AV俱乐部鈥檚 Board of Governors voted last Tuesday (Feb. 12) to adopt a Fossil Fuel Investment Review report from the Investment Committee, including specific measures to broaden communication of Dal鈥檚 Environment, Social and Governance (ESG) investment practices and听its enhanced听investment risk assessments听specifically听related听to climate change.
These include specific communication on AV俱乐部鈥檚 ESG integration, more specific follow-up with investment fund managers around climate change risk, and formally signing onto the UN鈥檚 .
Read the full report:
Ian Nason, AV俱乐部 vice-president finance and administration, explains that Dal was one of the first universities in Canada to adopt ESG investment practices back in 2013. While those practices already took climate change-related factors into account, these new measures endorsed by the Board provide additional language and direction around climate change risks in the investment portfolio.
鈥淐limate change is a real concern globally, and that鈥檚 something that鈥檚 reflected across our operations as a university,鈥� says Nason.
AV俱乐部 and its partners have invested more than $93 million in sustainability-related projects on campus over the past decade. The university hosts Canada鈥檚 first College of Sustainability and holds a prestigious gold rating from STARS 鈥斕齮he world鈥檚 foremost rating system for sustainability across all aspects of higher education (teaching, research, operations).
Dal鈥檚 ESG practices
The new report marks the second time the Investment Committee has reported on fossil fuel investments at Dal. Its first report, adopted by the Board in November 2014, rejected a proposal for full divestment from fossil fuel-related investment funds but supported continued integration of ESG factors, which Dal had first adopted in its investment policies the year prior.
This new report follows the motion passed by the Board last February requesting the Investment Committee to assess the need for a third-party search for fossil free investment funds for AV俱乐部.
The Investment Committee鈥檚 review reached the following conclusions:
- AV俱乐部鈥檚 ESG integration includes climate change risk assessment along with other risks to improve performance.
- Better communication on AV俱乐部鈥檚 ESG integration and related activities is required.
- AV俱乐部 become a signatory to the Principles for Responsible Investing (鈥淧RI鈥�).
- Provide specific Climate Change Risk (鈥淐CR鈥�) communication.
- Continue to add private investments in renewable and clean-tech that have promise to meet return threshold targets.
As part of its review, the Investment Committee engaged a third-party to undertake an independent environmental scan of potential sustainable or fossil-fuel-free institutional investment products, but was unable to identify funds that both fit the definition of 鈥渇ossil fuel free鈥� and met Dal鈥檚 standards for risk-adjusted investment returns. The Investment Committee worked collaboratively with stakeholders听 鈥斕齣ncluding听 Senate committee and student Board reps 鈥� to explore approaches to address climate change risks in the university鈥檚 investment portfolio.
In addition to discussions with these groups, reports authored by the Senate (February 2018)听and听the student rep (September 2018) were helpful in demonstrating the need for clearer and more forceful language relating to climate change risks.
Reinforcing Dal's commitment
Among the Investment Committee report鈥檚 conclusions, endorsed by the Board, are that AV俱乐部鈥檚 investment manager reviews will include specific follow-up on climate change risk, and that AV俱乐部 continue to add private investments in renewable and clean tech that have promise to meet risk-adjusted return threshold targets.
Read the full report:
It also recommended AV俱乐部 become a formal signatory to the Principles for Responsible Investment (PRI). A UN-associated initiative that鈥檚 the world鈥檚 leading proponent of responsible investing, PRI鈥檚 principles are ones AV俱乐部 has looked to (and have followed) for some time, but the university was hesitant to formally sign on due to concerns about resources required to fully meet their standards. However, discussions between AV俱乐部 and PRI have identified that Dal is further ahead on PRI principles than many other signatories, and the Investment Committee felt signing on would be further indication of the university鈥檚 continued commitment to sustainable investments.
Finally, the report suggests AV俱乐部 update its investment website with clear direction around the climate change aspects of its ESG practices, with the following language recommended:
鈥淎V俱乐部 believes that anthropogenic climate change poses substantial risk (鈥淐CR鈥�) to human and natural systems, and that local and international efforts to reduce dependence on fossil fuels are critical to addressing this risk. AV俱乐部 believes how companies respond to this risk, and to efforts, is an important consideration when assessing long-term value. Companies which deny the reality of climate change and fail to take actions to address this risk, or oppose actions to mitigate climate change, may pose an unwarranted risk to the Endowment Funds. Staff鈥檚 formal reviews of investment managers will include specific questions on CCR in the respective investment strategies. Consistent with the Principles of Responsible Investing, related measures will be reviewed and reported on an ongoing basis.
Likewise, subject to assessment of business strategy, management and financial metrics, opportunities in alternative energy and other technologies to mitigate the impacts of CCR have the potential to be good investments."
In producing this latest report, the Investment Committee also examined what other Canadian universities are doing with regards to fossil fuel investment questions, surveyed Board members, engaged with the Advancement office for a discussion on donor investment inquiries, and met with Senate committee and student representatives. The Investment Committee feels this engagement, reflected in the report鈥檚 conclusions, strengthens the ESG elements of Dal鈥檚 investment program.
鈥淭he Investment Committee found the discussions with Senate representatives and student Board member representative to be thoughtful and productive,鈥� says the report. 鈥淭his has led the Investment Committee to identify further improvements to its overall approach to address not just climate change risks, but other ESG factors as well.鈥�
Building on success to date
The Investment Committee report also offers a sense of how successful Dal鈥檚 ESG practices have already been.
鈥淲e鈥檝e heard directly from our investment managers that Dal鈥檚 push around ESG practices is what led them to formally adopt ESG in their work,鈥� explains Colin Spinney, university treasurer.
In 2013, when Dal first adopted ESG principles, only a few of its 20+ investment managers were formally using ESG. Today, investment managers who have formally adopted ESG represent nearly 80% of the university鈥檚 overall portfolio.
As well, through ESG factor integration with ongoing risk/reward assessment, Dal鈥檚 investments in the top 100 coal and the top 100 oil and gas publicly-traded reserve holders globally have declined from 3.3% of the investment fund to 1.3% since integration of ESG factors was adopted six years ago.
鈥淎V俱乐部 has done a commendable job in walking the talk,鈥� said Investment Committee Chair Aubrey Palmeter, speaking on behalf of the report at Tuesday鈥檚 Board meeting. Board Chair Larry Stordy also took time in the meeting to recognize the advocacy efforts of the student group Divest Dal, thanking them for pushing fossil fuel investment issues onto the Board鈥檚 agenda.
Read also: Board Highlights 鈥� February 12, 2019
Student Board rep Kathleen Olds, who is also a Divest Dal organizer, spoke in favour of the motion. 鈥淸Climate change] is not a theory, it鈥檚 not a future possibility, it鈥檚 very real and happening right now, and affecting millions of people around the world,鈥� she said. 鈥淚f we continue to invest in companies who have climate change risks, we are undermining the fundamental mission of the university.鈥�