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Capital markets are the oxygen of our economy, says GreenFin and Harvard Extension School adviser instructor Graham Sinclair told me.
Sticking to its bodily comparison, asset owners can be the diaphragm, maintaining a constant flow of oxygen with a long-term interest in keeping the entire system alive.
But asset owners are not a monolith in terms of scale, substance or influence. By way of introduction, asset owners are: pension funds, general accounts of insurance companies, outsourced CIOs, sovereign wealth funds (SWFs), family offices, endowments and foundations. Pension funds and sovereign wealth funds hold the bulk of global assets, at around $32 trillion collectively – for context, that’s nearly 40% of global GDP.
Student activists make more headlines than retirees.
Although the market value of college endowments in the United States is just under $1 trillion, what the category lacks in scale makes up for in social and cultural capital. As Jeff Mindlin, Chief Investment Officer for ASU Endowment, told me, “Higher education is only 5% of the carbon footprint, but 100% of the learning footprint.
This cultural capital is particularly relevant when it comes to considering and integrating ESG into the asset allocation of endowment funds. Pressures are undoubtedly put on pension funds and sovereign wealth funds by their leaders to maintain long-term value through investments, but the relatively awkward and quiet world of pensions and sovereign wealth funds does not occupy the same space in our collective cultural imagination and shared narrative as universities. To do.
The result: student activists make more headlines than retirees. Particularly in climate discussions and more specifically on the perennial question of “divest or engage” – a central tension in our “ESG 2.0” era.
Take Harvard, an institution that supported tuition before the Salem witch trials and is now home to the world’s largest university endowment — more than $53 billion, as of last fall. Sustained and highly visible student pressure and protest to force Harvard’s endowment to take the path of divestment — despite doubts about the success of the strategy — has worked. Harvard University President Lawrence Bacow responded last year that “legacy investments” through third-party firms “are in trickle-down mode.” An opaque, restrained and reluctantly delivered translation of “divestment”.
Similarly, Arizona State University (ASU) is a cultural institution in the field of sustainability: it is home to the first school dedicated to sustainability in the United States, the first on the Sierra Club’s list of the most environment in North America and, for seven consecutive years, ranked #1 as the most innovative university in U.S. News & World Report. (Sorry, Stanford.)
It also houses an endowment whose holistic method of integrating ESG piqued my interest. In particular, how ASU Enterprise Partners – the private, not-for-profit company that manages the university’s endowment – integrates students as empowered and active agents in the fund’s ESG approach.
Overcome financial complexity
As the ESG investing space expands and Gen Zers seek out “impact” careers, those trying to enter the space without a traditional financial education are encountering complexity complex en masse. financial. But the moats, fences, and gates that guard the complex — constructed of proprietary jargon, relationships, and networks — may not be so complex.
Trevor Harper, an ASU student pursuing a master’s degree in sustainability solutions and one of 20 students from across disciplines who helped write recommendations for the ASU’s corporate partner proxy voting guidelines ASU, shared an anecdote with me that might relate to those who feel powerless to push for change from within the system.
The English major-turned-hirer told me, “Anyone can learn anything, can’t they? We put ourselves in silos and become cynical about the fact that we can’t tell the difference. know anything about it, so how could I get involved?'” As Masters student Gabriela McCrossan shared, “The answer is always no if you don’t ask.
With top-notch sustainability trainings under their belt, they set out to get smart at the intersection of sustainability and capital markets. With a faculty that strives to embody the “New American University” – a model of simultaneously pursuing excellence, maintaining broad access to quality education, and creating meaningful societal impact – they found the support and empowerment of the institution to participate in the development of the endowment’s approach to engaging with invested companies.
A takeaway here is that ASU Enterprise Partners’ approach to sustainable investing incorporates the thinking and beliefs of a university’s primary stakeholder group: students. It is also an approach that empowers the next generation of leaders who will be tasked far more heavily with addressing the climate crisis urgently.
When the Business Roundtable, an association of lobbyists for American CEOs, proclaims a noble and admirable desire to “redefine the purpose of business to promote an economy that serves all Americans”, it is reasonable to assume that the conversation in the world real during the real round table does not correspond so perfectly to this proclamation. And because there’s no room at the table anyway — that’s for CEOs, not all of us — guessing is all we can do.
The ASU Enterprise Partners model actually includes the people they work on behalf of to serve, and in a meaningful way. The 20 students who helped write the endowment’s proxy voting guidelines came from departments across the university, not just the business school. And, in a bid to put the money where the mouth is — Nico McCrossan, another ASU master’s student and chair of the school’s Sustainable Fundraising and Impact Initiative, sits in made in the investment team of ASU Enterprise Partners as an ESG analyst under Mindlin.
Back to the long-standing divestment versus engagement thread: “Our goal is decarbonization, not divestment,” McCrossan told me. “We’re looking at it from the perspective of the real-world emissions reduction goal. We see engagement as the best path to get there, because we need the biggest emitters to actually reduce their emissions. And that’s where we’re going to see a massive impact.”
To be clear, this is not a student-friendly exercise or ambitious systemic change like that of the Business Roundtable. Through ASU’s Sustainable and Impact Funding Initiative, students chose to invest in Chevron with an allocated amount that enabled engagement with Chevron. The students had multiple engagements with the oil major where they discussed business practices related to climate change and resource use and sought to clarify the investment risks of proposed climate regulations, pending lawsuits and Chevron’s social license to operate. In their experience, Chevron has been an active listener (if not an active player).
Again, the university endowment corner of the asset owner realm is not in the trillions, but what would it look like if others opened the door on who is heard and who can advise and defend from within?
And if this is an integral part of a new American university, what would a new American company do in the same way? The fight against climate change requires a holistic approach, and this holistic way of recruiting new deckhands holds promise.