Frequently Asked Questions
Q. What is the value of Smith’s endowment?
Smith’s endowment totaled $1.8 billion as of June 30, 2017. Income from the endowment is a critical funding source, providing more than one-third of the college’s annual operating budget. It supports the full range of college activities and programs, including financial aid, faculty, academic programs and facilities.
Q. What is the current exposure to fossil fuels in Smith’s endowment?
As of June 30, 2017, Smith does not have any direct ownership in fossil fuels. As of the same date, 6.2 percent of Smith’s endowment is invested indirectly in fossil fuels. Interests in ETFs or indices are not considered direct ownership.
As background, Smith’s endowment comprises a variety of investment vehicles. Some are directly held, which means they are owned by Smith, and some are interests in Investure funds over which Investure maintains discretion.
As of June 30, 2017, approximately 80 percent of Smith’s endowment assets are held in commingled funds. These funds are commingled in a manner similar to the mutual funds many people hold in their retirement accounts. Commingled funds are the most common form of institutional and individual investing today. They also mean that the college does not have control over which companies are included—or excluded—in any particular fund.
The request from the board for enhanced reporting from Investure will assist the Investment Committee and ACIR in monitoring the college’s exposure to fossil fuels in all categories of investments.
Q. Does Smith intend to stay with Investure?
Yes. Smith continues to have a strong relationship with Investure. The Investment Committee actively reviews Investure’s activities and performance to ensure the long-term financial success of the college. Members of the Investment Committee will work with Investure to implement the environmental sustainability actions approved by the board.
Q. Can you explain in more detail about environmental, social and governance funds?
Socially responsible investment is a topic of growing interest in the investment industry. The dramatic growth in the number of investment managers who have adopted the Principles for Responsible Investment, a set of principles designed to develop a more sustainable global financial system, is a clear indicator of this.
ESG-focused funds use environmental, social and governance criteria in portfolio construction. ESG management is based on the belief that addressing these types of issues will protect and enhance portfolio returns, especially over the longer term, thus encompassing both social responsibility and financial performance. Responsible investors may choose to exclude entire sectors they consider unsustainable or unethical, or they may seek out companies with better ESG performance.
Q. How will excluding future direct investments in coal affect fossil fuel companies?
Given the size of Smith’s endowment (and those of other mission-driven institutions) relative to the financial assets of fossil fuel companies, endowment-related actions are unlikely to cause a direct, material financial impact on these companies. Rather, the intention is to send a clear signal of Smith’s interest in having more environmentally responsible investment options. Favoring investments that support the development of alternative, cleaner sources of energy will encourage similar types of investment opportunities. Over time, participating in these global collective actions can help shape the evolution of the investment landscape and contribute to promoting environmentally responsible behavior.
Q. Has the Smith board ever taken divestment actions?
Smith has used its role as an investor to act on social issues a handful of times. In the 1980s, the board excluded from its direct investments those companies invested in South Africa. In 2000, the board excluded tobacco-producing companies from its direct investments. In 2006, the board excluded 26 companies doing business in Sudan.
Q. Will the board consider other socially responsible investment requests?
ACIR has responsibility for reviewing recommendations for socially responsible investment efforts and opportunities. Procedures for submitting a request to the ACIR can be found here.
Q. How will the Smith community learn of progress in these climate-focused actions?
As the recommendations are enacted, ACIR will monitor their progress over a two-year implementation phase. During this time period, ACIR will continue an open dialogue with the Smith community, share updates on their website and via other forums, and suggest to the Investment Committee any needed adjustments to the actions. It is unlikely that a request to consider the same topic would be considered before the two-year implementation phase is complete.
Q. How else is Smith addressing climate change?
The college is taking a comprehensive, multi-pronged approach to understanding and mitigating the effects of climate change:
- Academic offerings: Smith offers majors in geosciences and environmental science and policy; concentrations in climate change and sustainable foods; environmental courses throughout all the divisions; and access to the Center for the Environment, Ecological Design and Sustainability, which supports students and faculty in integrating knowledge across disciplines in support of environmental decisions and actions.
- Research: Faculty and students conduct climate- and sustainability-related research in numerous departments, such as engineering, government, economics and geosciences and at the MacLeish Field Station.
- Campus operations: The college has committed to net-zero greenhouse gas emissions by 2030.
- Strategic plan: Theme 5—Complex, Urgent Problems—of the college’s strategic plan specifically targets climate change as a topic of inquiry, research and teaching.