The Foundation’s Investment Committee recently voted to invest a portion of our $300 million endowment in ESG (Environmental, Social and Governance) funds to begin to better align our investments with our programmatic mission and values.
As family business owners concerned with the environment, Fred and Barbara Erb believed that sustainability – the harmonizing of economic, environmental, and social interests, meeting the needs of the present without compromising the needs of the future – was compatible with long-term profit and prosperity. But while the foundation’s mission was developed around those beliefs, our investments followed more conventional principles, looking at the single bottom line rather than the triple bottom line.
Today, studies affirm that sustainability, once thought to be a detractor from financial performance, is a key predictor of long-term success. A report presented by Merrill Lynch’s Global Research Team shows that companies’ performance in environmental, social, and governance (ESG) factors is a reliable indicator of future stock performance—and the integration of ESG practices makes companies less likely to suffer large price declines.
As research continues to point to the viability of investing sustainably, we recognize the need to align all of our investments with our mission. As a step towards that long-term goal, we will align a portion of the foundation’s endowment, across three of the portfolio’s asset classes, with ESG principles:
- Our fixed income holdings will transition away from mining, weapons, tobacco, and fossil fuels and tilt towards green bonds where they are available. This new screen will be implemented immediately, but the shift in the portfolio will occur gradually, with no deviation from our current financial metrics. Over time, we plan to transition 100% of our investment grade fixed income holdings (nearly 18% of the foundation’s assets) to align with ESG principles.
- In public equity, we are investing in a fund called JUST Capital, which tracks the companies in the Russell 1000 Index that rank in the top 50% on 7 factors: workers, customers, products, environment, communities, jobs, and management. It is our hope that demanding transparent reporting from publicly-traded companies will drive those companies to improve their practices.
- In private equity, we are transitioning a small amount of our portfolio from Goldman Sachs private equity managers into Goldman Sachs private equity managers with an additional impact screen.
These changes will be phased in over time, allowing us to learn and adjust our approach as we go. We look forward to sharing those learnings and results with you.