Established in 1924 by Sebastien Kresge, founder of S.S. Kresge Company which became Kmart, the Kresge Foundation seeks to expand opportunities in the United States' cities. The organization had an endowment of $3.7 billion as at December 31, 2018.
In 2015, the Kresge Foundation's Board of Trustees chose to complement its grant-making activities with impact investments through loans, deposits, equity and others. The organization's goal is to deploy a $350 million pool of funding by 2020 on programs such as health care clinics, affordable housing, social service providers and real estate to advance economic development. As of 2019, the Foundation had $251 million of committed capital to program and mission-related investments.
Case Study – East Jefferson Development Corporation
Bloomberg: It was the usual setup for panelists at a finance conference talking about making smart investments. They were all the same gender. In this case, all women. That probably wasn’t surprising, considering the event was hosted by the United Nations-backed Principles for Responsible Investment.
Institutional Investor: Early last year, alumni of Blue Harbour Group launched a new activist hedge fund, Impactive Capital, with a $250 million anchor investment from the California State Teachers Retirement System. Its strategy: environmental, social, and governance advocacy.
Financial Times: When it comes to hitting the 2030 targets underpinning the UN’s 17 Sustainable Development Goals, considering risk alone will not cut it. Larry Fink’s recent emphasis on climate change risks and divesting in coal is significant, albeit a few decades late, but what about opportunities? And what about other sustainable development issues that threaten to bring businesses down? [Full article available to Financial Times subscribers.]
IPE: The Net Zero Asset Owner Alliance has gained two new members and kicked off its campaign to help achieve the Paris Agreement goals by driving change via engagement with companies. Launched in September, the now 18*-strong group of pension funds and insurers today announced that it had gained new members in the form of the Church of England, with its three national investing bodies, and Italian insurance group Generali.
Top 1000 Funds: When the CEO of the world’s largest asset manager speaks, the world tends to listen. So it was last week when BlackRock’s Larry Fink announced the company would put climate change centre-stage across its $7 trillion portfolio after what critics have called years of prevarication.
Bloomberg: Japan’s Government Pension Investment Fund has been a trailblazer in promoting the need to incorporate environmental, social and governance issues into the day-to-day job of portfolio construction. With $1.6 trillion under management, it has a lot of firepower in the investing world. So its recent stand against short selling, judging the practice to be incompatible with its role as the long-term custodian of multigenerational assets, is worth paying attention to.
Bloomberg: Singapore’s state-owned Temasek Holdings Pte and Swedish private equity firm EQT AB have formed a $500 million venture that will invest in solar and wind power generators across India.
Asian Investor: Ping An Group, parent company of China’s second-largest life insurer by investable assets, is playing a bigger role in driving environmental, social and governance (ESG) investing, which is gradually gaining momentum in the country.
Citywire Selector: ESG mandates come in different shades of green with some excluding even the most popular asset classes. One high-impact exclusion zone is the $14.4 trillion US treasuries market. With European sovereigns largely offering negative yields, their higher-yielding US equivalents are often a preferred holding.
Created in 1964 by David Packard, co-founder of HP, and his wife Lucile, the David & Lucile Packard Foundation supports organizations seeking to improve the lives of children, enabling the creative pursuit of science, advancing reproductive health, and conserving and restoring the earth’s natural systems. As at December 2018, the Foundation had $7.6 billion of assets under management.
Since the 1980s, the David & Lucile Packard Foundation has been leveraging impact investments to expand its grant-making activities. The organization has invested over $760 million on both nonprofits and for-profits since launching their Program-related and Mission-related investment programs.
Mission Investing Program Overview
Mission Investments at the Packard Foundation
Institutional Asset Manager: The Eurozone is outperforming North America when it comes to ESG investing, although passive and active ESG investors on both sides of the pond have seen a positive impact on portfolio performance since 2014.
Business & Human Rights Resource Centre: The ethical investment trend that has swept the developed world is making its mark in China, where authorities are urging companies to say more about their environmental, social and governance (ESG) risks.
Top 1000 Funds: California’s Governor Gavin Newsom’s recent executive order calling on the state’s pension funds and endowments to invest more in green energy and less in fossil fuels flags more, complicated divestment decisions ahead for CalPERS 13-member board.
Financial Standard: Market Forces has put UniSuper on the chopping block in a divestment campaign aimed at pressuring the fund to ditch shares in fossil fuel companies.
The Guardian: Vanguard, the world’s second largest asset manager, has refused to sign up to a group of major investors demanding that polluters respond to the climate crisis, despite its rival BlackRock relenting to pressure to do so.
Chief Investment Officer: The New York State Common Retirement Fund has appointed Andrew Siwo to help lead its climate change-oriented ambitions as director of Sustainable Investments and Climate Solutions.
Financial Times: The world’s biggest investors are coming under intense pressure over the role they play in climate change, as the focus on tackling global warming moves beyond oil, gas and mining to the companies that finance fossil fuel producers. [Full article available to Financial Times subscribers.]
Financial News: More than 370 City firms are now signed up to the UK government’s drive to increase diversity at the very top of the country’s financial institutions. While the Women in Finance Charter, which launched in 2016, does not impose diversity targets on its signatories, there is evidence that is indeed changing attitudes in the male-dominated worlds of banking and investing. [Full article available to Financial News subscribers.]
The Asset: While environmental, social, and governance (ESG) integration has been moving rapidly in the public market, more investors are beginning to realize that the private equity is perhaps better suited for ESG integration when compared to public market asset classes.
The University of California is a public university system in the state of California which includes 10 campuses. The Office of the Chief Investment Officer of the Regents manages the retirement, endowment, working capital and cash assets of the organization. As at June 30, 2019, the Office of the Chief Investment Officer had US$ 126.1 billion of assets under management.
UC Investments started structuring its approach to sustainable investing 5 years ago. Since then, it has implemented a Sustainable Investment Framework, which identifies Climate Change, Food and Water Security, Inequality, Ageing Population, Diversity, Human Rights, the Circular Economy, and Ethics and Governance as key focus areas of the investment strategy. Furthermore, the University of California set itself a goal to invest $1 billion in climate change solutions as part of the White House's Clean Energy Investment Initiative while progressively divesting from its fossil fuel assets. Finally, as an active owner, the organization has set clear voting guidelines on ESG-related issues such as diversity at the board of portfolio companies, indigenous people's rights and energy efficiency.
Sustainable Investment Framework
Financial Times: BlackRock is stepping up its efforts to pressure corporate boards on climate change by joining an influential investor group, after the world’s largest fund manager was accused of failing to match rhetoric with action. [Full article available to Financial Times subscribers.]
Institutional Investor: In September, 12 asset allocators and managers announced that they had signed on to a new stewardship code that committed them to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050. Signatories included PensionDanmark, Caisse de dépôt et placement du Québec, and Allianz, among others.
Citywire Selector: Fund houses’ road to ESG integration and emphasis has been a long and winding one, and it will continue to present challenges that companies must acknowledge and adjust accordingly to.
IPE: A group of shareholders including large UK public pension funds has filed a shareholder resolution calling on Barclays to set out a plan to phase out financing of fossil fuel companies and certain utility companies.
Top 1000 Funds: Most institutional investors have long-dated obligations that extend decades into the future. Consistent with their long time-horizon and the need to deliver inflation-beating returns, such investors typically allocate the majority of their capital to public and private equity, real estate and infrastructure assets. Increasingly, such allocations are managed with environmental, social and governance (ESG) concerns to the fore.
IPE: The EU financial markets watchdog has recommended the European Commission take steps to improve the quality of environmental, social and governance (ESG) disclosure as a potential counter to “undue short-termism” in financial markets.
Professional Pensions: Since 1 October 2019, schemes are required to update or prepare their SIPs to set out their policies in relation to the running of their scheme's default investments, and the "financially material considerations" of the investments, as well as the extent to which "non-financial matters are taken into account".
Institutional Investor: Activist hedge funds are successfully pressing companies to reduce toxic chemical emissions and produce bigger stock returns as a result, according to research from business schools in the U.S. and China.
IPE: Integrating ESG has become commonplace in institutional investment, but generally the discussion has focused on areas such as security selection and stewardship. Relatively little attention has been paid to ESG considerations at the level of strategic asset allocation (SAA), which is often described as a bedrock of institutional portfolios.
Established in 2000 by Bill Gates, founder of Microsoft, and his wife Melinda, the Foundation seeks to improve healthcare and reduce extreme poverty. It is the largest foundation in the world with US$ 47.8 billion of assets under management as at December 31, 2018.
In 2009, the Strategic Investment Fund was set to complement their grantmaking efforts with impact investing. The Foundation may employ direct equity investments, intermediary funds, and loans and credit enhancements. The Fund also works with suppliers of critical products (vaccines, drugs and contraceptives) to guarantee volumes of sales so they can increase production and drive costs down.
Digitizing Payments in a Cash Economy
Financing Small Agribusinesses in Africa
Institutional Investor: Twenty-nine U.S. schools excised the industry from their portfolios between 2011 and 2018, including Stanford University, Syracuse University, and Pitzer College. Another six endowments partially divested, most of them in California. Two researchers examined the burning question around dropping fossil fuels: What does it do endowment assets?
IPE: The UK’s largest auto-enrolment provider is stress-testing using a 1.5°C scenario for its climate aware fund, while also planning to investigate in more detail risks linked to the physical impacts of climate change, according to its new responsible investment report.
Financial Times: What do Aviva, HSBC, Legal & General, Nomura and Northern Trust have in common? They all agreed this year to lobby Silicon Valley’s biggest social media companies about content. [Full article available to Financial Times subscribers.]
Top 1000 Funds: Nearly half the assets under management in the UK are in pooled funds, and their stewardship is currently almost exclusively under the control of fund managers. The continued refusal of fund managers to accept the voting policies, even on a comply or explain basis, of their UK clients in pooled funds is an issue of enormous importance.
Citywire Selector: It seems that every other day there is news about another asset manager integrating ESG into portfolios and almost as frequently an announcement that more ESG analysts have been hired. This is all good progress but raises key questions which haven’t received a much attention: how much does it cost to maintain an expanded roster of ESG staff and are these costs passed on to investors?
Bloomberg: Governments are getting set to cash in on a booming market in green bonds—debt that funds projects with environmental benefits. Fueled by the growing awareness that more radical action has to be done to combat climate change, and by the need to fund it, Europe is taking the lead.
Think Advisor: Keep this year in mind: 2044. That’s when MSCI projects there could be a 50/50 gender split on company boards globally. Although that date seems far away (and no doubt some of us won’t be around to witness it), the MSCI’s Women on Boards 2019 Progress Report has found some positive trends.
Citywire Selector: The Danish financial regulator, the FSA, and its Norwegian counterpart Finanstilsynet have put a much greater emphasis on the pitfalls of greenwashing.
Reuters: Tens of trillions of global investment dollars are pouring into companies touting robust environmental, social and governance credentials. Now short-sellers spy an opportunity.