Cornell University
PA-10: Sustainable Investment

Sustainable Industries: This includes any investment directly in an entire industry sector as well as holdings of companies whose entire business is sustainable. Cornell is an investor in U.S. 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: This includes funds with a mission focused on investing in sustainable sectors or industries, as well as any funds that are focused on purchasing bonds with sustainable goals. As part of the aforementioned fossil fuel moratorium, Cornell initiated a search for sustainable investment funds. That search has culminated in four 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 second fund seeks to capitalize on and support the highly material-intensive energy transition through investments in industrial metals critical to the carbon energy transition (e.g., copper, nickel, etc.). The third fund seeks to make impact investments and utilize stakeholder activism to achieve positive environmental and social change in eight impact areas inspired by the UN sustainable development goals including climate change mitigation, biodiversity preservation, and sustainable food, agriculture, and land use. Finally, the fourth fund invests in platforms and companies focused on renewable energy generation and storage, distributed energy resources and energy efficiency, renewable fuels, and electrification infrastructure. These funds join an existing lineup of sustainability-focused funds that Cornell has been a longstanding investor in. Additionally, about 83.8% 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. All information is as of June 30, 2023.

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 83.8% 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. Cornell reviews its managers annually 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 of investment managers while they are engaged in a contractual relationship with Cornell’s Investment Office. Cornell asks managers to vote proxies in a manner that maximizes the long-term sustainable economic value of the company. In the case of managers who use a proxy voting service such as ISS, managers must use their discretion and report back to the university a record of all proxies voted inconsistently with its guidelines, at Cornell’s request. Cornell retains the right to 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 its 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.

Cornell’s negative screening and divestment efforts encompass both pooled funds and separately managed accounts. 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 increases the list of prohibited investments, which currently also includes several oil companies in Sudan that were instrumental in financing genocide in the Darfur region, and previously included 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. When Cornell banned investments in Sudanese oil companies, letters were sent to all of its managers, and a similar process and review occurred at the time of divestment from private prisons. Restrictions on investments in private prisons currently remain in place with certain relevant accounts.

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.