| Overall Rating | Platinum |
|---|---|
| Overall Score | 85.50 |
| Liaison | Breeana Sylvas |
| Submission Date | Feb. 28, 2022 |
University of California, Merced
PA-10: Sustainable Investment
| Status | Score | Responsible Party |
|---|---|---|
|
3.19 / 5.00 |
Breeana
Sylvas Assistant Director Sustainability |
"---"
indicates that no data was submitted for this field
Part 1. Positive sustainability investment
14,000,000,000
US/Canadian $
Value of holdings in each of the following categories:
| Value of holdings | |
| Sustainable industries (e.g., renewable energy or sustainable forestry) | 748,200,000 US/Canadian $ |
| Businesses selected for exemplary sustainability performance (e.g., using criteria specified in a sustainable investment policy) | 326,200,000 US/Canadian $ |
| Sustainability investment funds (e.g., a renewable energy or impact investment fund) | 52,500,000 US/Canadian $ |
| Community development financial institutions (CDFIs) or the equivalent | 36,300,000 US/Canadian $ |
| Socially responsible mutual funds with positive screens (or the equivalent) | 0 US/Canadian $ |
| Green revolving funds funded from the endowment | 0 US/Canadian $ |
If any of the above is greater than zero, provide:
The examples below are not the comprehensive list of the investments referenced above, but rather illustrative examples.
SUSTAINABLE INDUSTRIES:
● Pattern Energy, Upper Bay Infrastructure, Goldman Sachs Renewable Power: renewable power & battery storage developers.
● Various public equity and real asset holdings in companies that provide alternative fueling infrastructure development, stationary fuel cells, solar equipment, energy efficiency technologies, agtech, and sustainable water technologies.
SUSTAINABILITY PERFORMANCE:
● Ownership of numerous LEED and/or EnergyStar certified green buildings.
SUSTAINABLE INVESTMENT FUNDS:
● Congruent Ventures: a venture fund focused on new solutions to sustainability challenges, including renewable energy, energy efficiency and the circular economy.
● TPG Rise Fund: impact investment fund specifically designed to address challenges identified by the UN’s Sustainable Development Goals.
Description of community development financial institutions (CDFI) investments:
UC is invested in several entities that promote financial inclusion and as such are functionally equivalent to CDFI’s. One of our investments, for example, is a whole loan purchase program, with a private company, that has funded approximately 48,000 personal loans to consumers who are unable to secure loans from banks / mainstream credit providers (as of 8/15/19). Of the approximate 48,000 loans, over 23,000 are debt consolidation loans (“C+ loans”). C+ loans enable consumers to consolidate personal debt and rehabilitate credit. Credit rehabilitation is evidenced by the fact that performing C+ borrowers have experienced meaningful FICO score improvement (i.e. 50-100 points) over the term of the loan. This FICO score improvement can help these consumers access more traditional forms of credit upon completion of the program.
SUSTAINABLE INDUSTRIES:
● Pattern Energy, Upper Bay Infrastructure, Goldman Sachs Renewable Power: renewable power & battery storage developers.
● Various public equity and real asset holdings in companies that provide alternative fueling infrastructure development, stationary fuel cells, solar equipment, energy efficiency technologies, agtech, and sustainable water technologies.
SUSTAINABILITY PERFORMANCE:
● Ownership of numerous LEED and/or EnergyStar certified green buildings.
SUSTAINABLE INVESTMENT FUNDS:
● Congruent Ventures: a venture fund focused on new solutions to sustainability challenges, including renewable energy, energy efficiency and the circular economy.
● TPG Rise Fund: impact investment fund specifically designed to address challenges identified by the UN’s Sustainable Development Goals.
Description of community development financial institutions (CDFI) investments:
UC is invested in several entities that promote financial inclusion and as such are functionally equivalent to CDFI’s. One of our investments, for example, is a whole loan purchase program, with a private company, that has funded approximately 48,000 personal loans to consumers who are unable to secure loans from banks / mainstream credit providers (as of 8/15/19). Of the approximate 48,000 loans, over 23,000 are debt consolidation loans (“C+ loans”). C+ loans enable consumers to consolidate personal debt and rehabilitate credit. Credit rehabilitation is evidenced by the fact that performing C+ borrowers have experienced meaningful FICO score improvement (i.e. 50-100 points) over the term of the loan. This FICO score improvement can help these consumers access more traditional forms of credit upon completion of the program.
Percentage of the institution's investment pool in positive sustainability investments:
8.31
Part 2. Investor engagement
Sustainable investment policy
Yes
None
A copy of the sustainable investment policy:
None
The sustainable investment policy:
“The Office of the Chief Investment Officer shall incorporate environmental sustainability, social responsibility, and governance (ESG) into the investment evaluation process as part of its overall risk assessment in its investments decision making. ESG factors are considered with the same weight as other material risk factors influencing investment decision making.
The Office of the Chief Investment Officer uses a proprietary sustainability framework to provide core universal principles that inform the decisions and assist in the process of investment evaluation. The Office of the Chief Investment Officer manages the [endowment] consistent with these sustainability principles. The Framework can be found on the Office of the Chief Investment Officer website in the sustainability section.”
Our Framework for Sustainable Investing can be found here:
https://www.ucop.edu/investment-office/_files/sustainable-investment-framework.pdf
The Office of the Chief Investment Officer uses a proprietary sustainability framework to provide core universal principles that inform the decisions and assist in the process of investment evaluation. The Office of the Chief Investment Officer manages the [endowment] consistent with these sustainability principles. The Framework can be found on the Office of the Chief Investment Officer website in the sustainability section.”
Our Framework for Sustainable Investing can be found here:
https://www.ucop.edu/investment-office/_files/sustainable-investment-framework.pdf
None
Does the institution use its sustainable investment policy to select and guide investment managers?:
Yes
A brief description of how the sustainable investment policy is applied:
We approach sustainability, at every stage of the investment process, both from a risk management and investment opportunity perspective. We believe that our focus on sustainability, including in particular climate change, food and water security and the circular economy, can help us create better risk-adjusted returns over the long term.
After determining that the risks posed by fossil fuel reserve stranded assets warranted additional changes to our portfolio , UC’s endowment sold its holdings of companies that own any amount of fossil fuel reserves, beginning in 2019 and concluding in 2020. As a result, the UC endowment has $1.6 billion invested in the MSCI ACWI IMI ex Tobacco ex Fossil Fuel Index, available at: https://www.msci.com/documents/10199/533e1509-9bc0-bdd4-946a-7736245c8c4e
In January, 2020, the endowment made a $30 million commitment to Upper Bay Infrastructure Partners through which we invested in new solar energy and battery storage projects.
As a result of UC endowment’s cumulative investments in clean energy, over 500 megawatts of new solar, wind and battery storage have been installed in the US, India, Canada, Ireland and Japan. What’s more, the University is doing well by doing good, earning a very competitive rate of return on its clean energy investments.
With regard to investment managers, we engage in ongoing dialogue with our external managers to ensure they understand the priority we place on sustainability and to make sure we understand how they assess ESG risks and opportunities in their investment process. We have also added a description of our Sustainable Investing Framework into our standardized external manager contracts and communications, including specific information about securities that should not be purchased on our behalf. As part of the overall due diligence process and ongoing assessment, we score investment managers against our sustainability framework.
After determining that the risks posed by fossil fuel reserve stranded assets warranted additional changes to our portfolio , UC’s endowment sold its holdings of companies that own any amount of fossil fuel reserves, beginning in 2019 and concluding in 2020. As a result, the UC endowment has $1.6 billion invested in the MSCI ACWI IMI ex Tobacco ex Fossil Fuel Index, available at: https://www.msci.com/documents/10199/533e1509-9bc0-bdd4-946a-7736245c8c4e
In January, 2020, the endowment made a $30 million commitment to Upper Bay Infrastructure Partners through which we invested in new solar energy and battery storage projects.
As a result of UC endowment’s cumulative investments in clean energy, over 500 megawatts of new solar, wind and battery storage have been installed in the US, India, Canada, Ireland and Japan. What’s more, the University is doing well by doing good, earning a very competitive rate of return on its clean energy investments.
With regard to investment managers, we engage in ongoing dialogue with our external managers to ensure they understand the priority we place on sustainability and to make sure we understand how they assess ESG risks and opportunities in their investment process. We have also added a description of our Sustainable Investing Framework into our standardized external manager contracts and communications, including specific information about securities that should not be purchased on our behalf. As part of the overall due diligence process and ongoing assessment, we score investment managers against our sustainability framework.
Proxy voting
Yes
None
A copy of the proxy voting guidelines or proxy record:
None
A brief description of how managers are adhering to proxy voting guidelines:
With limited exceptions, UC Investments does not delegate proxy voting to its managers. In the rare instances in which managers vote our shares, we ask that they do so consistent with our proxy voting guidelines. When they intend to vote otherwise, they contact us and we discuss the matter prior to the vote.
Proxy Voting Dashboard: https://vds.issgovernance.com/vds/#/MzY1OQ==/
Proxy Voting Dashboard: https://vds.issgovernance.com/vds/#/MzY1OQ==/
Shareholder resolutions
Yes
Examples of how the institution has engaged with corporations in its portfolio about sustainability issues during the previous three years:
We augment our shareholder engagement efforts by working in collaboration with other institutional investors through the Bank of Montreal’s responsible engagement overlay (“reo”) service. Working through reo, UC Investments is able to amplify our voice as a shareholder in order to improve our investee companies’ long-term performance on material environmental, social and governance issues, including climate change risks. In the past year, we engaged directly - through letters and dialogue - with senior management and boards of directors of 121 companies on climate change and environmental issues. Examples of our engagement leading to positive change in 2020 include:
1. Chinese consumer discretionary products company: Enhanced the incorporation of environmental considerations into product design and development. The company also launched a sportswear line featuring articles made of recycled plastic. This move can help improve brand reputation and contribute to the optimisation of production costs. We had encouraged the company to make environmental factors part of the product design and development process.
2. Taiwanese information technology company: Agreed to buy the entire power production from Orsted's third offshore wind farm in Taiwan. The 20-year deal, the world’s largest renewables corporate power purchase agreement, will help mitigate fluctuating energy costs while contributing to Taiwan's energy transition. We had encouraged the company to take steps to support the transition to a low carbon economy.
3. Two Brazilian food companies: One company launched a digital ledger to trace all of its livestock back to origin. The company said that within five years its direct suppliers would be obliged to monitor their own supply chains and ensure they have documentation to prove the origins of the cattle. This is a significant development that will help curb deforestation across a number of Brazilian biomes, including the Amazon and, ultimately, contribute to a more resilient supply chain. It will also help the company manage reputational and commercial risks. In our multi-year engagement with the company, we encouraged it to address deforestation-related risks by improving supply chain traceability.
Another company launched an ambitious plan to monitor all indirect suppliers in the Amazon by 2025 and Brazil’s Cerrado savanna region by 2030, using chips in cattle, satellite monitoring, blockchain and risk maps, as well as schemes to help farmers previously involved in deforestation produce sustainably. This is a significant step to improve management of deforestation risks in the beef supply chain. Together with other investors, we met with the three largest Brazilian meat companies in 2020 to ask them to step up their efforts to combat deforestation in the Amazon.
Going forward, we intend to also engage a number of global financial institutions that have loan and underwriting portfolios exposed to climate change-related risks. The vast majority of major global banks lack sufficiently robust systems and practices to address climate risk. This can lead, in the mid-to long-term, to lower credit quality loan and underwriting portfolios and negatively impact profitability metrics.
In 2017 - 2019, the endowment engaged directly with corporations in our portfolio regarding gender and racial diversity on the Board of Directors. Specifically, in coalition with other large public California institutional investors, we wrote to every California-based company in our portfolio that did not have at least one woman on its board. We asked for a dialogue with the Board’s Nominating & Governance Committees and, as a result, spoke directly with dozens of companies over the past three years. Our specific recommendations to the Nominating & Governance Committees included incorporating procedures by which women and diverse racial and ethnic backgrounds are identified for consideration in every search for a board nominee (a practice commonly known as “the Rooney Rule,” after its successful use in the National Football League.)
1. Chinese consumer discretionary products company: Enhanced the incorporation of environmental considerations into product design and development. The company also launched a sportswear line featuring articles made of recycled plastic. This move can help improve brand reputation and contribute to the optimisation of production costs. We had encouraged the company to make environmental factors part of the product design and development process.
2. Taiwanese information technology company: Agreed to buy the entire power production from Orsted's third offshore wind farm in Taiwan. The 20-year deal, the world’s largest renewables corporate power purchase agreement, will help mitigate fluctuating energy costs while contributing to Taiwan's energy transition. We had encouraged the company to take steps to support the transition to a low carbon economy.
3. Two Brazilian food companies: One company launched a digital ledger to trace all of its livestock back to origin. The company said that within five years its direct suppliers would be obliged to monitor their own supply chains and ensure they have documentation to prove the origins of the cattle. This is a significant development that will help curb deforestation across a number of Brazilian biomes, including the Amazon and, ultimately, contribute to a more resilient supply chain. It will also help the company manage reputational and commercial risks. In our multi-year engagement with the company, we encouraged it to address deforestation-related risks by improving supply chain traceability.
Another company launched an ambitious plan to monitor all indirect suppliers in the Amazon by 2025 and Brazil’s Cerrado savanna region by 2030, using chips in cattle, satellite monitoring, blockchain and risk maps, as well as schemes to help farmers previously involved in deforestation produce sustainably. This is a significant step to improve management of deforestation risks in the beef supply chain. Together with other investors, we met with the three largest Brazilian meat companies in 2020 to ask them to step up their efforts to combat deforestation in the Amazon.
Going forward, we intend to also engage a number of global financial institutions that have loan and underwriting portfolios exposed to climate change-related risks. The vast majority of major global banks lack sufficiently robust systems and practices to address climate risk. This can lead, in the mid-to long-term, to lower credit quality loan and underwriting portfolios and negatively impact profitability metrics.
In 2017 - 2019, the endowment engaged directly with corporations in our portfolio regarding gender and racial diversity on the Board of Directors. Specifically, in coalition with other large public California institutional investors, we wrote to every California-based company in our portfolio that did not have at least one woman on its board. We asked for a dialogue with the Board’s Nominating & Governance Committees and, as a result, spoke directly with dozens of companies over the past three years. Our specific recommendations to the Nominating & Governance Committees included incorporating procedures by which women and diverse racial and ethnic backgrounds are identified for consideration in every search for a board nominee (a practice commonly known as “the Rooney Rule,” after its successful use in the National Football League.)
Divestment efforts and negative screens
Yes
A brief description of the divestment effort or negative screens and how they have been implemented:
We track the MSCI ACWI IMI ex Tobacco ex Fossil Fuel Index, which screens out roughly 313 publicly traded companies that own “proved and probable” reserves of thermal coal, oil and gas. We apply the same screening definition (i.e., any amount of fossil fuel reserves) to our investments in fixed income and the private asset classes (private equity, absolute returns, real assets and real estate), thus comprehensively covering the entire endowment.
In addition, UC Investments applies other negative screens to its investments, namely: companies doing business in Sudan; tobacco related businesses; firearms manufacturers; and businesses which operate private prisons in the United States.
In addition, UC Investments applies other negative screens to its investments, namely: companies doing business in Sudan; tobacco related businesses; firearms manufacturers; and businesses which operate private prisons in the United States.
Approximate percentage of endowment that the divestment effort and/or negative screens apply to:
100
Investor networks
Yes
None
A brief description of the investor networks and/or collaborations:
UC Investments participates in a number of investor networks to engage in policy advocacy and to share best practices, including, e.g., Climate Action 100+, FAIRR Collier, Ceres Investor Network on Climate Change & Sustainability, the UN Principles for Responsible Investment, the Intentional Endowments Network, the Council of Institutional Investors, the Task Force on Climate-related Financial Disclosures and the Thirty Percent Coalition.
Importantly, in 2020, in order to amplify our voice as a shareholder on key sustainability issues, UC Investments enlisted the services of the responsible engagement overlay team at the Bank of Montreal - https://www.bmogam.com/us-en/institutional/wp-content/uploads/2020/06/us_introducing-reo_responsible-investing.pdf
Along with other institutional investors whose assets total roughly $465 billion, UC Investments actively engaged with dozens of publicly traded companies on key environmental and climate issues in 2020.
Influential investors from leading asset management firms, public pension funds, labor and socially-responsible investment funds, foundations, endowments and family offices make up the Ceres Investor Network. Ceres Investor Network members engage and collaborate on environmental, social, and governance issues to advance leading investment practices, corporate engagement strategies and policy solutions through working groups and shared learning opportunities, such as webinars and events. Ceres works with investors specifically to better manage carbon, water and supply chain risks, and ramp up global investments in clean energy and sustainable food and water systems. In addition, Ceres Investor Network members pressure stock exchanges and capital market regulators to improve climate and sustainability risk disclosure, and opportunities to advocate for stronger climate, clean energy and water policies at all levels of government.
The Intentional Endowments Network is a peer learning network of colleges, universities, and other mission-driven institutional investors working together to achieve their risk and return objectives through investment actions that create a thriving, sustainable economy.
The FSB Task Force on Climate-related Financial Disclosures (TCFD) will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The Task Force will consider the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. The work and recommendations of the Task Force will help companies understand what financial markets want from disclosure in order to measure and respond to climate change risks, and encourage firms to align their disclosures with investors’ needs.
The United Nations-supported Principles for Responsible Investment is an international network of investors working together to put the six principles into practice.
The Council on Institutional Investors is an international non-profit organization representing the voice of corporate governance, supporting effective corporate governance practices and strong shareowner rights.
The Thirty Percent Coalition, founded in 2011, is a pioneer advocating for diversity in the corporate boardroom. Our vision is for senior leadership and board of directors to reflect the gender, racial and ethnic diversity of the United States workforce. The mission of the Thirty Percent Coalition is to promote gender diversity, including women of color, on corporate boards.
Importantly, in 2020, in order to amplify our voice as a shareholder on key sustainability issues, UC Investments enlisted the services of the responsible engagement overlay team at the Bank of Montreal - https://www.bmogam.com/us-en/institutional/wp-content/uploads/2020/06/us_introducing-reo_responsible-investing.pdf
Along with other institutional investors whose assets total roughly $465 billion, UC Investments actively engaged with dozens of publicly traded companies on key environmental and climate issues in 2020.
Influential investors from leading asset management firms, public pension funds, labor and socially-responsible investment funds, foundations, endowments and family offices make up the Ceres Investor Network. Ceres Investor Network members engage and collaborate on environmental, social, and governance issues to advance leading investment practices, corporate engagement strategies and policy solutions through working groups and shared learning opportunities, such as webinars and events. Ceres works with investors specifically to better manage carbon, water and supply chain risks, and ramp up global investments in clean energy and sustainable food and water systems. In addition, Ceres Investor Network members pressure stock exchanges and capital market regulators to improve climate and sustainability risk disclosure, and opportunities to advocate for stronger climate, clean energy and water policies at all levels of government.
The Intentional Endowments Network is a peer learning network of colleges, universities, and other mission-driven institutional investors working together to achieve their risk and return objectives through investment actions that create a thriving, sustainable economy.
The FSB Task Force on Climate-related Financial Disclosures (TCFD) will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The Task Force will consider the physical, liability and transition risks associated with climate change and what constitutes effective financial disclosures across industries. The work and recommendations of the Task Force will help companies understand what financial markets want from disclosure in order to measure and respond to climate change risks, and encourage firms to align their disclosures with investors’ needs.
The United Nations-supported Principles for Responsible Investment is an international network of investors working together to put the six principles into practice.
The Council on Institutional Investors is an international non-profit organization representing the voice of corporate governance, supporting effective corporate governance practices and strong shareowner rights.
The Thirty Percent Coalition, founded in 2011, is a pioneer advocating for diversity in the corporate boardroom. Our vision is for senior leadership and board of directors to reflect the gender, racial and ethnic diversity of the United States workforce. The mission of the Thirty Percent Coalition is to promote gender diversity, including women of color, on corporate boards.
Optional Fields
Additional documentation to support the submission:
---
Data source(s) and notes about the submission:
LA Times: “UC investments are going fossil free. But not exactly for the reasons you may think” https://www.latimes.com/opinion/story/2019-09-16/divestment-fossil-fuel-university-of-california-climate-change
MSCI Global Fossil Fuels Exclusion Indexes Methodology:
https://www.msci.com/eqb/methodology/meth_docs/MSCI_Global_ex_Fossil_Fuels_Indexes_Methodology_Dec2017.pdf
University of California Sustainable Investment Framework:
https://www.ucop.edu/investment-office/_files/sustainable-investment-framework.pdf
MSCI Global Fossil Fuels Exclusion Indexes Methodology:
https://www.msci.com/eqb/methodology/meth_docs/MSCI_Global_ex_Fossil_Fuels_Indexes_Methodology_Dec2017.pdf
University of California Sustainable Investment Framework:
https://www.ucop.edu/investment-office/_files/sustainable-investment-framework.pdf
The information presented here is self-reported. While AASHE staff review portions of all STARS reports and institutions are welcome to seek additional forms of review, the data in STARS reports are not verified by AASHE. If you believe any of this information is erroneous or inconsistent with credit criteria, please review the process for inquiring about the information reported by an institution or simply email your inquiry to stars@aashe.org.