Cornell University
PA-10: Sustainable Investment

Sustainable Industries: Cornell is an investor in US timberlands that are certified by the Sustainable Forestry Initiative. This category of holdings also includes investments in renewable energy, energy efficiency, energy storage, environmental credit creation, and clean technologies. Sustainable Investment Funds: As part of the fossil fuel moratorium, Cornell initiated a search for sustainable investment funds. That search has culminated in two funds, thus far, that seek to benefit from a transition to a lower carbon economy. The first fund invests in carbon allowances and is long companies aligned with the energy transition and is short carbon-intensive companies. The other fund seeks to capitalize on and support the highly material-intensive energy transition through investments in industrial metals (e.g., copper, nickel, etc.). These funds join an existing lineup of sustainability-focused funds that Cornell has been a longstanding investor in.

Additionally, about 83% of Cornell’s long-term investment assets are handled by managers who are UNPRI signatories or have another strong ESG/SRI framework in place to support their investment decision-making processes. “Sustainable investments,” based on the STARS criteria, account for 2.45% of the investment pool because of the strict qualifications for positive sustainability investments outlined by STARS. As such, a much smaller percentage (2.45% vs 83%) falls into one of the six recognized categories listed in the STARS criteria.
Cornell's focus is far boarder than this narrow definition, and seeks for greater impact over the medium and long-term.

All information is as of June 30, 2021.

The Board of Trustees’ Investment Policy Statement (IPS) stipulates that investment decisions be made with social, environmental, and similar aspects evaluated as an integral part of the financial considerations involved.
In adhering to the Board of Trustees’ IPS, Cornell formally promotes responsible investment practices by utilizing and monitoring managers who have formally adopted ESG/SRI/UNPRI/etc. considerations in their investment process. Currently, about 83% of Cornell’s long-term investment assets are handled by managers who are UNPRI signatories or have another strong ESG/SRI framework in place to support their investment decision-making processes. Cornell provides a copy of its proxy voting policy to new and existing managers, annually reviews LTI managers with respect to their ESG/ SRI practices and incorporates questions into its due diligence processes (both investment and operational due diligence), among other things, which require managers to notify Cornell if compliant with UNPRI or other responsible investor networks (or frameworks), while encouraging them to consider the relevance of such networks (frameworks) if the firm is not affiliated.

Cornell's policies improve its diligence of potential managers and understanding of existing managers. Annually, Cornell reviews its managers with respect to their ESG practices, reaching out to each manager individually to request a copy of its ESG policy and a description of the ESG factors it considers in its investment process. This recurring exercise provides guidance to managers who are in the early stages of adopting a policy to help them establish a firm-wide document while reaffirming Cornell's commitment to the space.

Cornell utilizes guidance on proxy voting for both its separately managed accounts as well as guiding principles on proxy voting for its commingled vehicles.
Managers must adhere to Cornell’s proxy voting guidelines while they are engaged in a contractual relationship with Cornell’s Investment Office.

The proxy voting guidelines ask managers to vote proxies in a manner that maximizes the long-term sustainable economic value of the company. Cornell also retains the right to request a record of proxies voted in a manner inconsistent with its guidelines and to take over and exercise voting rights with respect to any securities or assets held in an account with the manager. If the Investment Office suspects (based on a manager review meeting, conversations with knowledgeable professionals, press reports, etc.) that a manager is violating the proxy voting requirements Cornell would act on our right to vote proxies directly.

Because Cornell has very few directly-held investments, it provides its investment managers latitude to engage corporations in its portfolio--including the ability, among others, to introduce shareholder resolutions, or proposals, to portfolio companies that encourage corporate responsibility and discourage practices that are unsustainable or unethical. Moreover, in recent years, OUI has undertaken two large initiatives with our managers on environmental and social issues. The first initiative promoted the adoption of responsible investment principles (as outlined by the United Nations Principles for Responsible Investment) and the second initiative emphasized the value Cornell places on diversity and inclusion (values that are fully consistent with our institution's founding principles and current practices).
Through these initiatives, we expect our managers to aid in advancing these issues through their investment practices and through their engagement with portfolio companies

Under Cornell’s processes, a negative screen list derives from decisions adopted through our CIR structure. The decisions create a running/dynamic set of restrictions. Most recently, Cornell instituted a moratorium on new private investments focused on fossil fuels. This moratorium will increase the list of prohibited investments, which previously included seven oil companies in Sudan that were instrumental in financing genocide in the Darfur region and various holdings in the equities of private prisons. Cornell banned investments in the Sudanese oil companies in 2006 and divested from private prisons in 2016.

Negative screens remain in place where relevant. Negative screening and divestment efforts have encompassed both pooled funds (Cornell’s investment office does not invest in mutual funds) and separately managed accounts. When Cornell banned investments in Sudanese oil companies, letters were sent to all of our managers. A similar process and review occurred at the time of divestment from private prisons. The fossil fuel moratorium is the only effort focused on new, private investments because that is where our portfolio had the most significant exposure.

Cornell participates in forums and surveys to share best practices with peer academic institutions. The university also encourages managers to review the relevance of UNPRI or other ESG frameworks in their internal investment process.