Overall Rating Silver - expired
Overall Score 63.61
Liaison Greg Kozak
Submission Date March 3, 2017
Executive Letter Download

STARS v2.0

Northwestern University
PA-14: Sustainable Investment

Status Score Responsible Party
Complete 1.07 / 4.00 Audrey Steinbach
sustainNU staff
Facilities Management
"---" indicates that no data was submitted for this field

Total value of the investment pool:
9,804,000,000 US/Canadian $

Value of holdings in each of the following categories::
Value of Holdings
Sustainable industries (e.g. renewable energy or sustainable forestry) 31,000,000 US/Canadian $
Businesses selected for exemplary sustainability performance (e.g. using criteria specified in a sustainable investment policy) 72,000,000 US/Canadian $
Sustainability investment funds (e.g. a renewable energy or impact investment fund) 0 US/Canadian $
Community development financial institutions (CDFIs) or the equivalent 0 US/Canadian $
Socially responsible mutual funds with positive screens (or the equivalent) 0 US/Canadian $
Green revolving loan funds that are funded from the endowment 0 US/Canadian $

A brief description of the companies, funds, and/or institutions referenced above:

The above investments represent an array of companies engaged in sustainable industries, including renewable energy research and installation, energy efficiency, and energy storage technology.

We partner with a third-party investment manager that selects stocks in Emerging Markets largely based on their ability to achieve sustainable growth. The manager completes a 25 point ESG assessment for all investments and engages with management on the most material ESG issues. This manager believes that companies that effectively address E, S, & G issues will be the long term winners in the emerging markets in which they invest. Additionally, this manager conducts thematic research into evolving ESG trends (sugar consumption, most recently).


Does the institution have a publicly available sustainable investment policy?:
Yes

A copy of the sustainable investment policy:
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The sustainable investment policy:

The University is a signatory to the United Nations-supported Principles for Responsible Investment. As a long-term investor, we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios – now and in the future. Therefore, where consistent with our fiduciary duties, Northwestern University commits to the following six Principles of the PRI organization:

•To incorporate Environmental, Social and Corporate Governance (ESG) issues into investment analysis and decision-making processes;
•To be an active owner and to incorporate ESG issues into our ownership policies and practices
•To seek appropriate disclosure on ESG issues by the entities in which we invest;
•To promote acceptance and implementation of the Principles within the investment industry;
•To work with the PRI Secretariat and other signatories to enhance their effectiveness in implementing the Principles;
•To report on our activities and progress towards implementing the Principles.

The above commitment places no explicit or prescriptive restrictions upon the investment activities of the Investment Office, without further consent and approval by the Investment Committee.


Does the institution use its sustainable investment policy to select and guide investment managers?:
No

A brief description of how the policy is applied, including recent examples:
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Does the institution's sustainable investment policy include negative screens?:
No

A brief description of the negative screens and how they have been implemented:
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Approximate percentage of the endowment that the negative screens apply to:
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Has the institution engaged in proxy voting, either by its CIR or other committee or through the use of guidelines, to promote sustainability during the previous three years?:
Yes

A copy of the proxy voting guidelines or proxy record:
A brief description of how managers are adhering to proxy voting guidelines:

The Investment Office utilizes a third party service provider, Institutional Shareholder Services (ISS), to track the proxy voting records for all of our third party separate account managers, with underlying investments in publicly traded equities in both the United States and International markets. ISS tracks over 8,000 proxies for the Investment Office annually, encompassing corporate governance, economic value and environmental and social issues. The Investment Office receives a quarterly summary of the proxies voted for that quarter, which includes:

·A subjective letter grade for each manager that corresponds to how each asset manager voted as compared to an ISS produced benchmark policy. We would note that while ISS benchmark policies tend to reflect best practices, it is still a subjective grading system.

·Additional commentary on the key underlying votes that produced the letter grade.

In the attached proxy record above, the numbers 1-5 correspond to a letter grade, A=5, while F=1. For some further perspective, the Investment Office tends to focus on changes over time in the scoring or outlier scores. For example, one U.S. manager received an ‘F’ during Q4, bringing the total score down as you can see above. The Investment Office can then dig deeper into the issue, and determine if there is a fundamental change to the manager’s business and investment practices that may require more careful consideration. In this instance, a relatively small number of voted proxies by the manager within the quarter skewed the results. The issue at hand has no clear right or wrong approach, which led the Investment Office to make note of the score and revisit the issue during the following quarter. Finally, it is important to realize that companies with good ‘ESG’ practices are often-times better long-term investments, and many of our underlying investment managers consider these factors quite seriously in their investment process.


Has the institution filed or co-filed one or more shareholder resolutions that address sustainability or submitted one or more letters about social or environmental responsibility to a company in which it holds investments during the previous three years?:
No

Examples of how the institution has engaged with corporations in its portfolio about sustainability issues during the previous three years:
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Does the institution engage in policy advocacy by participating in investor networks and/or engaging in inter-organizational collaborations to share best practices?:
Yes

A brief description of the investor networks and/or collaborations:

Northwestern University became the third endowment based in the United States to sign on to the United Nations-supported Principles for Responsible Investment in early 2016. As part of this commitment, the University commits to providing an annual transparency report, detailing the investment policies and procedures of the University, and what role ESG factors play in portfolio management. Additionally, as members of this organization, members of the University’s Investment Office will increasingly engage in peer and industry conferences, roundtables, and small group discussions on how best to apply ESG factors to their respective areas of expertise. We are continually evaluating third party providers of ESG data and scoring for our underlying investment holdings. Finally, with the recent creation of our Advisory Committee on Investment Responsibility, we anticipate greater community involvement in the establishment of proxy voting policies for our separately managed accounts.


The website URL where information about the institution's sustainable investment efforts is available:
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Data source(s) and notes about the submission:
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The information presented here is self-reported. While AASHE staff review portions of all STARS reports and institutions are welcome to seek additional forms of review, the data in STARS reports are not verified by AASHE. If you believe any of this information is erroneous or inconsistent with credit criteria, please review the process for inquiring about the information reported by an institution or simply email your inquiry to stars@aashe.org.