University of Connecticut
PA-10: Sustainable Investment

The UConn Foundation’s Investment Committee, in its role as a prudent steward of institutional assets, will be aware of environmental, social, and governance (ESG) principles as well as established Socially Responsible Investment (SRI) principles in its investment process. Within the context of its fiduciary responsibilities, including the duty to achieve maximized, risk-adjusted investment returns, the Investment Committee will consider such principles on an ongoing basis in the administration of the Foundation’s investment portfolio. The Committee has made social and environmental responsibility an explicit part of its mission and investment policy statement, and a regular component of its investment process.

For public asset class investments, the UConn Foundation utilizes company-level ESG Risk Scores computed by Morningstar Sustainalytics, a leading ESG and corporate governance, ratings, and analytics firm. Sustainalytics ESG Risk Scores are a proprietary metric that applies the concept of risk decomposition to derive the level of unmanaged risk for a company, which is assigned to one of five risk categories. The UConn Foundation invests in pooled investment vehicles managed by third party managers, who then invest in individual companies.
Risk Categories:

• negligible risk: the company's risks driven by environmental, social and governance factors are assessed as negligible
• low risk: the company's risks driven by environmental, social and governance factors are assessed as low
• medium risk: the company's risks driven by environmental, social and governance factors are assessed as medium
• high risk: the company's risks driven by environmental, social and governance factors are assessed as high
• severe risk: the company's risks driven by environmental, social and governance factors are assessed as severe

Sustainalytics then ranks each score across their research universe. The UConn Foundation considers its exposure to companies ranked in the top quartile of Sustainalytics’ research universe as business that display exemplary sustainability performance.

For the private asset classes, the UConn Foundation has engaged with an independent advisor, Stepstone, for recommendations and due diligence analysis in the manager selection process. Stepstone is considered an industry leader in recognizing climate risk as investment risk, promoting sustainable investing, and engaging directly with market participants to promote ESG principles. As part of their recommendation process, Stepstone’s proprietary rating scale scores the level of ESG integration for private investments. This framework rates managers across the following key scoring areas:
• Policy: adoption of RI/ESG policy; policy aligned with recognized standards such as UNPRI, TCFD; policy reviewed and updated annually; diversity initiatives at GP and portfolio company levels
• Accountability: integration into responsibilities of investment professionals; investment committee oversight; annual trainings
• Investment Process: consideration during due diligence, with ESG as standard part of investment committee memos; post-investment ESG value creation initiatives, as
evidenced by case studies
• Reporting: ESG regularly addressed at AGMs/LPACs; critical ESG Incidents process established; ESG KPIs tracked and included in annual/quarterly reports or separate sustainability report
• Strategy: Indication of whether sector(s) of focus may generate positive or negative environmental or social outcomes

The UConn Foundation considers top-quartile managers within their respective private asset classes as displaying exemplary sustainability performance. Additionally, the Foundation has approved numerous investments to diverse managers, climate impact funds, and funds with mandates to invest in companies with positive ESG
characteristics.

The UConn Foundation’s investment policy provides a framework for the management of assets in the Foundation’s investment portfolio. Among other factors, the investment policy explicitly mandates that ESG principles as well as Socially Responsible Investment (“SRI”) principles are considered in all investment decisions. As a part of its responsibility for the oversight and investment of the portfolio, the Investment Committee approves all investment decisions, including those recommended by third-party advisors, and ensures compliance to all guidelines outlined in the investment policy.

The Foundation Investment Committee considers ESG and SRI principles on a continuous basis in the administration of the Foundation’s investment portfolio. This policy has guided the Committee’s decisions to invest in environmentally and socially impactful opportunities.

Investments to-date include, among others, timberland reforestation projects, companies developing novel direct air capture (“DAC”) technologies to remove CO2 from the atmosphere, and carbon fusion investments. This year the Foundaton invested in a fund whose investment focus includes the crossover between climate change and spaced-based technology. For example, a recent portfolio company is working to develop space-based solar power. Additionally, the fund invested in a company, spun out of UConn, developing artificial retinas to restore vision in patients who are blind or have lost significant sight. Since 2021, the Foundation has made commitments to eight private investment funds across six diverse-managed partners.

The Foundation does not have any direct holdings of companies with which to file shareholder resolutions. All Foundation funds are in co-mingled funds with different fund managers

No, the University does not have a publicly available investment policy with negative screens. Our investment policy does require ESG considerations but it does not include negative screening.

Foundation leadership participates in various inter-organizational collaborations to share best practices around ESG investing, including participation on panel discussions. Such organizations include the Association of Governing Boards of Universities and Colleges (AGB), The Council for Advancement and Support of Education (CASE), and the University Foundation Financial Officers (UFFO).