Overall Rating Gold
Overall Score 68.42
Liaison Austin Sutherland
Submission Date Feb. 18, 2025

STARS v2.2

University of Pennsylvania
PA-10: Sustainable Investment

Status Score Responsible Party
Complete 2.71 / 5.00
"---" indicates that no data was submitted for this field

Part 1. Positive sustainability investment

Total value of the investment pool:
21,000,000,000 US/Canadian $

Value of holdings in each of the following categories:
Value of holdings
Sustainable industries (e.g., renewable energy or sustainable forestry) 420,000,000 US/Canadian $
Businesses selected for exemplary sustainability performance (e.g., using criteria specified in a sustainable investment policy) 0 US/Canadian $
Sustainability investment funds (e.g., a renewable energy or impact investment fund) 0 US/Canadian $
Community development financial institutions (CDFIs) or the equivalent 0 US/Canadian $
Socially responsible mutual funds with positive screens (or the equivalent) 0 US/Canadian $
Green revolving funds funded from the endowment 112,000,000 US/Canadian $

If any of the above is greater than zero, provide:

A brief description of the companies, funds, and/or institutions referenced above:
Sustainable industries:
  • Low-carbon power and energy storage solutions continue to garner interest and capital from Penn’s managers. One partner increased its investment in a next-generation geothermal company after the company’s pilot project successfully produced zero-carbon baseload electricity for its anchor corporate customer. Others have invested in short- and long-duration storage solutions needed to stabilize the grid by regulating the growing supply of intermittent wind and solar power. One such manager owns a growth-stage company developing a gravity-based storage system. Another company is pursuing grid-scale battery technology. A handful of Penn’s venture capital managers have funded next-generation nuclear companies advancing small modular fission reactors, in addition to seed-stage companies exploring nascent nuclear fusion solutions. New investments include companies directly and indirectly cultivating the supply of renewable natural gas, hydrogen, and biofuels. In the electric mobility space, our managers are funding manufacturers of next-generation batteries, developers of high-capacity materials for these innovative batteries, and companies whose software solutions improve battery management.
  • Several Penn managers continue to invest in high-potential companies that decarbonize and minimize waste from industrial processes. One manager owns a company helping decarbonize manufacturing facilities by supplying more efficient steam turbines, as well as systems that recover and reuse waste heat. Multiple portfolio companies use innovative practices to reduce the life-cycle emissions of aluminum and steel products. Others are looking to further circular ecosystems by isolating reusable materials from industrial waste to recycle and repurpose for a variety of uses. One of Penn’s partners invested additional capital to help industrial emitters mitigate their methane emissions and decarbonize their operations.
  • Finally, one of Penn’s energy transition specialists continues to capitalize companies selling products and services across the preceding end markets. One such portfolio company tests and maintains high-voltage electrical equipment used in renewable power generation and industrial end markets. Others provide engineering, procurement, and construction services to build or repower community solar projects and other utility-scale renewable energy infrastructure.
 
Green revolving funds: 
  • The Penn Century Bond Program was established to support large-scale building renovations that integrate energy conservation with deferred maintenance needs, such as deep-energy retrofits and lighting upgrades. The program functions as a green revolving fund by reinvesting energy cost savings from completed projects into future sustainability initiatives, creating a continuous funding cycle. While bond proceeds initially finance the improvements, ongoing savings generated by these projects help replenish the fund, ensuring long-term investment in campus energy efficiency. Additionally, any unused proceeds were allocated to the endowment to sustain future purchasing power for these efforts.

Percentage of the institution's investment pool in positive sustainability investments:
2.53

Part 2. Investor engagement

Sustainable investment policy 

Does the institution have a publicly available sustainable investment policy?:
Yes

None
A copy of the sustainable investment policy:
Penns_Approach_to_Sustainable_Investing_-_for_STARs_Oct_2024_vF.pdf

None
The sustainable investment policy:
The purpose of Penn’s endowment is to provide significant and perpetual support for the mission and programs of the University. Spending from the endowment funds scholarships, teaching, research, medical innovation, and thousands of other initiatives. The Office of Investments is tasked with maintaining and growing long-term purchasing power so that the endowment can support both current and future generations at Penn. The Office seeks to maximize long-term risk-adjusted investment returns by partnering with external investment management firms pursuing a range of strategies around the globe. Our partners, in turn, choose underlying investments that appropriately balance risk and reward.
 
We expect our partners to carefully consider all relevant risks when making investment decisions. Unfortunately, the risks created by climate change have become increasingly important considerations for investors. Most directly, extreme weather events can damage properties or infrastructure, create supply chain disruptions, and increase operational costs for businesses. Climate change can also impact investments indirectly. For example, government policies designed to address climate change, such as carbon pricing or emissions regulations, can significantly impact a company’s business model. Even without government policies, financial markets may begin to price explicitly the negative externalities from a business’s greenhouse gas emissions. Companies that are unable or unwilling to transition away from carbon-intensive business models could face significant economic risks that make them unattractive as investments.
 
Penn engages with both existing and prospective partners on the topic of climate risk. The Office has developed a framework to assess how our investment partners incorporate considerations around climate change risks into their investment processes. We focus on understanding how they identify, underwrite, and manage the emissions footprints and other climate risks in their portfolios. For partners who control their holdings, we also seek to understand when and how they might choose to drive changes at their companies or assets. Ultimately, these conversations allow us to evaluate how investment firms identify and manage risks, to share best practices that we observe across investors, and to communicate our approach and expectations around climate risk management.
 
Beyond the assessment of investment risks created by climate change, Penn and many of its partners also evaluate investment opportunities related to the energy transition. Any such investments must be compelling on a risk-adjusted basis, regardless of their role in the energy transition. The massive scope of the energy transition, however, makes it fertile ground for finding attractive investments that both support and benefit from a decarbonizing economy. We address this activity in more detail in our periodic community updates.
 
The Office regularly reviews and refines the endowment’s sustainable investment principles. While our approach may evolve, we will always incorporate climate-related investment considerations in a manner consistent with our responsibility to support the endowment’s core mission. Ultimately, we believe that a thoughtful approach to the assessment and management of climate risk is necessary to maximize Penn’s long-term risk-adjusted returns.

Public Facing Statement from University Leadership: https://penntoday.upenn.edu/announcements/message-penn-community-combatting-climate-change. 

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:

Penn engages with both existing and prospective partners on the topic of climate risk. The Office has developed a framework to assess how our investment partners incorporate considerations around climate change risks into their investment processes. We focus on understanding how they identify, underwrite, and manage the emissions footprints and other climate risks in their portfolios. For partners who control their holdings, we also seek to understand when and how they might choose to drive changes at their companies or assets. Ultimately, these conversations allow us to evaluate how investment firms identify and manage risks, to share best practices that we observe across investors, and to communicate our approach and expectations around climate risk management.


Proxy voting 

Has the institution engaged in proxy voting, either by its CIR or other committee or through the use of guidelines, to promote sustainability during the previous three years?:
Yes

None
A copy of the proxy voting guidelines or proxy record:
SRAC-Statement-of-responsibility.pdf

None
A brief description of how managers are adhering to proxy voting guidelines:

The University of Pennsylvania has engaged in proxy voting over the past three years through the structured framework established by the Board of Trustees. This process is guided by the Penn Social Responsibility Advisory Committee (Penn SRAC) and the Trustee Proxy Voting Subcommittee, ensuring that proxy voting aligns with the institution’s commitment to social responsibility.

Governance and Decision-Making Process

  1. Penn SRAC’s Role:
    • The committee reviews shareholder resolutions related to social and environmental issues within the University’s investment portfolio.
    • It assesses whether corporate activities result in substantial social injury or environmental harm, per the University’s Statement on Responsibility Concerning Endowment Securities.
    • Based on this evaluation, Penn SRAC provides clear, fact-based recommendations to the Trustee Proxy Voting Subcommittee.
  2. Trustee Proxy Voting Subcommittee’s Responsibilities:
    • The Subcommittee has ultimate decision-making authority on how the University votes on proxy matters.
    • It considers Penn SRAC’s recommendations while balancing fiduciary responsibilities and ethical investment principles.
    • Decisions are guided by the principle that the University will support shareholder proposals aimed at reducing substantial social or environmental harm, provided they align with the Trustees’ fiduciary obligations.

Application to Sustainability and ESG Considerations

  • Proxy voting at Penn prioritizes environmental, social, and governance (ESG) concerns, ensuring that the University's endowment is managed in a responsible and ethical manner.
  • The Trustee Resolution on Proxy Voting explicitly acknowledges the growing interest from the University community in proxy voting as a tool to influence corporate behavior positively.
  • The established procedures ensure transparency and accountability, allowing community input while maintaining the Trustees’ investment oversight.

The University of Pennsylvania’s adherence to proxy voting guidelines reflects a deliberate and structured approach to responsible investment. Through Penn SRAC’s rigorous review process and the oversight of the Trustee Proxy Voting Subcommittee, the University ensures that its investments align with ethical considerations while fulfilling its fiduciary duties. This approach demonstrates a commitment to sustainability and social responsibility in investment decisions.

--------

For more infomration, see Statement on Responsibility Concerning Endowment Securities from Board of Trustees: https://secretary.upenn.edu/trustees-governance/proxy-voting.


Shareholder resolutions 

Has the institution filed or co-filed one or more shareholder resolutions that address sustainability or submitted one or more letters about social or environmental responsibility to a company in which it holds investments during the previous three years?:
Yes

Examples of how the institution has engaged with corporations in its portfolio about sustainability issues during the previous three years:

The Office has deepened its engagement with its investment partners regarding their sustainability efforts. Penn developed a framework to understand investor efforts in five core categories: Organizational Commitment, Governance & Resourcing, Underwriting Process, Value Creation & Measurement, and Reporting. As markets begin to explicitly price the negative externalities of greenhouse gas emissions, the framework allows us to more systematically ascertain how our investment partners identify, underwrite, and manage the emissions footprints and climate risk of their portfolios. We also aim to understand, in greater depth, how our managers pursue decarbonization at their portfolio companies. A third core objective of our ongoing conversations is to encourage our managers in the private markets to measure and report the emissions footprints of their portfolios in a more robust and standardized fashion.


Divestment efforts and negative screens

Does the institution participate in a public divestment effort and/or have a publicly available investment policy with negative screens?:
Yes

A brief description of the divestment effort or negative screens and how they have been implemented:

The University's divestment policies prohibit direct ownership of tobacco companies or certain companies related to South Sudan. Penn implements these policies by notifying managers in writing.


Approximate percentage of endowment that the divestment effort and/or negative screens apply to:
100

Investor networks 

Does the institution engage in policy advocacy by participating in investor networks and/or engage in inter-organizational collaborations to share best practices?:
Yes

None
A brief description of the investor networks and/or collaborations:

The Office of Investments collaborates with a number of peer institutions, academic researchers, and industry practitioner associations to share ideas and best practices for a sustainable investment approach. The endowment also participates in conferences and investor roundtables related to sustainability and its net-zero goal. In 2023, Penn joined the ESG Data Convergence Initiative (EDCI), an industry effort to improve the availability and quality of ESG data in the private markets.


Optional Fields 

Website URL where information about the institution’s sustainable investment efforts is available:
https://investments.upenn.edu/sustainability

Additional documentation to support the submission:
---

Data source(s) and notes about the submission:

Guidelines and Procedures for Consideration by the Trustees of Proposals for Divestment from the University Endowment or Other Holdings Based Upon Social Responsibility Concerns of the Penn Community can be found here: https://secretary.upenn.edu/trustees-governance/divestment.


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.