Our Investment Beliefs
As a long-term investor of this capital, we understand that sustainability risks and opportunities are material and directly impact business profitability over the long run. We view climate change, which cuts across every other sustainability issue, as the most urgent global challenge of our time (we further elaborate on our climate-related investment beliefs in our Climate Change Investment Statement). Therefore, companies that proactively manage for these pressing environmental, social and governance (ESG) issues are best positioned to survive — and thrive — in a resource-constrained world.
Given this understanding, WRI has committed to invest our endowment in a prudent manner that incorporates how companies manage ESG risks and opportunities, while achieving a market return. This approach will help maintain and increase our financial resources to provide continuous support to carry out our mission.
WRI has been a signatory to the Principles of Responsible Investment since 2016.
Our Sustainable Investment Strategy
WRI has partnered with an Outsourced Chief Investment Officer (OCIO) to manage our endowment and help implement our sustainable investment strategy.
Even before our commitment to sustainable investment, WRI faced challenges to effectively managing and overseeing our assets in-house. The added task of integrating ESG across the portfolio made it even more difficult, especially given the complex investment structure of the portfolio. An OCIO partnership, which the latest research shows to be best practice for a smaller endowment like ours, has helped resolve these issues. The partnership has brought a dedicated and accountable staff to facilitate a more nimble, strategic investment operation.
In collaboration with our OCIO partner, WRI uses a tailored approach to proactively integrate sustainability across our endowment portfolio. We follow a three-part framework that structures the portfolio to minimize exposure to sustainability risks, while optimizing the opportunities of a changing world.
- Reduce exposure to ESG risks through passive strategies: To minimize exposure to various climate and sustainability risks, we include passive strategies that under-weight (or exclude, in the case of fossil fuels) investments in companies with poor sustainability records and favor investments in companies that are helping to solve the world's sustainability problems. This allows us to achieve a broadly diversified portfolio while managing for potential downside risks.
- Drive value creation through active managers with strong competency for ESG integration: To ensure our portfolio accounts for broad sustainability risks and opportunities, we prioritize active investments constructed through holistic and data-driven ESG integration processes. This requires identifying and selecting active managers that demonstrate best practices on ESG competencies. These are managers who not only understand sustainability issues, but are equipped to evaluate the potential impact on a portfolio and make decisions accordingly. Our OCIO uses the following framework to evaluate potential managers along ESG competence:
- Firm Ethos: commitment to ESG and sustainable practices in its business management
- ESG Philosophy: commitment to sustainability as core to the firm's investment philosoph
- Process: formal incorporation of ESG factors into the investment process, with the objective of enhancing risk-adjusted returns.
- Team & Resources: presence and quality of dedicated team and resources for integrating ESG into the investment process.
- Engagement: record of active engagement with portfolio companies on ESG themes.
- Allocate capital to solutions and capture growth opportunities through private market investments with measurable positive impacts: To help advance climate and sustainability solutions while capitalizing on the potential opportunities associated with these issues, we have designated 15 percent of WRI's portfolio to a private market "impact" carve-out. Through this allocation, we will proactively invest in companies that target environmental and social solutions and achieve measurable positive impacts in areas such as renewable energy development.
Our Climate Change Investment Statement elaborates on our approach to holistically integrate climate-related factors as part of this ESG strategy. It further details our plan for aligning WRI’s portfolio with the goals of the Paris Agreement, including key steps and interim targets for transitioning the portfolio to net-zero GHG emissions by 2050 and for supporting the transition to a climate-resilient and just economy.
WRI is committed to integrating ESG considerations across the entire portfolio, deploying all of our endowment capital to sustainable investments. An important aspect of this commitment will be to maintain competitive returns, as it is our hope to demonstrate that a sustainable investing approach can help asset owners preserve and grow their financial resources.
Sharing our Endowment Experience
We will periodically update this section to include materials that may serve as a reference or resource to other organizations. These are not intended to serve as guidance, but rather as examples of different elements of a sustainable investment strategy.
- WRI's Investment Policy Statement
- WRI’s Climate Change Investment Statement (full text)
- WRI’s Climate Change Investment Statement (overview)
- WRI's 2016 Request for Proposal for an Outsourced Chief Investment Officer
- WRI’s PRI Transparency Reports
- We published a detailed account of our endowment journey from 2013 to 2018 in the WRI Commentary, "Learning By Doing: Lessons from WRI's Sustainable Investing Journey".
- 4 Lessons from WRI’s Sustainable Investing Journey: A CFO’s Perspective
- Structuring an Endowment to Align with Paris Agreement Goals: Early Insights from WRI’s Climate Change Investment Efforts
Along with being a PRI asset owner signatory, WRI has also joined the Intentional Endowments Network and Confluence Philanthropy. These initiatives provide opportunities for us to engage in peer-to-peer learning opportunities with other asset owners and support broader efforts to advance sustainable investment practices in the mainstream investor marketplace.
WRI is also an active participant in the Climate Action 100+, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
Beyond WRI's Endowment
WRI's journey to sustainable investing stems from the Institute's belief that sustainability risks and opportunities are material and directly impact business profitability over the long term. We believe that our journey — coupled with WRI research — is relevant to all investors looking to secure their financial resources over the long term.
WRI's Sustainable Investing Initiative uses WRI's investment experience, data, research and convening power to advance sustainable investing in the mainstream investor marketplace. We collaborate with institutional investors and other market participants to inform, develop, and promote widespread adoption of sustainable investments strategies.
Through this initiative, WRI is working toward a future where all investors consider sustainability as part of fundamental decision-making and where global markets incorporate company sustainability performance into valuation. To learn more about this work, see our Sustainable Investing Initiative.
For more information contact Giulia Christianson.