By SHANNON O. WELLS
The inaugural report on Pitt’s commitment to including environmental, social and governance (ESG) factors in managing its Consolidated Endowment Fund now has its own dedicated web page. The online site provides a user-friendly portal and overview showing how these elements factor into Pitt’s decision-making process regarding investments.
“The purpose of the new ESG webpage is to provide greater clarity regarding how ESG factors are applied in the investment decision-making process of the University’s Consolidated Endowment Fund (CEF),” said Jeffer Choudhry, Pitt’s chief investment officer. “We hope the University community sees the new page as an effort to enhance overall awareness on this important topic.”
Officially launched in July, the page spotlights the ESG report that was initially published in March. The report outlines the goal of “fully integrating” ESG factors into the University’s decision-making processes based on “the core belief that supporting responsible business practices also supports strong investment outcomes,” a statement on the page reads.
The report emerged from Pitt’s formal ESG policy statement, adopted in March 2020, that clarifies how ESG factors are incorporated into the endowment’s investment-based decisions. It also addresses the Pitt endowment’s fossil-fuel investment exposure as determined by Board of Trustees’ Ad Hoc Committee on Fossil Fuels.
The webpage explains that the inaugural ESG report was delayed to accommodate investment statements from fiscal year 2021 as well as the process of hiring a chief investment officer. Choudhry was hired in January to replace Gregory Schuler, who stepped down in 2021.
Hari Sastry, Pitt senior vice chancellor and chief financial officer, noted earlier that while the report itself is new, the University has incorporated many ESG-oriented concepts into its investment practices since 1990. Choudhry elaborated that “Pitt’s ESG policy builds on that approach and ensures a more consistent and comprehensive approach to evaluating investment opportunities for the endowment.”
The University’s investment exposure to fossil fuel has recently decreased, in part because of declines of energy companies in the public markets and Pitt’s fewer private-market investments. The report shows a decline in the endowment’s total portfolio exposure to fossil fuels from 10 percent as of June 30, 2015, to 5.9 percent as of June 30, 2021. The latter figure reflects Pitt’s total fossil fuel exposure, with 1.4 percent of that public-market investments and 4.5 percent private. Figures from the 2021-22 fiscal year ended June 30, 2022, will be available in September.
“As mentioned in the ESG report, the private holdings are projected to decrease to zero by 2035 as our investment managers liquidate them over time,” Choudhry said. “The public portion is likely to fluctuate in line with publicly traded energy companies.”
The report also notes that the Office of Finance has made no new fossil fuel investments since February 2021, when the ad hoc committee’s report was issued. “Fossil fuel exposure in the CEF’s public market holdings is expected to remain low as the exploration and production of fossil fuels are expected to continue to become less attractive over time,” it says.
“We know and expect that the CEF will generally fluctuate with the broader market,” Choudhry noted. “Fortunately, the University has the benefit of being a patient, long-term investor that can ride out short-term gyrations. We also benefit from partnering with talented third-party investment managers that can take advantage of these fluctuations to help mitigate risk.”
While the report notes the investment industry’s lack of quantitative measurement standards limits the ESG report’s utility and Pitt’s ability to gauge progress, Choudhry said the report’s value is substantial and will increase once such limitations are overcome.
“The ESG report is an important step in our efforts to increase transparency regarding our investment processes,” he said. “This report includes more information about endowment investments than what (Pitt has provided) in the past. We look forward to the day when there will be standardized set of industry-established metrics by which to gauge ESG investing. As those standards are developed, we will explore including those in future reports.”
To be on par with peer university endowments, Pitt’s finance office engaged a sustainable investment-oriented consulting firm to advise in developing ESG policy. The office reviewed ESG and/or socially responsible investment (SRI) policies published by 19 public and private peer universities, including those with similar endowment sizes.
Factors Pitt considers when evaluating investment risk include energy efficiency, hazardous materials management, climate change, water and land management, data protection and privacy, human rights, labor standards, product safety, accounting and audit standards, bribery and corruption, business ethics and regulatory compliance, the website says.
“Pitt is one of the first public universities to publish an ESG report, and we want to enhance awareness and understanding regarding the endowment’s investment practices,” Choudhry said, adding he regularly meets with key student organizations and spoke at the Chancellor's Advisory Council on Sustainability in June with the goal of improving “overall awareness” and creating ongoing dialogue. “I look forward to continued engagement with the Pitt community on our ESG efforts.”
Shannon O. Wells is a writer for the University Times. Reach him at email@example.com.
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