Northwestern University
PA-14: Sustainable Investment

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).

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.

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.

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.