| Overall Rating | Gold |
|---|---|
| Overall Score | 72.67 |
| Liaison | Aurora Sharrard |
| Submission Date | Feb. 13, 2024 |
University of Pittsburgh
PA-10: Sustainable Investment
| Status | Score | Responsible Party |
|---|---|---|
|
1.26 / 5.00 |
John
Kaye Managing Director of Endowment Operations Endowment Accounting & Administration |
Total value of the investment pool:
Value of holdings in each of the following categories:
| Value of holdings | |
| Sustainable industries (e.g., renewable energy or sustainable forestry) | 0 US/Canadian $ |
| Businesses selected for exemplary sustainability performance (e.g., using criteria specified in a sustainable investment policy) | 0 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 funds funded from the endowment | 3,548,933 US/Canadian $ |
A brief description of the companies, funds, and/or institutions referenced above:
GREEN REVOLVING INVESTMENT: The University of Pittsburgh’s internal Capital Loan Program (CLP) provides schools, offices, and departments with funds to invest in approved capital projects and/or equipment, while recognizing the inherent costs associated with using the University' s financial resources. Loans are paid back internally over time with interest.
In November 2020, the first CLP project explicitly focused under a Sustainability Investment Fund concept was signed internally for $3,548,933. Deployment of this project in 2021 for 10 years is managed by Facilities Management and focused on energy and water upgrades originally conceptualized as 10 dedicated projects over 13 buildings. Project energy reductions, utility cost savings, and triple bottom line benefits are tracked by Facilities Management and the Office of Sustainability at a variety of scales and over time, including by meter, by project, by building, along with aggregated project savings across all buildings and aggregated campus-wide savings.
Percentage of the institution's investment pool in positive sustainability investments:
Does the institution have a publicly available sustainable investment policy?:
A copy of the sustainable investment policy:
The sustainable investment policy:
FULL ESG POLICY ATTACHED above. Summary & key quotes below:
In March 2020, the University of Pittsburgh’s Office of Finance established an Environmental, Social, and Governance (ESG) Policy, which helps inform investment decisions related to the institution’s Consolidated Endowment Fund.
The policy offers a systematic way for fund managers to make investment decisions after considering a range of factors, including: energy efficiency and use, hazardous materials management, water and land management, data protection and privacy, human rights, labor standards, product safety, regulatory compliance, business ethics and adherence to auditing standards.
As stated in the ESG Policy, the Consolidated Endowment Fund’s (CEF) “statement of Governance addresses “Social Responsibility” in Section XIV, providing:
“To fulfill the University's stated mission and meet the expectations of the donors who have entrusted gifts to the University, the University must manage its CEF wisely. As stated previously, the primary investment objective established for the CEF is to maximize the financial return on such assets, taking into account risk and other considerations as more specifically set forth in this Statement, in order to provide a reliable stream of meaningful income while preserving the CEF's real asset value. Accordingly, the Committee shall not apply non-financial constraints pertaining to investment holdings of the CEF unless there is a situation of such magnitude that the Board specifically directs the Committee to consider such non-financial parameters. In evaluating any specific social responsibility concern as directed by the Board, the Committee may consider the gravity of the social impact, the University's need to maintain a sound financial investment policy, the potential effectiveness of the Committee's investment or voting decisions to influence positive change, and such other considerations as the Committee may deem appropriate. In no event will a recommendation be made that an investment be selected or retained solely for the purpose of encouraging or expressing approval of a company's activities or, alternatively, for the purpose of placing or leaving the University in a position to contest a company's activities.”
Consistent with these responsibilities, the University recognizes that a key set of considerations appropriately included in the management of the CEF concerns ESG factors. As a result, the University’s Office of Finance (OOF), led by the Chief Investment Officer (CIO), has developed ESG criteria to incorporate into its existing processes for assessing investment opportunities, both in the U.S. and around the world.
Pitt ESG Policy Reference: https://www.cfo.pitt.edu/sites/default/files/esgpolicyfinal3-25-20_0.pdf
Does the institution use its sustainable investment policy to select and guide investment managers?:
A brief description of how the sustainable investment policy is applied:
The University currently uses and will continue to consider active investment managers who take into account environmental, social, and governance factors when making investment decisions on behalf of the University. In FY22, 87% of external investment managers had formal ESG Policies and/or considered ESG in FY22.
In March 2020, the University of Pittsburgh’s Office of Finance established an Environmental, Social, and Governance (ESG) Policy, which helps inform investment decisions related to the institution’s Consolidated Endowment Fund. The policy offers a systematic way for fund managers to make investment decisions after considering a range of factors, including: energy efficiency and use, hazardous materials management, water and land management, data protection and privacy, human rights, labor standards, product safety, regulatory compliance, business ethics and adherence to auditing standards.
As stated in the ESG Policy, the Consolidated Endowment Fund’s (CEF) “statement of Governance addresses “Social Responsibility” in Section XIV, providing:
“To fulfill the University's stated mission and meet the expectations of the donors who have entrusted gifts to the University, the University must manage its CEF wisely. As stated previously, the primary investment objective established for the CEF is to maximize the financial return on such assets, taking into account risk and other considerations as more specifically set forth in this Statement, in order to provide a reliable stream of meaningful income while preserving the CEF's real asset value. Accordingly, the Committee shall not apply non-financial constraints pertaining to investment holdings of the CEF unless there is a situation of such magnitude that the Board specifically directs the Committee to consider such non-financial parameters. In evaluating any specific social responsibility concern as directed by the Board, the Committee may consider the gravity of the social impact, the University's need to maintain a sound financial investment policy, the potential effectiveness of the Committee's investment or voting decisions to influence positive change, and such other considerations as the Committee may deem appropriate. In no event will a recommendation be made that an investment be selected or retained solely for the purpose of encouraging or expressing approval of a company's activities or, alternatively, for the purpose of placing or leaving the University in a position to contest a company's activities.”
Consistent with these responsibilities, the University recognizes that a key set of considerations appropriately included in the management of the CEF concerns ESG factors. As a result, the University’s Office of Finance (OOF), led by the Chief Investment Officer (CIO), has developed ESG criteria to incorporate into its existing processes for assessing investment opportunities, both in the U.S. and around the world.
Pitt ESG Policy Reference: https://www.cfo.pitt.edu/sites/default/files/esgpolicyfinal3-25-20_0.pdf
EXAMPLES OF ESG APPLICATION are detailed on pages 12 – 16 of the FY21 CEF ESG Report include:
• Identifying and Addressing Risks to Employee Health and Well-being
• Supporting Healthier Communities
• Actively Mitigating Stranded Asset Risks
• Advocating for Strong Governance Standards
Link to FY21 Pitt Consolidated Endowment Fund ESG Report (2022) - https://www.cfo.pitt.edu/sites/default/files/esg_report_final.pdf
As stated in the FY22 CEF ESG Report, the University of Pittsburgh “continues to explore sustainable investments that might enhance risk-adjusted financial returns while advancing sustainable outcomes.”
Link to FY22 Pitt Consolidated Endowment Fund ESG Report (2023) - https://www.cfo.pitt.edu/sites/default/files/esg_report_2023-final_0.pdf
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?:
A copy of the proxy voting guidelines or proxy record:
A brief description of how managers are adhering to proxy voting guidelines:
As stated in the University of Pittsburgh’s ESG Policy, the University of Pittsburgh believes that the investment managers that are carefully selected and employed by the University are best suited to vote the proxies of shares held in the portfolios that they manage. Therefore, responsibility for voting such proxies is delegated to the respective external investment managers utilized by the CEF. In the event of any regulatory or other statutory requirement that prohibits the investment manager from voting on behalf of the University, Pitt’s Chief Investment Officer (CIO) shall assume responsibility for voting such proxies.
Accordingly, the University of Pittsburgh does not typically engage in the voting of proxies, relying instead on its external investment managers to do so. To the best of Pitt’s Office of Finance’s knowledge, there currently are no regulatory or other statutory requirements that prohibit any of the CEF’s investment managers from voting proxies on behalf of the University, precluding the need for the CIO to assume responsibility for voting such proxies
In 2021 through 2023, the University outsourced all proxy voting to our external (and global) investment managers, 87% of which had formal ESG Policies and/or considered ESG in FY22.
The University currently uses and will continue to consider active investment managers who take into account environmental and sustainability factors when making investment decisions on behalf of the University.
Pitt March 2020 ESG Policy reference: https://www.cfo.pitt.edu/sites/default/files/esgpolicyfinal3-25-20_0.pdf
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?:
Examples of how the institution has engaged with corporations in its portfolio about sustainability issues during the previous three years:
As with proxy voting, any filings would be undertaken by the University's external investment managers, 87% of which had formal ESG Policies and/or considered ESG in FY22.
Does the institution participate in a public divestment effort and/or have a publicly available investment policy with negative screens?:
A brief description of the divestment effort or negative screens and how they have been implemented:
While the answer to the question above is no, details below belie applicable performance:
• 1970 to 1994 - University Board of Trustees considered the issue of divestment for social concerns prior to the end of apartheid in South Africa.
• 1987 - Executive Committee of the Board approved a resolution directing the University to completely divest stockholdings in American companies that by March 31, 1988, had not effectively commenced withdrawal from South Africa, with divestment to be completed no later than December 31, 1988.
• 1994 - Following the end of apartheid in South Africa, the Board approved a resolution to lift the University's sanction on investing in companies doing business in South Africa
• 2014 – Pitt’s student-led divestment campaign became active, led by the Fossil Free Pitt Coalition, which includes students, student organizations, employees, and alumni.
• 2018 – 2019 – Socially Responsible Investment (SRI) Committee of Pitt faculty, staff, and students answered the Chancellor’s charge to explore and report on the potential impacts of SRI strategies on Pitt’s Consolidated Endowment Fund (CEF) investments.
• FEBRUARY 2020 – Pitt’s Board of Trustees (BOT) adopted a SRI Screening Process for how the University should consider proposed CEF investment exclusions.
• MARCH 2020 – University’s Office of Finance released its Environmental, Social, and Governance (ESG) Policy for the CEF. Developed by the University’s Office of Finance and shared with the Board’s Investment Committee, the ESG Policy clarifies further the University’s approach to integrating considerations of ESG factors (including related risks and value-creation opportunities) into its decision-making processes. Many of the factors now labeled “ESG factors” have been an essential element of the University’s investment processes for years. ESG Policy: https://cfo.pitt.edu/documents/ESGPolicyFinal3-25-20.pdf
• 2020 – 2021 – Pitt’s BOT activated the SRI Screening Process and created the 2020-21 Board of Trustees Ad Hoc Committee on Fossil Fuels, whose report on “whether, to what extent, and via what methods the University, in its Endowment, should consider divestment from fossil fuels in existing and/or future investments” was adopted in full by the BOT in February 2021 (details below). The Ad Hoc Committee’s Report also disclosed: “Specifically, the CEF’s exposure to fossil fuels has decreased 42% over the past five years, falling from 10.0% on June 30, 2015 to 5.8% of the CEF’s holdings as of June 30, 2020. Most of the remaining exposure is in private equity investments, which are expected to drop to zero by the end of 2035 (as these investments are liquidated by external fund managers and not replaced with others). As private fossil fuel investments drop to zero, the CEF’s total fossil fuel exposure is expected to be less than 1% by the end of 2035, with the remaining exposure primarily tied to public equity and bond investments that are extremely difficult to disentangle. ESG considerations may cause those fund managers to further reduce their fossil fuel-related exposures over time.”
• 2022 – University released its first ESG Report (for fiscal year 2021), hosted on a brand new CEF webpage. In an effort to increase transparency regarding the CEF and application of the ESG policy, enhance awareness about the CEF, and advance dialogue on this important topic, Pitt’s new Chief Investment Officer regularly met with key student leaders and is speaking at various University forums. “Portfolio exposure to fossil fuels decreased to 5.9% by June 30, 2021, compared to 10% on June 30, 2015. The University remains on track to meet the expectation of the Ad Hoc Committee on Fossil Fuels that private holdings in fossil fuels will decline to zero by the end of 2035.”
Link to FY21 Pitt Consolidated Endowment Fund ESG Report (2022) -
https://www.cfo.pitt.edu/sites/default/files/esg_report_final.pdf
• 2023 – University released its second ESG Report (for fiscal year 2022), including updates on fossil fuel exposure, the ESG policies of external investment managers, and the use of proxy voting. “Total (public and private) exposure to fossil fuels increased from 5.9% of the CEF as of June 30, 2021, to 8.1% as of June 30, 2022. The increase in total exposure to fossil fuels was primarily attributable to changes in the market value of fossil fuel companies and commodity prices for oil and natural gas and was not the result of new investment activity. Private investment exposure to fossil fuels, which comprised 6.3% of the CEF by value as of June 30, 2022, is currently projected to become de minimis around 2035-36. This forecast is likely to fluctuate significantly over time for reasons outlined in this report.”
Link to FY22 Pitt Consolidated Endowment Fund ESG Report (2023) - https://www.cfo.pitt.edu/sites/default/files/esg_report_2023-final_0.pdf
2021 REPORT OF THE AD HOC COMMITTEE ON FOSSIL FUELS OF THE BOARD OF TRUSTEES
As stated in the report of the 2020-21 Ad Hoc Committee on Fossil Fuels of the Board of Trustees of the University of Pittsburgh:
“Pursuant to the Bylaws of the University, the Investment Committee (“IC”) of the Board of Trustees provides oversight and guidance to the Chief Investment Officer regarding the management of the University endowment. The IC’s “responsibilities shall include, but not necessarily be limited to, the approval of endowment investment guidelines, objectives and spending policies, and the review of the selection of investment advisers and consultants and the review of the performance of investments.”
The IC is guided in its work by the “Statement of Governance, Investment Objectives and Policies for the Consolidated Endowment Fund” (“Statement of Governance”). The Statement of Governance provides that “the Committee shall not apply non-financial constraints pertaining to investment holdings of the CEF unless there is a situation of such magnitude that the Board specifically directs the Committee to consider such non-financial parameters.” The IC includes two student members.
While the IC provides oversight and direction, only the University Board of Trustees can apply non-financial constraints to the CEF, which it has done only once previously. No current nonfinancial constraints on the CEF currently exist. A history of the Board’s consideration of nonfinancial factors is provided in “Section 1.4 and Appendix B.” of the Ad Hoc Committee’s Report.
2021 Report of the 2020-21 Ad Hoc Committee of the Board of Trustees of the University of Pittsburgh: https://www.trustees.pitt.edu/sites/default/files/osec-docs/fossil_fuels/ad_hoc_committee_ff_report_final_w_appendix.pdf
At the February 2021 meeting of the Board of Trustees, the Board adopted all the findings and options of the Ad Hoc Committee’s report, implying that the University should implement all options (quoted below):
1) Forgo applying a negative screen to the CEF with respect to fossil fuels.
2) Strongly support the implementation of the University’s current ESG Policy and direct the University’s Chief Investment Officer and investment team to apply ESG considerations to every CEF investment decision.
3) Strongly support the current long-term strategy of the University’s CEF, which is expected to continue to pursue strong risk-adjusted financial returns while reducing private holdings in fossil fuel exploration and production to zero by the end of 2035, as monitored by the Investment Committee.
4) Direct the University’s Investment Committee to oversee the development of a long-term strategy focused on seeking attractive investments that help reduce, avoid, and eliminate GHG emissions.
5) Direct the University to provide greater transparency regarding the fossil fuel investment trends of the CEF, which would support the University in its mission and goals, while increasing University community understanding about the purpose and management of the CEF. Specifically:
A) Support the commitment made by the Office of the Chief Financial Officer (“CFO”) to begin publishing an annual public ESG Report in 2021, which will highlight the application of ESG considerations in ensuring the CEF provides strong financial returns in perpetuity and to fossil fuel investments specifically.
B) Support regular, clear, and accessible University communication, education, and engagement about the CEF’s aggregate status, trends, and current and future fossil fuel exposure (including the basis for any material changes in expectations), including an annual update to the Board and University community.
Approximate percentage of endowment that the divestment effort and/or negative screens apply to:
Does the institution engage in policy advocacy by participating in investor networks and/or engage in inter-organizational collaborations to share best practices?:
A brief description of the investor networks and/or collaborations:
The University of Pittsburgh participates in the Big Plus Roundtable (formerly Big Ten Network), the 360 One Firm, and COO Peer Network. ESG and Diversity & Inclusion are active topics of discussion in these forums.
As detailed in the ESG Policy & subsequent CEF ESG reports, the University currently uses and will continue to consider active investment managers who take into account environmental, social, and governance factors when making investment decisions on behalf of the University. Some of the University's external investment managers have robust ESG / SRI policies and/or are signatories to the UN PRI or other noteworthy organizations.
The University currently uses and will continue to consider active investment managers who take into account environmental and sustainability factors when making investment decisions on behalf of the University; 87% of Pitt investment managers in FY22 had formal ESG Policies and/or considered ESG.
As directed in the 2021 BOT Ad Hoc Committee report, Pitt’s Office of Finance has met with multiple collaborative organizations focused on various ESG initiatives and continues to consider which organization is best aligned with the University’s goals, values, and governance framework.
Website URL where information about the institution’s sustainable investment efforts is available:
Additional documentation to support the submission:
Data source(s) and notes about the submission:
Information provided by Office of Finance, December 2023
• University of Pittsburgh Office of Finance ESG webpage – https://www.cfo.pitt.edu/divisions/office-finance/environmental-social-and-governance-esg-investment-considerations-pitt
• FY22 Pitt Consolidated Endowment Fund ESG Report (2023) - https://www.cfo.pitt.edu/sites/default/files/esg_report_2023-final_0.pdf
• FY21 Pitt Consolidated Endowment Fund ESG Report (2022) - https://www.cfo.pitt.edu/sites/default/files/esg_report_final.pdf
• 2021 Report of the 2020-21 Ad Hoc Committee of the Board of Trustees of the University of Pittsburgh: https://www.trustees.pitt.edu/sites/default/files/osec-docs/fossil_fuels/ad_hoc_committee_ff_report_final_w_appendix.pdf
Information provided by Office of Finance, December 2023
• University of Pittsburgh Office of Finance ESG webpage – https://www.cfo.pitt.edu/divisions/office-finance/environmental-social-and-governance-esg-investment-considerations-pitt
• FY22 Pitt Consolidated Endowment Fund ESG Report (2023) - https://www.cfo.pitt.edu/sites/default/files/esg_report_2023-final_0.pdf
• FY21 Pitt Consolidated Endowment Fund ESG Report (2022) - https://www.cfo.pitt.edu/sites/default/files/esg_report_final.pdf
• 2021 Report of the 2020-21 Ad Hoc Committee of the Board of Trustees of the University of Pittsburgh: https://www.trustees.pitt.edu/sites/default/files/osec-docs/fossil_fuels/ad_hoc_committee_ff_report_final_w_appendix.pdf
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