Stanford University
SD-14: Endowment

Notes in this section provide additional details and context for responses limited to "yes/no" entry fields. Each question is written again for clarity, and then followed by a detailed response.

-- Does the institution offer donors the option of directing gifts to an investment fund that considers environmental/sustainability factors?

The majority of endowment gifts are given without restrictions and the gift value goes directly into the Merged Endowment Pool. Stanford does accept restricted gifts into the endowment for environmental-related purposes such as high-performance campus buildings, environmental institutes, and specific fundraising campaigns, including the Initiative on the Environment and Sustainability, through which the university raised $432.8M for programs related to sustainability (http://thestanfordchallenge.stanford.edu/by-the-numbers/environment-and-sustainability/).

-- Has the institution made investments in on-campus energy and/or water efficiency projects through the endowment (as an endowment investment and not a payout or using operating budget funds)?

Yes, the endowment provides funds for the capital budget (as well as the operating budget) of the university, which includes investment in on-campus energy and/or water efficiency projects. See the next question for examples.

NOTE: In 1991 the decision was made to separate the university’s endowment management responsibilities from the capital budget as well as from the operating budget. Previously, both had been the purview of the Treasurer’s Office. The Board of Trustees established bylaws for the Stanford Management Company (SMC), the organization whose role is to invest and manage Stanford University's endowment and other financial assets. The SMC goal is to provide financial support for the continued strength of Stanford University. This requires balancing current needs and obligations with the opportunity to grow the endowment over time, through portfolio diversification and innovative approaches to investing. SMC is a division of the University, governed by a Board of Directors who are appointed by the Board of Trustees of the Leland Stanford Junior University. SMC, as Stanford's endowment and trust fiduciary, plays an important role in building and maintaining a strong financial foundation to support the University's teaching, learning, and research mission.

-- Describe capital commitments made within the past 3 years?

(1) Stanford Energy System Innovations (SESI) - $438M
http://sustainable.stanford.edu/climate_action

In December 2011, Stanford’s Board of Trustees gave concept approval to the $438 million Stanford Energy System Innovation (SESI) project, which is designed to meet the university’s energy demand though 2050. SESI represents a significant transformation of the university from 100% fossil-fuel-based cogeneration to a more efficient electric heat recovery system, powered by a diverse mix of conventional and renewable electricity sources.

Due to the significant overlap between campus heating and cooling demand, SESI entails an innovative heat recovery design that is 70% more efficient than the existing Central Energy Facility (CEF) operations. In the new system, heat collected from buildings via the chilled-water loop will be captured at the CEF for reuse, reducing the use of conventional chillers to discharge waste heat via cooling towers. Instead, heat recovery chillers will move the heat collected from the chilled water loop to a new hot-water loop scheduled to replace Stanford’s aging steam distribution system.

SESI will result in immense benefits for Stanford University in the decades to come. When completed, SESI will reduce campus greenhouse gas emissions by 50%, save 18% of campus potable water, open up the energy supply platform to future technologies, enable campus to better manage its power portfolio, and yield significantly higher utilities savings though 2050.

(2) Whole Building Energy Retrofit Program - $30M
http://sustainable.stanford.edu/energy_initiatives

The Whole Energy Retrofit Program is a $30 million capital program that was established to reduce energy consumption in Stanford's largest, most energy-intensive buildings. The program began in 2003/04 with studies of the top 12 energy-using buildings, representing $15.9 million of energy expenses per year, or nearly 36% of the total campus energy expense. It has now been expanded to include the top 26 energy-using buildings, representing an additional $9.2 million of energy expenses (total $25.1 million) per year and 60% of the total campus.

-- Does institution lack the ability to vote proxies on environmental and social resolutions, as the entire equity holdings of the endowment are invested in mutual funds (e.g. CommonFund, Fidelity, Vanguard)?

No. All proxies are voted in-house based on Stanford’s Core Social Issue Policy Statements and Proxy Voting Guidelines. One of the four core policy statements is Environmental Sustainability. The fifteen specific sub-issues include: energy alternatives, toxics, water, and forced/slave labor. Please see http://apir.stanford.edu/ and specifically http://apir.stanford.edu/social_issues.

-- Does the institution lack the ability to vote proxies on corporate governance resolutions, as the entire equity holdings of the endowment are invested in mutual funds (e.g. CommonFund, Fidelity, Vanguard)?

No. All proxies are voted in-house based on Stanford’s Corporate Governance Policy Statements and Proxy Voting Guidelines. The policy statements specifically include board responsibility and management of environmental risk.

-- Do investment managers handle the details of proxy voting on environmental and social resolutions?

No. Stanford votes all proxies in-house based on Stanford’s Core Social Issue Policy Statements and Proxy Voting Guidelines. Please see http://apir.stanford.edu/. See the prior questions for details.

-- Do investment managers handle the details of proxy voting on corporate governance resolutions?

No. Stanford votes all proxies in-house based on Stanford’s Corporate Governance Policy Statements and Proxy Voting Guidelines. See the prior questions for details.

-- Are investment managers provided with general guidelines that determine proxy votes on environmental and social resolutions?

Yes. Stanford provides a copy of the university’s Statement on Investment Responsibility, Core Social Issue Policy Statements (see prior question), and Investment Restriction Letters (e.g. tobacco) annually to external Investment Fund Managers and new Investment Fund Managers during SMC’s due diligence process.

-- Are investment managers provided with general guidelines that determine proxy votes on corporate governance resolutions?

Yes. Stanford provides a copy of the University’s Statement on Investment Responsibility and Corporate Governance Policy Statements (see prior question) annually to external Investment Fund Managers and new Investment Fund Managers during SMC’s due diligence process.

-- Are investment managers provided with specific guidelines that determine proxy votes on environmental and social resolutions?

No. Stanford votes all proxies in-house.

-- Are investment managers provided with specific guidelines that determine proxy votes on corporate governance resolutions?

No. Stanford votes all proxies in-house.

-- Does a single administrator determine proxy votes on environmental and social resolutions?

No. Stanford’s Core Social Issue Policy Statements and Proxy Voting Guidelines (see question 9) are developed by the University’s Advisory Panel on Investment Responsibility (APIR-L); recommendations are submitted to the Trustees’ Special Committee on Investment Responsibility, and are then reviewed, discussed, and approved by Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the university’s approved Core Social Issue Policy Statements and Proxy Voting Guidelines.

-- Does a single administrator determine proxy votes on corporate governance resolutions?

No. Stanford’s Social Issue Policy Statements and Proxy Voting Guidelines (see prior question) are developed by the University’s Advisory Panel on Investment Responsibility; recommendations are submitted to the Trustees’ Special Committee on Investment Responsibility, and are then reviewed, discussed, and approved by Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the university’s approved Corporate Governance Statements and Proxy Voting Guidelines.

-- Does a committee of administrators and/or trustees deliberate and make decisions on proxy votes on environmental and social resolutions?

Any needed modifications of or additions to Stanford’s Core Social Issue Policy Statements and Proxy Voting Guidelines are reviewed annually by APIR-L which submits recommendations to the Trustees’ Special Committee on Investment Responsibility (SCIR), where they are reviewed, discussed, and approved by Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the university’s approved Core Social Issue Policy Statements and Proxy Voting Guidelines.

-- Does a committee of administrators and/or trustees deliberate and make decisions on proxy votes on corporate governance resolutions?

Any needed modifications of or additions to Stanford’s Corporate Governance Policy Statements and Proxy Voting Guidelines are reviewed annually by APIR-L which submits recommendations to the Trustees’ Special Committee on Investment Responsibility (SCIR), where they are reviewed, discussed, and approved by Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the university’s approved Corporate Governance Policy Statements and Proxy Voting Guidelines.

-- Does a committee that includes student representatives deliberate and make recommendations or decisions on proxy votes on environmental and social resolutions?

Stanford’s Advisory Panel on Investment Responsibility & Licensing (APIR-L) includes students and representatives from all levels of the Stanford community. It annually: reviews Stanford’s approved Core Social Issue Policy Statements and Proxy Voting Guidelines against the coming year’s Shareholder Social Issue Resolutions; identifies and reviews new issues; and submits any needed new recommendations to the Trustees’ Special Committee on Investment Responsibility (SCIR). The SCIR reviews those recommendations and submits them for final review, discussion, and approval by Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the University’s approved Social Issue Policy Statements and Proxy Voting Guidelines.

-- Does a committee that includes student representatives deliberate and make recommendations or decisions on proxy votes on corporate governance resolutions?

In 1985, the APIR determined that addressing the myriad Corporate Governance and Social Issue Resolutions was too time consuming (and often too complex) for Panel volunteers to do the issues justice. At the Panel’s request, the Trustees approved eliminating Corporate Governance responsibilities from APIR’s duties. That task was then transferred to the Manager of Investment Responsibility. Updates and recommendations are developed by the Manager of Investment Responsibility on new issues of corporate governance, and then reviewed and discussed with members of SMC Investment Committee and Stanford’s Rock Center on Corporate Governance, which has student and faculty representatives from Stanford Law School and the Graduate School of Business. Final approval of Corporate Governance Policy Statement and Proxy Voting Guidelines recommendations is the responsibility of Stanford’s Board of Trustees. The Proxy Administrator votes all proxies based on the university’s approved Corporate Governance Policy Statement and Proxy Voting Guidelines.

-- Is institution community feedback incorporated into proxy voting decisions on environmental and social resolutions through town hall meetings or a website?

Stanford Community members have been provided several options for submitting their concerns on &/or feedback to APIR-L relating to Social Issues (which includes Environmental Sustainability):

(1) TOWN HALL MEETINGS: The APIR-L holds an open Annual Town Hall Meeting on Investment Responsibility. The session encourages community representatives to participate in an open discussion of the APIR-L process and corporate social issues.

(2) WEBSITE: All Stanford community members have access to the APIR-L website and the APIR-L “Request for Review” form which allows any member of the community to submit endowment-related Social Issue Resolution concerns to the Panel for review.

(3) REPRESENTATIVE COMMITTEE: The 12 members of the APIR-L are Stanford Community members nominated by an organizational process of colleagues. APIR-L members include – 4 Students (2 undergraduate, 2 graduates), 4 Faculty (from different schools), 2 Alumni, and 2 Senior Administrators. These members are appointed to advise the Trustees on Investment Responsibility issues making recommendations in the best interest of the University and growth of the endowment to meet Stanford's educational and research mission.

(4) STUDENT INTERNSHIPS: Stanford's Investment Responsibility Internship Program offers undergraduate and graduate students the opportunity to research and develop social issue background reports in the areas of Diversity, Non-discrimination & Labor, Environmental Sustainability, and Human Rights. This research supports the work of Stanford’s Advisory Panel on Investment Responsibility & Licensing (APIR-L) in addressing allegations of company-caused “substantial social injury” from direct or indirect action or inaction by global corporate business policies and practices. There are 4 to 6 Investment Responsibility Student Research Interns throughout each year.

-- Is institution community feedback incorporated into proxy voting decisions on corporate governance resolutions through town hall meetings or a website?

Concerns from Stanford Community members related to Corporate Governance issues can be addressed by the same mechanisms described in the prior question and these additional avenues:

(1) REQUEST FOR REVIEW FORM: Website availability of Stanford’s “Request for Review” (RFR) form for any community member to submit feedback and request action.

(2) ROCK CENTER FOR CORPORATE GOVERNANCE: The Arthur and Toni Rembe Rock Center for Corporate Governance is a joint initiative of Stanford Law School and the Graduate School of Business at Stanford University. The Center was created to advance the understanding and practice of corporate governance in a cross-disciplinary environment where leading academics, business leaders, policy makers, practitioners and regulators can meet and work together.

(3) ADDITIONAL COMMUNITY INPUT: Large and small, national and local Corporate Governance Conferences and Forums where Stanford Community members participate with other Institutional Investors including
(a) Employee Pension Funds (such as CalPERS and CalSTRS),
(b) Corporate Employee Retirement Funds,
(c) Other Endowments and Foundations,
(d) SRI Fund Managers, and
(e) Proxy Advisory Research Services Members who participate in Corporate Governance legal and regulatory reviews, updates and recommendations.