april 26, 2018 investing with impact - oacubo...1100 superior avenue east suite 700 cleveland, ohio...
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1100 Superior Avenue East Suite 700
Cleveland, Ohio 44114
216.621.1090 | HARTLAND.com
INVESTING WITH IMPACT: NAVIGATING THE RESPONSIBLE INVESTING LANDSCAPE
April 26, 2018
2 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
HARTLAND.com
QUICK POLL
1. Asked about Responsible Investing (SRI, ESG, and/or Impact Investing) in the
last year?
2. Your institution currently has or has had a student or faculty-led divestment
movement?
3. Your institution currently incorporates Responsible Investing into the investment
program?
4. If your program is not currently incorporating Responsible Investing, are you
considering it?
Why hasn’t your institution considered it?
1. Not of interest to institution / Board / Committee
2. Complexity
3. Investment Results
4. Fees
3 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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AT SOME POINT, YOU WILL ANSWER “YES”
• In 1995, there was $639 billion invested according to Responsible Investing
principles
• That number has grown by 1300% (a 14-fold increase)
• $8.72 trillion in 2016
Source: US SIF.
Responsible Investing in the United States 1995-2016
4 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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AGENDA & KEY TAKEAWAYS
Agenda Key Takeaway
1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing
that includes exclusionary screens, ESG integration,
and Impact Investing
2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will
continue to grow from key stakeholders: board,
donors, faculty, students, millennials, etc.
3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and
stakeholder considerations
4. Incorporating Responsible Investing 4. Organizations need to have a clear process to
assess, implement, and evaluate a Responsible
Investing program
5 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
HARTLAND.com
HARTLAND OVERVIEW
Independence
• Employee owned
• Single revenue source: advisory services
• Objective
Expertise
• 29 years advising institutional clients
• 100+ Endowments, Foundations, and
University Asset Pools
Results
• Competitive results
• Low total costs
• Highest fiduciary standards *By number of relationships
$20+ Billion Assets Under Advisement
500+ Number of Private
Clients: Families,
Individuals, and
Related Accounts
28 Number of
Shareholders
120+ Number of Institutional
Clients: Not-for-Profits,
Hospitals, and Retirement
Funds
72 Number of Employees
28 Number of Employees
with CFA, CPA, and CFP®
Designations
36 Number of states in
which we have clients
29 Number of Boards on which
we Volunteer
Institutional Clients
Foundations and
Endowments 46%
Operating Pools 18%
Retirement Plans 36%
6 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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PRESENTING TODAY
Professional Years
Experience Previous Experience and Education
Mike Shebak
Senior Managing Director
Head of Institutional Consulting
Group
17
The Huntington Investment Company
MBA – The Ohio State University
BA – Wittenberg University
John Evans
Director 8
Goldman Sachs
BA – University of Pennsylvania
WHAT IS RESPONSIBLE INVESTING?
8 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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ALPHABET SOUP: DECODING THE TERMINOLOGY
9 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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SIMPLIFYING THE TERMINOLOGY AND LANDSCAPE
Source: US SIF: The Forum for Sustainable and Responsible Investment
Exclusionary
(SRI)
Integration
(ESG)
Impact
Investing
Direct social
and environmental
impacts
Responsible Investing
Positive tilts
to incorporate
ESG factors
Avoid investments
not compatible with
mission and goals
Alignment Impact
10 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
FACTORS
Environmental
(E)
• Green Building / Smart
Growth
• Climate Change / Carbon
• Clean Technology
• Pollution / Toxics
• Sustainable Natural
Resources / Agriculture
• Water Use and Conservation
Source: US SIF, The Forum for Sustainable and Responsible Investment and Bloomberg
Social
(S)
• Workplace Safety
• Labor Relations
• Workplace Benefits
• Diversity and Anti-Bias
Issues
• Community Development
• Human Rights
Governance
(G)
• Board Independence
• Anti-Corruption Policies
• Board Diversity
• Executive Compensation
• Corporate Political
Contributions
GROWTH IN RESPONSIBLE INVESTING
13 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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$8.72 trillion invested according to Responsible
Investing strategies in the US1
RESPONSIBLE INVESTING: TREMENDOUS GROWTH
Sources: 1 US SIF Report on US Sustainable, Responsible and Impact Investing Trends 2016. 2Governance & Accountability Institute. 3 Principles for Responsible Investment 2016. 4 Morgan Stanley. 5 “How
College Kids Helped Divest $50 Billion from Fossil Fuel,” Time Magazine, September 22, 2014.
86% of Millennials say they are interested
in Responsible Investing4
400 Since 2011, 400 college campuses
have had divestment movements
fueled by student activism5
135% growth in Responsible Investing
since 20121
82% of S&P 500 companies published
corporate sustainability reports in
2016, up from 20% in 20112
$70 trillion assets under management by
Principles for Responsible Investment
signatories3
14 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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LEADING CRITERIA: EDUCATIONAL INSTITUTIONS
Source: US SIF Foundation
$- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0
Affordable Housing
Labor
Pornography
Faith-Based
Military/Weapons
Prison-Related Issues
EEO/Diversity
Human Rights
Fossil Fuel Divestment
Climate Change/Carbon
Governance - General
Social - General
Environmental - General
Tobacco
Conflict Risk (Terrorist or Repressive Regimes)
$ Billions
Leading Responsible Investing Criteria for Educational Institutions 2016
15 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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NOTABLE MOVERS
Source: 350.org. Institutions include full commitments, partial commitments, and divestments from coal & tar sands.
EDUCATIONAL INSTITUTIONS
RESPONSIBLE INVESTING CONSIDERATIONS
17 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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FIDUCIARY BALANCE
Financial
Responsibility
Social
Responsibility
18 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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RESPONSIBLE INVESTING CONSIDERATIONS
Factor Considerations
Financial • Returns
• Objectives
• Fees
Risk • Portfolio Risk and Complexity
• Implementation
• Headline Risk
Stakeholder • Organization Priorities
• Board Members
• Donors
• Faculty & Students
• Future Constituents
19 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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RESPONSIBLE INVESTING CONSIDERATIONS
Factor Considerations
Financial • Returns
• Objectives
• Fees
Risk • Portfolio Risk and Complexity
• Implementation
• Headline Risk
Stakeholder • Organization Priorities
• Board Members
• Donors
• Faculty & Students
• Future Constituents
20 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
HARTLAND.com
RESPONSIBLE INVESTING CONSIDERATIONS
Factor Considerations
Financial • Returns
• Objectives
• Fees
Risk • Portfolio Risk and Complexity
• Implementation
• Headline Risk
Stakeholder • Organization Priorities
• Board Members
• Donors
• Faculty & Students
• Future Constituents
INCORPORATING RESPONSIBLE INVESTING
22 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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CASE STUDY: PORTLAND, OREGON (APRIL 2017)
• April 2017, Portland City Council voted unanimously to divest from all corporations
o Activists mounted campaign to divest from controversial companies
o City could not agree on an investment process or what exclusions to apply
• Portland will move $539 million currently invested in corporate securities to federal bonds and other
non-corporate options
• Estimated to cost the City at least $4.5 million a year
o Equivalent of over 200 affordable housing units or 600 new shelter beds
Source: The Oregonian. www.oregonlive.com/politics/index.ssf/2017/04/portland_to_stop_corporate_inv.html
23 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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RESPONSIBLE INVESTING ROADMAP
CLIENT
HARTLAND
Education
• What is Responsible Investing?
• How can it be incorporated into the portfolio?
Identify Objectives
• Core mission & values
• Focus areas
Decide Approach
• Exclusionary
• ESG Integration
• Impact
Reporting & Risk Management
• Performance
• Objective
• Monitoring and risk management
Portfolio Construction
• Manager selection
• Partial vs. full integration
• Active vs. passive
24 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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CLIENT QUESTIONNAIRE
• Hartland has developed a questionnaire to lead clients through
o Identifying Objectives
o Deciding Approach
25 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090
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CONCLUSION
Agenda Key Takeaway
1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing
that includes exclusionary screens, ESG integration,
and Impact Investing
2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will
continue to grow from key stakeholders: board,
donors, faculty, students, millennials, etc.
3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and
stakeholder considerations
4. Incorporating Responsible Investing 4. Organizations need to have a clear process to
assess, implement, and evaluate a Responsible
Investing program