG option. We also incorporated sustainable investing beliefs into our investment policy statement.
№3: Partnering with a global leader in investment management
We partnered with BlackRock Inc., which serves as our outsourced chief investment officer. We chose BlackRock because it is a global leader in investment management, risk management and advisory services.
We align with BlackRock’s philosophy on promoting sustainability, mitigating climate change and being more transparent in investment decisions. So, we tapped into its expertise to support the development and implementation of our investment strategy for the new Sustainable Responsible Impact Pool.
We’re also working with BlackRock to analyze our public equity portfolio with ESG data. In the future, we hope to leverage BlackRock’s analytic capabilities to develop ESG metrics for more targeted impact measurement in our private equity, fixed income and hedge fund portfolios.
№4: Educating the next generation on the importance of sustainable investing
In collaboration with the Julie Ann Wrigley School of Sustainability and W. P. Carey School of Business, we launched a sustainability-geared Student Investment Management Fund in 2018 with $800,000 from the endowment.
In the course, students learn about the spectrum of sustainable investing by designing a strategy incorporating exclusion, ESG integration and/or impact techniques while also developing strategies for shareholder engagement with a significant amount of real capital to deploy.
For fiscal year 2020, the sustainable student-managed fund outperformed the other student funds as well as its benchmark, which is similar to the outperformance trend in other sustainable investment strategies lately.
While many students don’t have a background in finance or sustainability, we try to instill the mindset that sustainability is important from an investing perspective and a socioeconomic standpoint. We hope the concepts learned in the course, coupled with hands-on experience managing an investment fund, will stay with the students as they pursue careers in corporate social responsibility or sustainability.
№5: Serving as a transformational catalyst with transparency and leadership in sustainable investing
We were a founding member of the Intentional Endowments Network. This is a peer-learning network of colleges, universities and other mission-driven institutional investors who work together to achieve risk and return objectives through investment actions that create a thriving, sustainable economy.
In partnership with BlackRock, we’ll continue our role as a leader in sustainable investing. We’re developing a robust measurement framework and innovative strategies to show the correlation between non-financial ESG factors and investment performance.
We expect the integration of non-financial ESG factors into the investment process will result in an underweight or complete divestment from certain segments of the portfolio.
These precedents will pave the way for other universities to assume sustainable investing and lead the way to a thriving and resilient future.
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About ASU Foundation
The foundation, a subsidiary of ASU Enterprise Partners, is a private, nonprofit organization that raises and invests private contributions to Arizona State University. It is one of Arizona’s oldest nonprofits.
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