At its October 21 meeting, the Smith College Board of Trustees approved a comprehensive, holistic set of recommendations designed to support the college’s commitment to environmental sustainability while also ensuring the continued health of the endowment.
Recommendation 1: Increase impact investing
First, and most significantly, Smith will increase its impact investments—those intended to generate measurable social and environmental change alongside a financial return—from $9.5 million to $30 million, over time. Examples of such investments might be industries and funds focused on sustainable agriculture, renewable energy, energy efficiency, conservation, affordable and accessible services and sustainable manufacturing processes. The Investment Committee has asked Investure—Smith’s outsourced investment office—to identify such investments. This enhanced commitment to impact investing aligns with values of innovation and social change at the center of the Smith experience.
Recommendation 2: Favor managers and funds adhering to environmental, social and governance (ESG) principles
As of June 30, 2017, 16 percent of Smith’s endowment is invested in ESG funds via 23 fund managers. The board voted to have the Investment Committee work with Investure to continue to increase the number of funds and fund managers in the endowment who have adopted ESG principles. This decision reflects the recognition that this type of investing can support the college’s broader commitments to environmental sustainability and social equity while still generating appropriate financial return.
Recommendation 3: Avoid future direct holdings in coal
As of June 30, 2017, Smith’s endowment does not have any direct coal holdings. Recognizing that coal is the most environmentally harmful fossil fuel, the board voted to avoid any future direct investments in coal. The Investment Committee will work with Investure to exclude from the endowment any new direct investments in coal that would be directly owned by Smith or held as public assets by Investure funds.
Recommendation 4: Report regularly on socially responsible investment progress
The Investment Committee of the board will work with Investure to provide regular, transparent reports to the Smith community on such metrics as fossil fuel exposure, ESG adoption and impact investments. The board’s Advisory Committee on Investor Responsibility (ACIR) will receive and review such reports on a quarterly basis.
In making the announcement, McCartney and Duncan noted, “Taken collectively, these actions send a clear signal of Smith’s strong and ongoing interest in environmentally responsible investing—and investment options—in support of its enduring mission: educating women of promise for lives of distinction and purpose.”
The Board of Trustees’ decision was based on recommendations from the board’s Advisory Committee on Investor Responsibility, following recommendations put forward in March 2017 by the college’s Study Group on Climate Change. In its 2017 report, the study group asserted, “Climate change is an urgent, complex problem. Human activities are pushing the climate beyond the range of conditions experienced over the last few million years and toward abrupt, unpredictable, highly damaging and potentially irreversible impacts.”
ABOUT SMITH COLLEGE’S ENDOWMENT
Most questions related to Smith’s endowment and the board’s recent decision are addressed in the FAQ that accompanied the announcement.
Among the key points:
What is the value of Smith’s endowment?
Smith’s endowment totaled $1.8 billion as of June 30, 2017.
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 individual fossil fuels nor are fossil fuels among the public assets directly owned by Investure funds. As of the same date, 6.2 percent of Smith’s endowment is invested indirectly in fossil fuels.
As background, Smith’s endowment comprises a variety of investment vehicles. Some are directly held, which means they are owned by Smith or as part of the set of public assets directly owned by Investure funds on Smith’s behalf. Investure maintains discretion over the public assets held on Smith’s behalf.
Some 80 percent of Smith’s endowment assets are held in commingled funds. These funds are 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.
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.
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.
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 here 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.
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.