Episcopal Diocese of Califoria: Itroducig ESG, SRI ad Impact Ivestig Laury Agew October 4, 2015
SRI, ESG ad Impact Ivestig The Old SRI: Socially Resposible Ivestig Exclude compaies that make or do bad Tobacco, weapos, Apartheid The curret SRI Curretly, we proactively scree for good compaies Public equity space ESG: Evirometal, Social, Goverace Busiess maagemet strategies that mitigate future ukow risks Proactive corporate resposibility ad reportig Public equity space ad corporate bods The New SRI: Sustaiable ad Resposible Ivestig Trackig ad disclosig ESG, corporate sustaiability reports Impact Ivestig Itetioal aligmet with ad impact o missio with a fiacial retur Seekig a fiacial retur ad a positive impact 2
ESG: Evirometal, Social ad Goverace Sustaiable ad Resposible Ivestig Global Activity Europe ad Australia leaders US laggard Priciples for Resposible Ivestmet (UN PRI) Lauched 2006 Over 1300 sigatories (ivestors, maagers, cosultats), $45 trillio US: over 20 ivestors, 150 maagers, 30 service providers US SIF Sustaiable, Resposible ad Impact Ivestig Treds Report**, Ceres, SASB, GIIN, GIIRS, etc. At begiig of 2014: over $6 trillio, 480 istitutioal ivestors, 300 maagers, 880 commuity ivestmet istitutios ESG itegratio is risk maagemet 3
Impact Ivestig Fiacial First Fiduciary stadards of expected risk ad returs Rigorous due diligece processes Impact Ivestig Impact First Seekig to alig ad impact missio May differet measuremets for impact Ivestmets that have strog fiacial returs ad a positive impact o the missio 4
Impact Ivestig Cotiuum A wide variety of fiacial structures with impact 5
Impact Ivestig Themes from Rockefeller Philathropy Advisors: Solutios for Impact Ivestors: From Strategy to Implemetatio
Itetioal Impacts Bods Liquidity ad scale for supportig corporate ad muicipal ivestmets Ifluece corporate behaviors ad employmet coditios Stocks Impact Portfolio Real Estate Promote sustaiable real estate developmet, job creatio Compay formatio, job creatio ad sustaiable developmet Private Equity / Veture Capital Ifrastructure Build log-term real assets i water, trasit, housig, eergy, schools, etc. Each asset class has a uique combiatio of risk, retur ad impact 7
Impact Ivestig Process: UWBA Process Articulate Missio ad Values UWBA Goal: Reducig Poverty i the Bay Area by ½ by 2020 Create Impact Themes Commuity Developmet, Affordable Housig, Job Traiig, Employmet Defie Impact Develop Impact Ivestig Policy Geerate Deal Flow Quatify jobs ad growth, uemploymet rates declie, affordable housig uits built, trasportatio fudig, etc.. Develop Ivestmet Policy: asset allocatio, liquidity, risk budgetig, spedig, moitorig, etc. Aalyze Deals ad Evaluate Impact Gather uiverse of ESG/Impact ivestmet maagers i all asset classes, model portfolios Source: Solutios for Impact Ivestors: From Strategy to Implemetatio, Rockefeller Philathropy Advisors Perform due diligece, moitor fiacial results, ad social impact, test for comparable performace ad risks 8
Customized Social Screes 25 Categories Cosesus votig Aligmet with drivers of poverty reductio Highly Relevat to Poverty Moderately Relevat Low Relevace Not Relevat Job Creatio Labor Relatios Recogitio (Corporate) Huma ad Employee Rights Workforce Diversity, icludig Sexual Orietatio Evirometal Corporate Goverace Metrics Auditig Practices Board Accoutability Board Compositio Board Idepedece CEO Compesatio Compay Owership Shareholder Rights Takeover Defeses Gamblig Tobacco Alcohol Adult Etertaimet Aimal Testig Bioethics Firearms Life/Choice Military Nuclear Power 9
UWBA Social & Geographic Criteria Positive Scorig: based o objective data q Job Creatio (High): defied by Uiverse of Bay Area employers Criteria Data Elemets Importace Weightig % of Total Labor Relatios Evaluatio of relatioships with orgaized labor High 4 22% Recogitio Workplace ad Diversity High 4 22% Diversity Total Workforce ad Maagemet Medium 2 11% Sexual Orietatio No-discrimiatio Statemet Same Sex Beefits Medium 2 11% Evirometal Toxic Release Iformatio ad Spills Medium 2 11% Huma Rights Global Sulliva ad Global Compact Medium 2 11% Corporate Goverace Goverace Metrics Grades. Medium 2 11% 10
Modelig the Equity Portfolios Custom ESG Scores, Trackig Error, Geographic Focus 70 60 50% Bay Area 65 60 65 75% Bay Area 65 100% Bay Area Model UWBA Custom ESG Score 50 40 30 Russ 3000 49 50 51 20 10 0 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Trackig Error vs. Russell 3000 11
UWBA Model Equity Portfolio 4 years: Jauary 1, 2011 December 31, 2014 aualized cumulative Bay Area/UWBA Equity Model 17.49% 90.53% Russell 3000 15.27% 76.54% BBACAX (+div reivested, cap wtd) 16.16% 82.06% The Uited Way of the Bay Area was the iitial seed groud for this study. It will follow developmets i this ew field with iterest. UWBA has ot edorsed ad does ot sposor ay particular ivestmet strategy at this time. 12
Bay Area Impact Ivestig Iitiative To promote sustaiable ecoomic prosperity ad commuity resiliece i the Sa Fracisco Bay Area www.baiii.org 13
The Impact Ivestig Itermediary Commuity Foudatios Quasi-Public & Private Foudatios Edowmets Public Retiremet Fuds Private & Corporate Retiremet Accouts Icreased Services Stocks Bods Real Estate Ifrastructure Private Equity / Veture Capital Ehaced Wealth Creatio Ivestmet Itegrate ESG factors ad corporate activism Allocate portio for place-based missio aliged bods Seek ad prioritize sustaiable local impact Target regioal co-ivestig i public / private parterships Expect log term local compay formatio ad job creatio Icreased SF Bay Ecoomic Prosperity Cetralizig ad Collaboratig 14
Resources o Impact Ivestig Bay Area Impact Ivestig Iitiative www.baiii.org UK Taskforce Social Impact Ivestig: www.socialimpactivestmet.org Missio Ivestors Exchage www.missioivestors.org ImpactBase ImpactAssets www.impactbase.org www.impactassets.org/impactassets-50 KL Felicitas Foudatio www.klfelicitasfoudatio.org Global Impact Ivestig Network www.gii.org Uited Natios Pricipals for Resposible Ivestmet: www.upri.org Seal Cove Fiacial research : www.sealcovefiacial.com 15