The Investment Office is vigilant about monitoring for investment strategies that would be clearly incongruous with the core values of the University.
The Brown Investment Office incorporates Environmental, Social and Governance (ESG) criteria while constructing and actively managing the Brown portfolio. In our engagement with investment managers, we advocate for principles such as more diverse teams, better governance and recognition and measurement of societal and environmental impact.
Brown’s endowment is primarily invested with professional investment managers. The Investment Office includes ESG in its analysis when identifying these managers.
We have developed a series of questions to identify and gauge the caliber of a manager’s ESG considerations as part of a standard due diligence process. In addition, we use a proprietary rating system that scores managers with a point-based system, ranging from those who have no ESG policy to those that demonstrate thoroughness and efficacy with their policies and practices. The system was developed with input from Brown students as part of the Investment Office’s community engagement efforts.
Questions for investment managers and companies include:
- Do you have a formal ESG policy, or are you considering adopting one?
- How do you identify and manage material ESG-related risks?
- How do ESG-related factors get quantified and how may they impact the investment decision-making process?
- How are ESG criteria in the portfolio reported to Limited Partners?
- Describe some firm or portfolio level example of ESG-related initiatives for each of Environmental, Social and Governance, and the impact of those initiatives on performance.
In addition to considering ESG when building the endowment portfolio, the Investment Office actively considers and assesses ESG criteria as part of ongoing management of investor relationships. Brown encourages ESG risk management and sustainable business practices in its engagement with investment managers and proposes and votes on ESG-related resolutions through proxy voting.
We use a three-pronged approach for manager-level engagement:
- Discuss. We discuss ESG considerations throughout a manager’s relationship with Brown.
- Advocate. For managers without an existing ESG policy, we advocate that they adopt one appropriate to their strategy.
- Notify. During document negotiations with new managers or existing managers with new funds, we provide the Investment Office’s statement of philosophy and work to integrate ESG into the fund documents or letter agreements.
Another aspect of Brown’s ESG efforts is to provide support to the Advisory Committee on Corporate Responsibility in Investment Policies (ACCRIP) in executing its proxy voting process, through which Brown can express its support for or objection to shareholder resolutions.
ACCRIP, which is advisory to Brown’s president, examines all proxy resolutions concerning issues of social responsibility that are presented to the University as a shareholder, and has guidelines in place for voting on these resolutions.
The ESG-managed portion of Brown's endowment is approximately 23%. Our expectation is that the portion of Brown’s endowment that is managed with a formal ESG policy will steadily increase over time. This aligns with a growing international movement in the financial and investment communities to demonstrate to stakeholders the ways in which investment activities align with societal impact.
In the absence of a recognized international standard for ESG, Brown has been proactive since 2014 in developing its points-based rubric and systematic approach to assessing and tracking managers in their adherence to ESG principles. Brown remains committed to working with managers to increasingly incorporate ESG principles into their investment programs.