INVESTING WITH IMPACT: NAVIGATING THE RESPONSIBLE INVESTING LANDSCAPE

Transcription

1 April 26, 2018 INVESTING WITH IMPACT: NAVIGATING THE RESPONSIBLE INVESTING LANDSCAPE 1100 Superior Avenue East Suite 700 Cleveland, Ohio

2 QUICK POLL 1. Asked about Responsible Investing (SRI, ESG, and/or Impact Investing) in the last year? 2. Your institution currently has or has had a student or faculty-led divestment movement? 3. Your institution currently incorporates Responsible Investing into the investment program? 4. If your program is not currently incorporating Responsible Investing, are you considering it? Why hasn t your institution considered it? 1. Not of interest to institution / Board / Committee 2. Complexity 3. Investment Results 4. Fees 2

3 AT SOME POINT, YOU WILL ANSWER YES In 1995, there was $639 billion invested according to Responsible Investing principles That number has grown by 1300% (a 14-fold increase) $8.72 trillion in 2016 Responsible Investing in the United States Source: US SIF. 3

4 AGENDA & KEY TAKEAWAYS Agenda Key Takeaway 1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing that includes exclusionary screens, ESG integration, and Impact Investing 2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will continue to grow from key stakeholders: board, donors, faculty, students, millennials, etc. 3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and stakeholder considerations 4. Incorporating Responsible Investing 4. Organizations need to have a clear process to assess, implement, and evaluate a Responsible Investing program 4

5 HARTLAND OVERVIEW $20+ Billion Assets Under Advisement 120+ Number of Institutional Clients: Not-for-Profits, Hospitals, and Retirement Funds 500+ Number of Private Clients: Families, Individuals, and Related Accounts 36 Number of states in which we have clients 72 Number of Employees 28 Number of Shareholders 28 Number of Employees with CFA, CPA, and CFP Designations 29 Number of Boards on which we Volunteer Independence Expertise Results Employee owned Single revenue source: advisory services Objective 29 years advising institutional clients 100+ Endowments, Foundations, and University Asset Pools Competitive results Low total costs Institutional Clients Retirement Plans 36% Operating Pools 18% Foundations and Endowments 46% Highest fiduciary standards *By number of relationships 5

6 PRESENTING TODAY Professional Years Experience Previous Experience and Education Mike Shebak Senior Managing Director Head of Institutional Consulting Group 17 The Huntington Investment Company MBA The Ohio State University BA Wittenberg University John Evans Director 8 Goldman Sachs BA University of Pennsylvania 6

7 WHAT IS RESPONSIBLE INVESTING?

8 ALPHABET SOUP: DECODING THE TERMINOLOGY 8

9 SIMPLIFYING THE TERMINOLOGY AND LANDSCAPE Responsible Investing Exclusionary (SRI) Integration (ESG) Impact Investing Alignment Avoid investments not compatible with mission and goals Positive tilts to incorporate ESG factors Direct social and environmental impacts Impact Source: US SIF: The Forum for Sustainable and Responsible Investment 9

10 ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FACTORS Environmental (E) Green Building / Smart Growth Climate Change / Carbon Clean Technology Pollution / Toxics Sustainable Natural Resources / Agriculture Water Use and Conservation Social (S) Workplace Safety Labor Relations Workplace Benefits Diversity and Anti-Bias Issues Community Development Human Rights Governance (G) Board Independence Anti-Corruption Policies Board Diversity Executive Compensation Corporate Political Contributions Source: US SIF, The Forum for Sustainable and Responsible Investment and Bloomberg 10

11 GROWTH IN RESPONSIBLE INVESTING

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13 RESPONSIBLE INVESTING: TREMENDOUS GROWTH $8.72 trillion invested according to Responsible Investing strategies in the US 1 86% of Millennials say they are interested in Responsible Investing 4 135% growth in Responsible Investing since Since 2011, 400 college campuses have had divestment movements fueled by student activism 5 82% of S&P 500 companies published corporate sustainability reports in assets under management by Principles for Responsible Investment $70 trillion 2016, up from 20% in signatories 3 Sources: 1 US SIF Report on US Sustainable, Responsible and Impact Investing Trends Governance & Accountability Institute. 3 Principles for Responsible Investment Morgan Stanley. 5 How College Kids Helped Divest $50 Billion from Fossil Fuel, Time Magazine, September 22,

14 LEADING CRITERIA: EDUCATIONAL INSTITUTIONS Leading Responsible Investing Criteria for Educational Institutions 2016 Conflict Risk (Terrorist or Repressive Regimes) Tobacco Environmental - General Social - General Governance - General Climate Change/Carbon Fossil Fuel Divestment Human Rights EEO/Diversity Prison-Related Issues Military/Weapons Faith-Based Pornography Labor Affordable Housing $- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $ Billions Source: US SIF Foundation 14

15 NOTABLE MOVERS EDUCATIONAL INSTITUTIONS Source: 350.org. Institutions include full commitments, partial commitments, and divestments from coal & tar sands. 15

16 RESPONSIBLE INVESTING CONSIDERATIONS

17 FIDUCIARY BALANCE Financial Responsibility Social Responsibility 17

18 RESPONSIBLE INVESTING CONSIDERATIONS Factor Considerations Financial Returns Objectives Fees Risk Portfolio Risk and Complexity Implementation Headline Risk Stakeholder Organization Priorities Board Members Donors Faculty & Students Future Constituents 18

19 RESPONSIBLE INVESTING CONSIDERATIONS Factor Considerations Financial Returns Objectives Fees Risk Portfolio Risk and Complexity Implementation Headline Risk Stakeholder Organization Priorities Board Members Donors Faculty & Students Future Constituents 19

20 RESPONSIBLE INVESTING CONSIDERATIONS Factor Considerations Financial Returns Objectives Fees Risk Portfolio Risk and Complexity Implementation Headline Risk Stakeholder Organization Priorities Board Members Donors Faculty & Students Future Constituents 20

21 INCORPORATING RESPONSIBLE INVESTING

22 CASE STUDY: PORTLAND, OREGON (APRIL 2017) April 2017, Portland City Council voted unanimously to divest from all corporations o o Activists mounted campaign to divest from controversial companies City could not agree on an investment process or what exclusions to apply Portland will move $539 million currently invested in corporate securities to federal bonds and other non-corporate options Estimated to cost the City at least $4.5 million a year o Equivalent of over 200 affordable housing units or 600 new shelter beds Source: The Oregonian. 22

23 RESPONSIBLE INVESTING ROADMAP CLIENT Identify Objectives Core mission & values Focus areas Decide Approach Exclusionary ESG Integration Impact HARTLAND Education What is Responsible Investing? How can it be incorporated into the portfolio? Portfolio Construction Manager selection Partial vs. full integration Active vs. passive Reporting & Risk Management Performance Objective Monitoring and risk management 23

24 CLIENT QUESTIONNAIRE Hartland has developed a questionnaire to lead clients through o o Identifying Objectives Deciding Approach 24

25 CONCLUSION Agenda Key Takeaway 1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing that includes exclusionary screens, ESG integration, and Impact Investing 2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will continue to grow from key stakeholders: board, donors, faculty, students, millennials, etc. 3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and stakeholder considerations 4. Incorporating Responsible Investing 4. Organizations need to have a clear process to assess, implement, and evaluate a Responsible Investing program 25