Ana Toepel, Green Impact, June 2019
UC Recognized for its Leadership in Sustainable Investment
In the wake of the UC Memorial on divestment, you might already be familiar with socially-responsible investing (SRI), which is also referred to as ethical investing or sustainable investing. In a nutshell, SRI is about aligning your investments with your values to support a more sustainable, just world. A more technical definition, courtesy of Net Impact, is that SRI is a mission-driven approach to generating positive outcomes through investment vehicles. SRI considers environmental, social, and corporate governance (ESG) criteria in investment analysis and portfolio construction to avoid investing in companies that negatively impact the environment and/or society.
“Ethical investing has reached a tipping point,” explained the editor-at-large of Financial Times. She claims that these ESG considerations are finally moving out of a specialized niche and into the mainstream, noting that large companies such as Verizon and numerous central banks are among the many financiers who want to avoid harm and are driving the growth of SRI. According to the US SIF Foundation’s 2018 Report on US Sustainable, Responsible and Impact Investing Trends, as of year-end 2017, more than one out of every four dollars under professional management in the United States—$12.0 trillion or more—was invested according to SRI strategies.
UC Recognized for SRI
The University of California (UC) is an institution that’s been following this trend toward responsible investing—and has recently been recognized for its role in using its funds to address the broader social and environmental challenges we face today. This spring the UC Regents Investment Funds was included in the 2019 RAAI Leaders List: The 25 Most Responsible Asset Allocators. The Responsible Asset Allocator Initiative (RAAI) is focused on mobilizing capital from the world’s largest institutions toward responsible investing and has created the index to analyze and rate approximately 200 Sovereign Wealth Funds and Government Pension Funds on their responsible investing practices.
UC’s Sustainable Investment Journey
According to Jagdeep Singh Bachher, UC’s Chief Investment Officer and Treasurer, this recognition is a great achievement, especially since UC Investments has come such a long way over the past five years. He points out that UC’s progress has been remarkable—going from very limited sustainable investment practices and limited engagement with stakeholders around environmental and social issues to now integrating factors such as climate change, diversity, inequality, and human rights into UC’s investment process. In a May story we shared that UC is in the process of considering fossil fuels divestment, with the Academic Senate faculty at nine of the ten campuses voting in favor of urging the Regents to divest its endowment portfolio ($10.4 billion) of all investments in 200 publicly traded fossil fuel companies with the largest carbon reserves. The entire UC faculty had the opportunity to vote in June, and it was approved, pending a final confirmation of the votes. Next it goes to the Regents. UCSF passed the Memorial with 120 votes in favor of the Memorial. These steps toward divestment align with a larger commitment UC has to environmental and social responsibility.
Below are some highlights from the sustainable investment actions UC has taken over the past five years.
- Formed the UC Task Force on Sustainable Investing.
- Became a signatory to the UN Principles for Responsible Investing, the first public American university to do so.
- Committed to invest $1 billion in clean energy and other environmentally sustainable companies over five years. (To date it has invested more than $900 million in clean energy and other environmentally sustainable companies and will reach the goal of $1 billion ahead of schedule.)
- Sold its shares in companies with major revenue from tar sands or coal and joined the Breakthrough Energy Coalition at COP 21 in Paris.
- Became the first U.S. pension plan and endowment fund to sign the Japan Stewardship Code, which aims to promote responsible and sustainable economic growth by more actively involving shareholders in investment decisions.
- Engaged with the Afrikan Black Coalition to learn more about inequality and private prisons. Decided that private prisons posed significant financial risks and sold all $25 million of its investments in private prisons.
- Engaged California companies whose shares it owns about the diversity of their boards and joined the 30% Coalition, whose mission is to increase the number of women on corporate boards.
- Engaged with the Legislature on Assembly Bill 2041, urging the regents to require the Office of the Chief Investment Officer to encourage diversity in hiring and investment choices.
- Amended the Regents’ Investment Policy Statement to require UC Investments to “incorporate ESG into the investment evaluation process as part of its overall risk assessment in its investments decision making. ESG factors are considered with the same weight as other material risk factors influencing investment decision making.”
This year, as a critical next step in its commitment to diversity and inclusion, UC is conducting a demographic survey of its investment partners and engaging them in discussions about their diversity and inclusion practices. By the end of this calendar year it will be in a position to answer the question, “How much of UC Investments’ AUM (assets under management) is managed by diverse fund managers?” It has also created an advisory board on diversity and inclusion.
Resources for Your Own Sustainable Investing
If you would like to learn more about responsible investing and how you can apply the principles to your own finances, check out the following resources: