Furman University
PA-10: Sustainable Investment

In 2017, a $3,000,000 commitment was made to a US-based Impact Fund (Fund of Funds) that will invest in funds that focus on early stage companies that generate target returns as well as positive social and environmental impact. As of 6/30/21, $1,200,000 has been paid in. The Fund is currently invested in 9 underlying funds (e.g. Rethink Impact II, Material Impact Fund, and Obvious Ventures III). Generally, investment themes will be: Sustainable & Agriculture Technology, Education Technology, Healthcare, Fintech & Collaborative Economy. In March 2021, a follow on $1,500,000 was made in Impact Fund II. That fund is just beginning its investment period, but is expecting to invest is similar funds as listed above.

In addition to the $4,500,000 described above, Furman also recently committed $1,500,000 to its first Diversity Fund (of Funds), which will seek to make commitments to underlying fund managers where >33% of Key persons are represented by socially disadvantaged individuals as defined by US Code of Federal Regulations Title 13.

The Investment sub-Committee and staff support the University’s sustainability initiatives within the context of seeking long-term, risk-adjusted returns as outlined in this policy. While performing research and diligence, investment staff and the consultant will monitor impact opportunities and seek to understand how external investment managers incorporate environmental, social and governance (ESG) factors within the overall investment process.

Furman has initiated a process, through its external consultant, to study and ascertain how each external manager integrates both DEI & ESG (Environmental, Social, and Governance) factors into their firms’ management and investment processes. From an ESG perspective, there is a ranking system as well.As an extension of the aforementioned project, we inventoried each external manager’s UN Global Compact compliance, carbon intensity, exposure to highest emitting companies, percent of power generation from renewables, and exposure to fossil fuels. This exercise will continue to be honed and improved over time. For the DEI exercise, we attempted to measure ownership and investment team composition from a minority and female perspective. Some examples from Furman’s portfolio include:
• Multiple managers which are signatories to the UNPRI initiative: (ex/, Barings, PIMCO, Orion, Westwood, DRZ, MFS, Artisan, Mondrian, RWC, Incentive, Acadian – first quantitative firm to be UNPRI signatory)
· Multiple managers that have ESG Policies, ESG Statements, Responsible Investment Policies, Impact Investment Policy, etc.: (ex/ Mondrian, Greenspring, Orion, GEM Realty, Juniper, PIMCO, Barings, Westwood, DRZ, Incentive, Mondrian,
MFS - https://www.mfs.com/en-us/institutions-and-consultants/insights/sustainable-investing.html
Westwood - https://westwoodgroup.com/esg/
DRZ - https://drz-inc.com/our-process/unpri-signatory
Mondrian - https://www.mondrian.com/esg-at-mondrian/
TCI - https://www.tcifund.com/ESG
TCI actively engages on ESG to help the team understand, quantify and influence a company’s exposure to climate change-related risk and the way it is managing those risk. TCI is in the process of submitting shareholder resolutions (where possible) requesting that its portfolio companies disclose their current greenhouse gas emissions in a manner consistent with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), including their emission reduction strategy and progress made in their reduction strategy. TCI is also requesting that all shareholders be given a non-binding advisory vote in respect of such matters at annual meetings. To date, TCI has filed resolutions in respect of the following companies: Canadian Pacific Railway, Canadian National Railway, Moody’s Corp, S&P Global, Union Pacific Railroad, Charter Communications, Alphabet and Aena (resolution passed). Engagement letters sent to these companies can be found on the TCI website.
Artisan -https://www.artisanpartners.com/individual-investors/about-us/sustainability-esg.html
Holdings at 12/31 included NextEra Energy, Orsted AS, Vestas Wind Systems.

Incentive – https://www.incentive.com/sustainability-policy/
Acadian - https://www.acadian-asset.com/news-and-spotlights/esg

RWC – https://www.pionline.com/money-management/rwc-partners-picks-head-sustainability-and-integration
RWC adopts an approach where its investment teams have a high degree of autonomy with regards to their investment process and, as such, the approach to incorporation of ESG considerations adopted by each investment team will differ accordingly. The firm's approach therefore has been to formulate their environmental, social and governance incorporation strategy to take account of diversity while building a firm-wide framework that is consistent, robust and scalable over time.
The degree and nature of integration of ESG considerations into individual investment teams' processes may differ due to a number of factors. Some of the most common ones are as follows:

• The applicability of ESG factors to the team's investment process, style and the nature of inefficiencies that it aims to explore.
• The insufficient length of holding period that minimises the impact of any engagement activity.
• The availability of an instrument (with the voting rights) to engage with individual companies on ESG issues.
• Availability of relevant information and access to expertise on the range of ESG issues.

In line with their investment freedoms, each investment team is responsible for determining the potential financial impact and applicability of ESG considerations on their respective investment fields. RWC believes this is the best way to ensure meaningful and genuine integration of ESG aspects into the investment process.

In addition to the firm-level ESG policy, each investment team have a strategy-specific policy detailing the way and extent to which those aspects are incorporated in the investment approach. RWC encourage their clients who are interested to know more about responsible investment aspects of what we do to review both the firm-level ESG Policy and the investment team level ESG-related documents to formulate a holistic view on the issue.

· Incorporates ESG factors into the investment process, but no formal policy: (Westwood, MFS, Silchester, Colchester,
In addition, Furman has clean energy holdings (see examples below - unable to publicly specify exact position size and/or manager/company names) in each of the following asset classes:
· Public Equity – examples include companies that produce LED lighting, or test equipment for high-efficiency lighting systems. Firms that have a significant portion of their generation mix from wind/hydro. Other examples are renewable pure-plays or have enhanced energy efficiency as part of their revenue streams.
· Flexible Capital/Hedged Strategies – small positions in wind turbine manufacturers or wind farms. Also, we have exposure to pollution control firms.
Sculptor –example of one of our larger hedge funds https://www.sculptor.com/responsibility/responsible-investing
· Private Equity/Venture Capital- Greenspring has exposure mainly via their Impact funds and soon in their Diversity fund, once the first investment is made.

Here are examples of potential pipeline investments by one of Furman’s private capital investment managers, as described in their Q3 letter:
Tomato Greenhouse, Biogas to Renewable Natural Gas, Demand Response, Solar Financing, Carbon capture and sequestration.

· Credit/Fixed Income-several small positions in renewable energy companies
· Natural Resources-significant exposure in one Denham fund in renewable energy within the International Power segment.
One real estate manager (Grubb) includes significant efforts to sustainable practices around LEED/NGBS programs in addition to utilization of green tax credits & abatements when available.
Currently, Furman’s investment office is performing later-stage due diligence on a dedicated private impact fund.

The overwhelming majority of Furman’s invested assets are via commingled vehicles and therefore, proxy voting is performed by the external investment managers.

At least on a quarterly basis, each investment manager or fund shall communicate the following to the University and its investment consultant, who in turn may provide a summary for the University: (i) major changes in the manager’s investment outlook, strategy or portfolio structure; (ii) significant changes in the manager’s ownership, organizational structure, financial condition or senior personnel; and (iii) transactions, holdings and performance reports. Managers of long-only security strategies should be prepared to report corporate action and proxy voting records if requested.

Furman did divest from its publicly traded energy equities account two years ago in early 2019, however it intentionally didn’t make a public announcement. At the time of the account termination it was approximately $9MM or between 1.5%-2.0% of the endowment pool.

To share best practices surrounding all areas of investment management, Furman’s investment office networks with multiple investor networks: other college & university investment offices, consultants, involvement on the editorial board of The Investment Institute, attendance at institutional investor conferences where ESG topics are often discussed in panel format, etc. The university’s consultant is active member of the following partnerships: Ceres, PRI, IEN, BASIC Boston, USSIF, etc. Furman’s investment office has recently had direct conversations with Intentional Endowments Network (IEN).